If your employer has deducted from your commissions because of rejects or returned work caused by another team or department, you are right to question whether this is allowed. This situation comes up frequently in Philippine companies involved in sales, manufacturing, e-commerce, BPO, retail, insurance, or service delivery, where one group handles production or operations and another closes the sale or manages the client. The answer is not a simple yes or no. It depends on the exact wording of your commission agreement, whether the commission was already earned, and how the deduction was implemented. Philippine labor law strongly protects wages and commissions, but it also respects clear contractual terms that define when and how much commission is actually earned.
Commissions are treated as part of wages under Philippine law. Article 97 of the Labor Code defines “wage” to include earnings “capable of being expressed in terms of money… on a… commission basis… payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done.” Because commissions count as wages, they receive the same strong protections against unauthorized deductions.
Legal Rules on Deductions from Wages and Commissions
Article 113 of the Labor Code states that no employer shall make any deduction from the wages of employees except in three narrow situations: (a) insurance premiums with the worker’s consent, (b) union dues when properly authorized, or (c) cases where the employer is authorized by law or by regulations issued by the Secretary of Labor and Employment. Additional mandatory deductions such as withholding tax, SSS, PhilHealth, and Pag-IBIG contributions are allowed because separate laws require them. Arbitrary deductions to cover company losses, quality rejects, or returns generally do not fall under these exceptions.
There is an important distinction between a true “deduction” and a proper computation of what commission is actually due. If your commission plan clearly states that commission is earned only upon final acceptance of the work, collection of payment, or absence of returns/rejects within a stated period, then adjusting the amount (or not paying the full amount) when a reject occurs is usually viewed as calculating what is owed rather than deducting from earned wages. In contrast, if the commission has already been paid or has become due under the agreed formula, taking it back is a deduction and must comply with Article 113. Unauthorized deductions or withholdings also violate Article 116 of the Labor Code, which prohibits any person from withholding any amount from a worker’s wages or inducing the worker to give up any part of those wages.
The fact that the reject was caused by another team does not automatically make a deduction illegal if your signed commission plan allows adjustments regardless of whose fault it was. Many companies allocate the risk of returns or quality issues to the person earning the commission as part of the overall compensation structure. However, if there is no clear written policy, if the policy was introduced without proper notice, or if the deduction is applied retroactively to already earned amounts, you have a strong basis to challenge it. Unilateral changes that diminish benefits already enjoyed can also violate the non-diminution rule in Article 100 of the Labor Code.
How to Check Whether the Deduction Is Legal in Your Situation
Follow these steps to evaluate your specific case:
Collect every relevant document: your employment contract or offer letter, the full commission or incentive plan (including any attachments or updates you signed or acknowledged), employee handbook sections on pay, all payslips showing commission calculations and deductions, and any emails, memos, or reports about the specific rejects and the resulting deduction.
Read the commission formula word for word. Look for phrases such as “subject to,” “net of rejects,” “chargeback for returns,” “payable only upon client acceptance,” “less quality deductions,” or “final and non-reversible sales.” These indicate conditions that must be met before commission is fully earned.
Determine whether you received clear notice and gave consent. Did you sign or acknowledge the policy during onboarding or when it was introduced? Was it explained to you? Continued employment after receiving written notice can sometimes constitute acceptance, but surprise deductions are much harder for employers to justify.
Verify the facts of the reject. Gather evidence showing it was caused by another team (production reports, QA logs, warehouse records, emails, or witness statements). While this does not always override a clear policy, it helps if the policy is vague or if you are arguing bad faith or arbitrary application.
Calculate the exact impact. Note the gross commission you expected, the amount deducted, the specific transactions involved, and whether the deduction pushed your effective pay below applicable minimum wage standards for the period worked.
Check the timing. Was the commission already paid in a previous payslip, or was it withheld from the current payout? Retroactive clawbacks of paid amounts are treated more strictly than adjustments to pending payouts.
Here is a quick comparison to help you assess:
| Situation | More Likely Legal | More Likely Illegal |
|---|---|---|
| Clear provision in signed commission plan allowing adjustment or non-payment for rejects/returns | Yes | — |
| No written policy or clause addressing rejects | — | Yes |
| Deduction applied only to future transactions with proper advance notice | Yes | — |
| Retroactive deduction from already paid or earned commissions without contractual basis | — | Yes |
| Deduction results in take-home pay below minimum wage | — | Yes (illegal regardless of contract) |
| Policy applied consistently and transparently to all similarly situated employees | Yes | — |
| Sudden new policy that reduces previously enjoyed commission levels without agreement | — | Yes (possible non-diminution violation) |
Practical Steps If You Believe the Deduction Was Illegal
Start internally. Send a polite but firm written request (email is fine, keep a copy) to your supervisor and HR asking for the exact contractual or legal basis for the deduction, a breakdown of the affected transactions, and reversal of the amount if no valid basis exists. Give them a reasonable deadline, such as five to seven working days.
If the response is unsatisfactory or you receive no reply, document everything and escalate within the company grievance process if one exists.
For external help, use the Department of Labor and Employment’s (DOLE) Single Entry Approach (SEnA). SEnA is a free, speedy conciliation-mediation program designed to resolve labor issues such as unpaid or underpaid wages, illegal deductions, and other money claims without immediately going to formal litigation. You can file a Request for Assistance (RFA) online through the DOLE portal (arms.dole.gov.ph) or in person at any Single Entry Assistance Desk (SEAD) located in DOLE regional, provincial, or field offices, as well as at National Conciliation and Mediation Board (NCMB) and National Labor Relations Commission (NLRC) offices. The process typically aims for resolution within 30 days. Bring your documents and a clear computation of what you believe is still owed.
If SEnA does not settle the matter, you can proceed to file a formal complaint with the appropriate NLRC Regional Arbitration Branch. Money claims for wages and commissions generally have a three-year prescriptive period from the time they became due. No filing fees are required from employees in most labor cases, and many workers handle the initial stages without a lawyer, although consulting a labor lawyer or seeking assistance from DOLE, a union, or the Public Attorney’s Office (if qualified) is advisable for larger or more complex claims.
Common Real-Life Scenarios
In manufacturing or production-linked sales roles, a sales representative may lose commission on orders that are later rejected due to factory defects or packaging errors made by the operations team. If the commission plan explicitly states that commission is paid only on accepted, non-returned deliveries, the adjustment is often upheld even though the sales person had no control over quality.
In BPO or service delivery settings, an account manager’s incentive may be reduced because of quality rejects flagged by a separate QA team. When the incentive plan ties payouts to overall quality metrics or client acceptance scores, the deduction is usually considered part of the agreed compensation structure.
In e-commerce or retail fulfillment, chargebacks for customer returns caused by warehouse picking errors or shipping mistakes are sometimes passed on to the sales or account team. Without a clear contractual clause allowing this, the practice is vulnerable to challenge as an illegal deduction.
A frequent pitfall is employees accepting verbal assurances from managers (“Don’t worry, it will be adjusted next month”) without getting anything in writing, or failing to keep copies of the original commission plan. Another is assuming that because the problem was not your fault, the deduction must be illegal — the existence of a clear, agreed policy often overrides the “whose fault” question.
Foreign nationals employed in the Philippines enjoy the same wage and deduction protections as Filipino workers. The remedies through DOLE and NLRC are the same, although your work permit and visa status are handled under separate rules by the Bureau of Immigration and DOLE.
Frequently Asked Questions
Can my employer deduct from my commission without my written consent or a clear policy?
Generally no. Such a deduction would likely violate Article 113 of the Labor Code unless it falls under one of the narrow exceptions or is a proper computation under a valid commission agreement you previously accepted.
What if I signed a commission plan that allows chargebacks or adjustments for rejects?
It is usually legal, even when the reject was caused by another team. By signing or accepting the plan, you agreed to the conditions under which commission is earned and adjusted. Courts generally respect clear contractual terms as long as they do not result in pay below minimum labor standards.
Does it matter that the reject was caused by another department and not me?
It can strengthen your position if the policy is vague or silent on the issue, or if you can show the deduction was applied arbitrarily or in bad faith. However, if the written plan applies adjustments neutrally regardless of cause, the “who caused it” factor often does not invalidate the adjustment.
Can the company take back commission I already received in a previous payslip?
Only in very limited circumstances allowed by Article 113 or if the amount was clearly an advance subject to conditions that were not met. Retroactive clawbacks without strong contractual or legal basis are usually illegal.
How long do I have to file a claim for unpaid or deducted commissions?
Money claims under the Labor Code generally prescribe after three years from the time the claim accrued. It is best to act promptly while evidence and memory are fresh.
Can I be retaliated against or fired for questioning or complaining about these deductions?
No. Retaliation for asserting labor rights is prohibited. Regular employees enjoy security of tenure and can only be dismissed for just or authorized causes with due process. Probationary employees also have rights against illegal dismissal during their probationary period.
What exactly is SEnA and do I need a lawyer to use it?
SEnA (Single Entry Approach) is DOLE’s free conciliation-mediation service for labor disputes, including illegal deductions and unpaid wages. It is designed to be simple, fast, and accessible. You do not need a lawyer to file or attend the initial conference, although you may bring one if you wish.
Are there industries where commission deductions for rejects are more common or more strictly regulated?
They appear frequently in sales-driven sectors (real estate, insurance, pharmaceuticals, FMCG) and in quality-metric environments such as BPO and manufacturing. The same Labor Code rules apply across industries; there is no special exemption for any sector.
Key Takeaways
- Commissions are wages under Article 97 of the Labor Code and receive strong protection against unauthorized deductions.
- Article 113 strictly limits when an employer may deduct from wages; most reject-related adjustments must instead be justified as proper computation under a clear commission agreement.
- A well-drafted, signed commission plan that makes full payment conditional on no rejects or final acceptance is generally enforceable, even when the underlying problem was caused by another team.
- Without such a clear contractual basis, or when deductions are applied retroactively to earned amounts, the practice is likely illegal.
- Always keep copies of your contract, commission plan, and payslips, and communicate concerns in writing.
- Start with internal written requests, then use DOLE’s free SEnA process for fast assistance. You have up to three years to pursue money claims, but acting sooner preserves evidence and options.
- Knowing these rules helps you evaluate your situation accurately, negotiate from a position of knowledge, and protect your income without unnecessary conflict.