Legality of Reducing Workdays After Salary Increase in the Philippines

Introduction

In the Philippine labor landscape, employers often seek ways to optimize operational costs while complying with legal mandates on employee compensation and working conditions. One such scenario involves granting a salary increase to employees, only to subsequently reduce their required workdays. This practice raises critical questions about its legality under Philippine law, particularly in the context of the Labor Code and related jurisprudence. This article explores the multifaceted legal implications, drawing from statutory provisions, administrative regulations, and judicial interpretations. It examines whether such adjustments constitute a permissible management prerogative or an unlawful diminution of benefits, potential violations of minimum wage laws, impacts on employee rights, and remedies available to affected workers.

Statutory Framework: The Labor Code and Related Laws

The primary legal foundation governing employment relations in the Philippines is the Labor Code of the Philippines (Presidential Decree No. 442, as amended). Key provisions relevant to salary increases and work schedules include:

Article 82: Coverage of Hours of Work Provisions. This article defines the normal hours of work as eight hours per day, exclusive of meal periods. However, it does not rigidly fix the number of workdays per week, allowing flexibility subject to other rules.
Article 83: Normal Hours of Work. Employees are entitled to a rest period of not less than 24 consecutive hours after every six consecutive normal workdays. This implies a standard six-day workweek, but employers may implement a five-day workweek or compressed work schedules with Department of Labor and Employment (DOLE) approval.
Article 100: Prohibition Against Elimination or Diminution of Benefits. This is a cornerstone provision prohibiting employers from reducing or eliminating benefits already enjoyed by employees. Benefits here include not just monetary compensation but also non-monetary perks like work schedules that affect overall earnings and work-life balance. If a salary increase is followed by a reduction in workdays, it could be argued that the net effect diminishes the employee's total compensation or established working conditions, violating this article.
Article 127: Non-Diminution of Benefits (in relation to Wages). Reinforcing Article 100, this ensures that wage adjustments, including increases mandated by law (e.g., minimum wage hikes via Wage Orders from Regional Tripartite Wages and Productivity Boards), cannot be offset by reductions in other employment terms.

Additionally, Republic Act No. 6727 (Wage Rationalization Act) and its implementing rules govern minimum wage adjustments. Salary increases, whether voluntary or mandatory, must comply with these to avoid circumvention through ancillary changes like reduced workdays.

DOLE Department Order No. 174-17, which regulates contracting and subcontracting, indirectly touches on this by emphasizing fair labor practices, but core issues fall under general labor standards.

Management Prerogative vs. Employee Rights

Philippine jurisprudence recognizes the employer's management prerogative to regulate all aspects of employment, including work assignments, schedules, and compensation structures, as long as these are exercised in good faith and without violating the law (e.g., San Miguel Brewery Sales Force Union v. Ople, G.R. No. L-53515, 1989). This includes the right to adjust workdays for business efficiency, such as shifting from a six-day to a five-day week.

However, this prerogative is not absolute. It must not infringe on constitutional rights to security of tenure (Article XIII, Section 3 of the 1987 Constitution) or result in constructive dismissal. Reducing workdays post-salary increase could be scrutinized if it:

Reduces Overall Compensation. If the salary increase is calculated on a monthly basis but workdays are reduced without proportional adjustment, the employee's effective daily rate might increase, but total earnings could stagnate or decrease if fewer days are worked. For instance, a monthly salary of PHP 15,000 for 26 workdays (assuming a six-day week) equates to about PHP 577 per day. A 10% increase to PHP 16,500, followed by a reduction to 22 workdays (five-day week), might yield a higher daily rate (PHP 750) but similar or lower monthly take-home if overtime or incentives are affected.
Violates Non-Diminution Rule. Courts have held that once a benefit is granted and becomes a company practice, it cannot be withdrawn unilaterally (Tiangco v. Leogardo, G.R. No. L-57636, 1982). If employees were accustomed to a certain number of workdays prior to the increase, reducing them could be seen as diminishing an established benefit, especially if the increase was intended to comply with minimum wage laws.
Constitutes Bad Faith. If the reduction appears designed to negate the salary increase's benefits—e.g., to maintain payroll costs— it may be deemed an act of bad faith, potentially leading to unfair labor practice claims under Article 248 of the Labor Code.

Impact on Minimum Wage and Overtime

Salary increases often stem from Wage Orders issued by the National Wages and Productivity Commission (NWPC) through Regional Boards. These increases are mandatory for covered employees and cannot be offset by reductions in work hours or days. DOLE Advisory No. 02-09 on Flexible Work Arrangements allows compressed workweeks (e.g., 48 hours over five days instead of six), but these must be voluntary, reported to DOLE, and not result in diminished benefits.

Overtime pay (Article 87) is computed at 25% premium for work beyond eight hours. Reducing workdays might shift workloads, leading to more overtime, but if not compensated properly, it violates the law. Night shift differentials (Article 86) and holiday pay (Article 94) could also be affected if schedules change.

For managerial or supervisory employees exempt from hours-of-work rules (Article 82), reductions might be more flexible, but rank-and-file workers enjoy stricter protections.

Judicial Precedents and DOLE Interpretations

Supreme Court decisions provide guidance:

In Wesleyan University-Philippines v. Wesleyan University-Philippines Faculty and Staff Association (G.R. No. 181806, 2010), the Court upheld non-diminution for established practices like paid leaves, applying similarly to work schedules.
Arco Metal Products Co., Inc. v. Samahan ng mga Manggagawa sa Arco-Metal-NAFLU (G.R. No. 170734, 2008) ruled that unilateral changes to work shifts violating collective bargaining agreements (CBAs) are illegal. Even without a CBA, similar principles apply via implied contracts.
In cases like Globe Mackay Cable and Radio Corp. v. NLRC (G.R. No. 82511, 1992), the Court emphasized that management changes must not be capricious or prejudicial.

DOLE opinions, while not binding, suggest that workweek reductions require employee consent or DOLE approval to avoid disputes. For example, during economic downturns, temporary reductions might be allowed under Article 286 (authorized causes for suspension), but not as a permanent offset to salary hikes.

Special Considerations: Compressed Workweeks and Flexible Arrangements

DOLE promotes flexible work arrangements (FWAs) under Republic Act No. 11165 (Telecommuting Act) and related advisories. A compressed workweek (CWW) allows up to 12 hours per day without overtime pay, provided total weekly hours do not exceed 48 and it's agreed upon. However, implementing CWW post-salary increase must not mask a diminution; employees must benefit or at least maintain status quo.

In the context of the COVID-19 pandemic, DOLE issuances like Labor Advisory No. 17-20 allowed temporary FWAs, but permanent changes require scrutiny.

Remedies for Employees and Employer Defenses

Affected employees can file complaints with DOLE for violation of labor standards, seeking reinstatement of original terms, backpay, or damages. If it leads to constructive dismissal, claims for separation pay and moral damages may arise (Article 279).

Employers can defend by proving:

Business necessity (e.g., cost-saving amid losses).
Employee consent via written agreements.
Compliance with DOLE reporting for FWAs.
That the net effect enhances, not diminishes, benefits (e.g., higher daily rates with better work-life balance).

Collective bargaining can preempt disputes by addressing such adjustments in CBAs.

Conclusion

The legality of reducing workdays after a salary increase in the Philippines hinges on whether it results in a net diminution of benefits, violates minimum wage laws, or is exercised in bad faith. While management prerogative allows flexibility, it is bounded by the non-diminution principle and employee protections under the Labor Code. Employers must ensure transparency, obtain consents where needed, and comply with DOLE requirements to mitigate risks. Employees, conversely, should document changes and seek DOLE assistance promptly. Ultimately, each case turns on specific facts, underscoring the need for legal consultation to navigate this complex interplay of rights and prerogatives.