The question of what constitutes "wages" is a perennial concern for both employers aiming for compliance and employees seeking fair compensation. In the Philippine legal landscape, a frequent point of confusion is whether De Minimis benefits—those small-value perks given for the general well-being of employees—can be credited toward the payment of the mandatory minimum wage.
Under current labor laws and jurisprudence, the short answer is no.
Understanding the Legal Definition of "Wages"
To understand why De Minimis benefits are excluded, we must first look at how the Labor Code of the Philippines defines "wage" under Article 97(f):
" 'Wage' paid to any employee shall mean the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered..."
Crucially, the law distinguishes between "basic wage" and "supplements" or "allowances."
What are De Minimis Benefits?
As defined by the Bureau of Internal Revenue (BIR) and recognized in labor practice, De Minimis benefits are facilities or privileges furnished or offered by an employer to employees that are of relatively small value and are offered or furnished merely as a means of promoting the health, goodwill, contentment, or efficiency of the employees.
Common examples include:
- Rice subsidy (up to ₱2,000 per month).
- Laundry allowance (up to ₱300 per month).
- Medical cash allowance to dependents (up to ₱750 per semester).
- Uniform and clothing allowance (up to ₱6,000 per annum).
The Integration Proscription: Why They Aren't Part of the Minimum Wage
The Department of Labor and Employment (DOLE) and the National Wages and Productivity Commission (NWPC) maintain strict guidelines on minimum wage compliance. The following legal principles explain the exclusion of De Minimis benefits:
1. The "Basic Wage" Requirement
The minimum wage refers to the basic cash wage an employee must receive for eight hours of work. Wage Orders issued by Regional Tripartite Wages and Productivity Boards (RTWPBs) specify the daily minimum wage rates. Statutory benefits, bonuses, and De Minimis perks are considered over and above this basic floor.
2. Benefits vs. Wages
Jurisprudence, including rulings by the Supreme Court, distinguishes between Supplements and Facilities:
- Facilities: Items of expense necessary for the laborer's and his family's existence (e.g., meals or housing) which may be deducted from wages under very specific conditions (must be voluntarily accepted in writing and not exceed 70% of the value).
- Supplements/Benefits: Extra remuneration or special privileges given to or received by the laborers over and above their ordinary earnings or wages.
Because De Minimis benefits are characterized as "supplements" intended for employee welfare rather than "remuneration for services rendered," they cannot be used to offset the employer's obligation to pay the minimum wage.
3. Tax Treatment vs. Labor Treatment
While De Minimis benefits are non-taxable (up to a certain threshold) under the Tax Reform for Acceleration and Inclusion (TRAIN) Law, this tax exemption does not change their status under labor law. An employer cannot argue that because a benefit is "monetized" or has value, it fulfills the "cash wage" requirement.
Consequences of Non-Compliance
If an employer includes De Minimis benefits in the calculation to reach the daily minimum wage, they are technically underpaying the employee. This leads to several risks:
- Money Claims: Employees may file for underpayment of wages before the Labor Arbiter.
- Double Indemnity: Under Republic Act No. 8188, employers found to have underpaid the minimum wage may be required to pay the prescribed minimum wage plus an additional amount equal to the unpaid benefits as a penalty (double indemnity).
- Criminal Liability: Willful violation of Wage Orders can lead to criminal prosecution, including fines and potential imprisonment for the responsible officers of the corporation.
Summary Table: Wage vs. De Minimis
| Feature | Basic Minimum Wage | De Minimis Benefits |
|---|---|---|
| Purpose | Base compensation for labor | Welfare, morale, and efficiency |
| Source | Mandated by Regional Wage Orders | Discretionary or CBA-negotiated |
| Compliance | Must be paid in cash (or check/ATM) | Usually provided in kind or specific allowances |
| Deductibility | Basis for 13th-month pay & OT | Generally excluded from OT/13th-month basis |
Conclusion
In the Philippines, the integrity of the minimum wage is protected by the principle that "wages" must be paid in legal tender, representing the direct value of the labor performed. De Minimis benefits are strictly supplemental. Employers must ensure that the daily rate—exclusive of these perks—meets or exceeds the prevailing Regional Wage Order to avoid costly legal disputes and statutory penalties.
Would you like me to draft a sample compliance checklist for auditing an employee's payslip against current wage orders?