I. Overview

In the Philippines, “incentives” are often a big part of an employee’s total pay—think sales commissions, performance bonuses, productivity pay, and shares in service charges. When these are not paid or are suddenly withheld, employees understandably look to the Department of Labor and Employment (DOLE) for help.

This article explains, in Philippine context:

What counts as “incentives”
When incentives become a legal right, not just a “privilege”
What amounts to unlawful non-payment or withholding
The DOLE remedies available to employees
The relationship between DOLE and the NLRC (National Labor Relations Commission)
Practical steps employees can take

This is for general information only and is not a substitute for specific legal advice on your case.

II. What Are “Incentives” in Philippine Labor Law?

“Incentives” is not a single magic term in the Labor Code. Instead, it covers several types of pay or benefits, some statutory (required by law) and some contractual or voluntary.

1. Statutory wage-related benefits commonly confused with “incentives”

13th Month Pay
- Governed by Presidential Decree No. 851 and its implementing rules.
- All rank-and-file employees in the private sector are generally entitled to 13th month pay, regardless of how they are paid, provided they have worked at least one month during the calendar year.
- Non-payment or unjustified withholding of 13th month pay is a labor standards violation enforceable by DOLE.
Service Charge Shares (in hotels, restaurants, etc.)
- Under the Labor Code as amended by RA 11360, 100% of service charges collected from customers must be distributed to covered employees, under a system agreed upon by management and employees.
- Failure to distribute is a labor standards violation.
Service Incentive Leave (SIL)
- At least five (5) days of paid SIL per year for qualified employees who have rendered at least one year of service, subject to exceptions (e.g., those already enjoying the same or better leave benefits, or specific categories excluded by law).
- The SIL is “incentive” only in name; it’s a statutory benefit.
- Non-payment of SIL (including conversion of unused SIL to cash when required) is also a labor standards violation.

2. Contractual and company-based incentives

Frequently, when employees talk about “incentives,” they mean non-statutory benefits, such as:

Performance bonuses
Sales commissions and overrides
Productivity or attendance bonuses
Profit-sharing, gainsharing schemes
“Incentive pay” pools, cash rewards, and similar

These may be:

Contractual – clearly promised in an employment contract, CBA, or written policy.
Policy-based – written in a company handbook, memo, or incentive scheme.
Company practice – given regularly and consistently over time (usually at least for 3 consecutive years, in a consistent manner), making it demandable as a benefit.

Once an incentive is shown to be contractual or an established company practice, its arbitrary non-payment or withholding can amount to:

Violation of labor standards, and/or
Diminution of benefits (which is prohibited), and/or
Breach of contract.

III. When Do Incentives Become a Legal Right?

Not all incentives start as a legal right. Employers initially have discretion whether to grant them. But once certain conditions are met, employees may legally demand these incentives.

1. Statutory incentives (law-based)

For benefits required by law (13th month, SIL, service charge distribution):

The entitlement flows directly from the law.
Employers cannot unilaterally withhold, reduce, or condition them in a way that defeats the law’s purpose.
Examples:
- A company may not withhold 13th month pay because an employee resigned before December (the employee is still entitled to a pro-rata share).
- A hotel cannot decide to keep a portion of service charges for “company use” contrary to RA 11360.

2. Contractual incentives

If an incentive is spelled out in:

An employment contract
A Collective Bargaining Agreement (CBA)
A formal incentive scheme issued by the employer

then it is legally enforceable on the basis of contract law and labor standards.

Key points:

Clear conditions must generally be followed (e.g., meeting performance targets, no specific infractions, etc.).
Once conditions are met, payment becomes a legal obligation.
One-sided changes that materially reduce or remove the benefit may be invalid, especially if they violate the non-diminution of benefits rule.

3. Company practice as a source of right

Even without a written policy, the Supreme Court has repeatedly held that a benefit can become demandable if:

It is given over a long period of time,
It is consistent and deliberate, and
It is not given by reason of error.

This is often referred to as the “company practice” doctrine.

Examples:

A “Christmas incentive” paid as one month’s salary every December for 5 straight years, without qualification, may become a vested benefit.
A “sales incentive” always paid at 3% of sales for several years and then arbitrarily cut to 1% without valid reason may be challenged.

IV. What Counts as Non-Payment or Unlawful Withholding?

1. Straight non-payment

Employer simply does not pay the incentive even when:
- The law requires it (e.g., 13th month, service charge share, SIL conversion), or
- The employee has clearly met contractual rules or established practice.

2. Delayed payment

Paying much later than the legally or contractually prescribed date.
- Example: 13th month pay must generally be paid not later than December 24 of each year; paying it the following year without valid reason can be non-compliance.
DOLE may still treat this as a violation, subject to compliance orders and penalties.

3. Conditional withholding or forfeiture clauses

Common questionable practices:

“No 13th month pay if you resign before December.”
- Improper; resigning employees are still entitled to a proportionate 13th month pay.
“You lose your earned commission if you resign or are terminated, even if the sale was already completed.”
- If the commission was already earned based on company rules and practice, forfeiture may be invalid.
“Incentives will be paid only if the employee signs a waiver of claims.”
- Waivers affecting statutory or already-earned benefits are often disfavored and may be struck down.

4. Diminution of benefits

Even if the employer does not entirely withhold the incentive, reducing it unilaterally in a substantial or arbitrary way may breach the non-diminution rule, which prohibits:

Unilateral withdrawal or reduction of benefits that are:
- Regularly and deliberately granted; and
- Not required by law but already part of company practice or contract.

V. DOLE’s Role and Powers

The Department of Labor and Employment has broad authority over labor standards, including wage-related benefits and incentives that form part of wages.

1. Visitorial and enforcement powers

Under the Labor Code (Article on DOLE’s visitorial and enforcement powers):

DOLE can:
- Inspect employer records and premises.
- Investigate complaints on non-payment or underpayment of wages and benefits.
- Issue Compliance Orders directing employers to pay deficiencies in wages and benefits (including incentives when they are part of wages/labor standards).
- Impose administrative fines and penalties for violations.

This is often exercised through:

Routine inspections (scheduled or random), and
Complaint inspections (triggered by an employee complaint).

2. Money claims jurisdiction of DOLE Regional Directors

DOLE Regional Directors can directly order payment of money claims (like unpaid incentives) under certain conditions, particularly when:

The claims arise from labor standards laws or required benefits.
There is an existing employer-employee relationship, or at least it existed when the cause of action arose.
The dispute does not require complicated evidentiary evaluation better suited for the NLRC (e.g., highly contested questions about whether a practice exists or not, or whether the employee is really a “managerial” employee excluded from certain benefits).

However:

If the case involves reinstatement, illegal dismissal, or damages, it usually falls under the exclusive jurisdiction of the Labor Arbiter (NLRC), not DOLE.

3. Limits of DOLE’s authority

DOLE, acting in its administrative capacity:

Primarily deals with labor standards (what the law requires as minimum).
Can order payment of money claims and impose fines, but generally cannot:
- Award moral or exemplary damages, or
- Grant reinstatement or rule on the validity of dismissal (these are for the NLRC/Labor Arbiter).

If the dispute heavily centers on interpretation of contract, employer classification, or damages for breach, the employee may ultimately need to file a case at the NLRC, often after or in parallel with DOLE processes.

VI. DOLE-Related Remedies: Step-by-Step

1. Internal grievance or HR route (practical first step)

Before going to DOLE, it is often wise (and sometimes required by company policy or CBA) to:

Raise the issue with HR or management in writing.
Request a clear explanation:
- “Why was my incentive not paid?”
- “What is the computation basis?”
Keep:
- Copies of the complaint or email
- Employer’s written responses

This isn’t mandatory under the law in all cases, but it strengthens your case and may resolve the problem faster.

2. SEnA: Single-Entry Approach (DOLE Conciliation-Mediation)

The SEnA (Single-Entry Approach) is a mandatory conciliation-mediation mechanism for most labor-related issues, including money claims such as unpaid incentives.

a. Coverage

SEnA covers:

Non-payment or underpayment of wages and wage-related benefits, including:
- 13th month pay
- Service charges
- Bonuses and incentives, if they are part of wage-related obligations
Other labor issues (illegal dismissal, etc., though that usually leads to NLRC if unresolved).

b. How to initiate SEnA

You can:

Go to the nearest DOLE Regional or Field Office, and
File a Request for Assistance (RFA), indicating:
- Your personal details
- Employer details
- Nature of the complaint: e.g., “Non-payment of 13th month” or “Withholding of performance incentives”
- Period covered and estimated amount (if known)

c. Process

Docketing of RFA – Your complaint is recorded.
DOLE schedules a conciliation-mediation conference (usually within a short period).
Both employee and employer are invited to attend.
The Conciliator-Mediator:
- Encourages parties to settle.
- Helps clarify legal obligations and possible liabilities.
Timeline – SEnA proceedings are time-bound (commonly within 30 days).

d. Outcomes

Settlement (Compromise Agreement) – If parties agree, the settlement is reduced into writing and signed.
- Settlements reached through SEnA can have the force of a final and binding agreement, enforceable in accordance with DOLE rules and, if necessary, through execution mechanisms.
No settlement – If no agreement is reached:
- The employee is typically issued a Referral or a Certificate of Non-Settlement, allowing them to:
  - Proceed to DOLE proper (for inspection or labor standards complaint), or
  - File a formal complaint with the NLRC, depending on the nature of the case.

3. Filing a formal complaint with DOLE (labor standards enforcement)

If SEnA fails or is not applicable, the employee may file a formal labor standards complaint.

a. Where to file

DOLE Regional Office / Field Office that covers the employer’s place of business.

b. What to include

Personal details
Employer name, address
Description of the complaint:
- “Non-payment of incentives for the period …”
- “Underpayment of 13th month pay”
- “Non-distribution of service charge”
Supporting documents (if available):
- Payslips, contracts, incentive scheme, HR memos, screenshots of company announcements, etc.

c. Possible actions by DOLE

Inspection / Investigation – DOLE may:
- Call the employer for conference.
- Inspect payrolls, vouchers, incentive reports.
Compliance Order – If violation is found, DOLE may order the employer to:
- Pay unpaid incentives or wage differentials.
- Fix their payroll practice.
- Pay administrative fines.

d. Appeal

Employers (or employees in some instances) may appeal a Compliance Order to higher DOLE officers or courts under specific rules and timelines.
During appeal, partial execution of awards may still take place (for uncontested amounts).

4. Filing a case with the NLRC (Labor Arbiter)

While this goes beyond DOLE strictly speaking, it’s an important part of the overall remedy system.

You may need to file with the NLRC if:

Your case involves:
- Illegal dismissal plus unpaid incentives,
- Claims for damages (moral, exemplary),
- Highly disputed questions (e.g., whether the “incentive” is really a vested benefit or not),
- A mix of issues better suited for a Labor Arbiter.

In many cases:

SEnA is still first required, then:
If no settlement, you proceed to filing a complaint with the NLRC.

The NLRC has the power to:

Award backwages, separation pay, and other money claims, including incentives that have become part of wages or benefits.
Issue decisions which can then be appealed to the Court of Appeals and, eventually, the Supreme Court.

VII. Evidence Employees Should Prepare

To maximize your chances of success—at DOLE, SEnA, or NLRC—it helps to gather:

Payslips and payroll records
- Show what you were actually paid and what was missing.
Employment contract, job offer, and company handbook
- Check for clauses on incentives, commissions, bonuses, and 13th month.
Company circulars, emails, or memos
- Announcements about incentive schemes, changes to incentive rates, or cancellation of bonuses.
Proof of actual performance / entitlement
- Sales records
- Performance evaluation reports
- Target vs. achievement reports These help prove that conditions for incentives were met.
Proof of company practice
- Old payslips showing repeated incentive payments over several years.
- Testimonies / statements of co-employees (even if initially informal).
Correspondence with HR/management
- Emails or letters where:
  - You asked for your incentives, or
  - The company gives reasons for non-payment.

VIII. Special Situations

1. Resigned or terminated employees

Resignation – Generally does not forfeit earned incentives or pro-rated statutory benefits.
Termination – Even if the dismissal is valid, the employee is still entitled to:
- Accrued incentives already earned prior to termination, and
- Statutory benefits due as of the last day (e.g., prorated 13th month, SIL conversion, service charge share already accrued).

2. Probationary employees

Probationary employees are usually covered by labor standards benefits (13th month, SIL when qualified, service charges) unless a specific legal exception applies.
Contractual incentives may or may not apply depending on the company scheme, but once they are included and earned under policy, the same principles on non-payment apply.

3. Retaliation for asserting rights

If an employee is punished (e.g., demoted, harassed, or dismissed) for complaining about incentives or asserting labor standards rights, this may give rise to:

Unfair labor practice (especially if union-related), or
Illegal dismissal / constructive dismissal.

In such cases, the remedy usually lies with the NLRC, after SEnA.

IX. Prescription (Time Limits) for Claims

Time limits matter:

Labor standards money claims (including unpaid incentives treated as part of compensation) generally prescribe within three (3) years from the time the cause of action accrued (i.e., when payment should have been made but was not).
Waiting too long may bar your claim, even if you are otherwise clearly entitled.

X. Practical Tips for Employees

Document everything early. Don’t rely on memory; keep copies of payslips, contracts, and emails.
Clarify your entitlement in writing. Send HR a polite email asking:
- “How is my incentive computed?”
- “Why was it not paid this period?”
Use the SEnA process at DOLE. It is designed to be employee-friendly, relatively quick, and informal.
Be realistic but firm in settlement. During DOLE mediation, consider:
- The strengths and weaknesses of your case,
- The time and effort of pursuing full litigation vs. a fair settlement.
Seek legal or union assistance for complex cases. Especially when:
- The amounts are large;
- The company disputes your basic entitlement;
- There are other issues like dismissal or harassment.

XI. Summary

Incentives in the Philippines may be statutory, contractual, or based on company practice.
Once legally vested, they cannot be arbitrarily withheld, reduced, or forfeited.
DOLE plays a key role in:
- Mediating disputes through SEnA,
- Enforcing labor standards through its visitorial and enforcement powers, and
- Ordering payment of money claims in appropriate cases.
For more complex disputes (especially involving dismissal or damages), the NLRC becomes the central forum.
Employees should act within the three-year prescriptive period, keep solid documentation, and use DOLE remedies strategically.

If you’d like, I can next help you draft a sample DOLE Request for Assistance (SEnA) or a template complaint letter to your HR tailored to non-payment or withholding of incentives.