Salary Deductions for Tardiness and Undertime under Philippine Labor Law
A comprehensive doctrinal, jurisprudential, and practical guide (updated to May 27 2025)
Executive Summary
Under Philippine labor law, an employer may proportionately reduce an employee’s wage when the employee fails to render the full work-day because of tardiness (late arrival) or undertime (early departure). The deduction is not treated as a “wage deduction” in the strict sense of Labor Code Article 113 (renumbered Article 118¹) because no wages have yet been earned for the unworked minutes or hours. Instead, it flows from the long-standing “no-work-no-pay” principle repeatedly affirmed by the Supreme Court. Nevertheless, the practice is bounded by (1) statutory rules on hours of work, (2) limits on unlawful wage deductions and penalties, (3) constitutional and contractual due-process requirements, and (4) the employer’s own timekeeping policy that must be reasonable, written, and properly communicated.
I. Legal Matrix
| Source of law | Key provisions / concepts relevant to tardiness & undertime |
|---|---|
| 1987 Constitution | Living-wage clause (Art. XIII §3); due-process guarantees |
| Labor Code of the Philippines (Pres. Decree 442, as amended) | • Book III: Hours of Work (Arts. 82–92) • Art. 113 [118]: Prohibited & authorized wage deductions • Art. 94 [100]: Non-diminution of benefits • Arts. 297-299 [282-284]: Just causes for dismissal (includes habitual neglect of duties) |
| Implementing Rules & Regulations (IRR), Book III | Rule I §2: “Hours worked” definition; Rule IV §9: computation of equivalent hourly rate |
| Department of Labor & Employment (DOLE) issuances | • Labor Advisory No. 01-09 (clarifies “no-work-no-pay”) • Handbook on Workers’ Statutory Benefits (updated 2023) |
| Supreme Court jurisprudence | e.g., Techno-Plast v. NLRC (G.R. 111222, 17 Jul 1997); Sy v. Neat Newswire (G.R. 150389, 19 Jun 2003); Intercontinental Broadcasting Corp. v. Benitez (G.R. 185709, 25 Feb 2015); A.Q. Shipmanagement (G.R. 170623, 13 Nov 2013) |
| Special legislation | • R.A. 10361 (Domestic Workers Act) – “no work, no pay” for kasambahays • R.A. 11165 (Telecommuting Act) – parity clause for remote workers |
| Company policy / CBA | May fix grace periods, rounding rules, penalties (if any), subject to Art. 100 & reasonableness |
¹The renumbering under DOLE Department Advisory No. 01-15 placed “Deductions from Wages” at Art. 118 without altering the text.
II. The “No Work, No Pay” Rule
- Concept – Wages are compensation for work actually performed. If the employee voluntarily or culpably fails to work for any period, the corresponding pay is not yet earned.
- Constitutionality – The Supreme Court has repeatedly upheld the rule as consistent with substantive due process and the right to contract (Sy; Techno-Plast).
- Distinction from penalties – Withholding pay not yet earned is lawful; imposing fines or double deductions is not, unless expressly allowed by law or with the employee’s written, informed consent.
III. Tardiness vs. Undertime vs. Absence
| Term | Working definition | Payroll effect |
|---|---|---|
| Tardiness | Arrival after the start of scheduled shift | Deduct minutes/hours late |
| Undertime | Leaving before the end of scheduled shift (excluding authorized undertime such as medical leave) | Deduct minutes/hours short |
| Absence | Failure to report for the entire work-day | Deduct full day; possible leave offset |
Habitual** tardiness or undertime may ripen into gross and habitual neglect of duties—a just cause for dismissal—after observance of procedural due process (A.Q. Shipmanagement).
IV. Authorized vs. Prohibited Wage Deductions
A. Article 113 [118]
An employer may deduct from wages only if any one of these applies:
- Required by law (tax, SSS, PhilHealth, Pag-IBIG, garnishment);
- Employee-authorized in writing for payment to a third party (no employer profit);
- Authorized by the DOLE Secretary (e.g., union shop fees); or
- Union-dues check-off under a collective bargaining agreement.
Tardiness/undertime does not fall under Art. 113 because the amount deducted is not “from wages already earned” but is the wage not yet earned for time not worked. This interpretation, adopted in Techno-Plast and in DOLE Advisories, insulates reasonable pro-rata deductions from the prohibition.
B. Article 116 [121] – Kickbacks and Reimbursements
Prohibits employers from exacting refunds of wages once paid. Hence, once a payroll is closed, retroactive claw-backs for tardiness without employee consent violate Art. 116. Employers must therefore capture time and deduct within the relevant cut-off.
V. Computation of Deductions
1. Identify Pay Scheme
| Scheme | Coverage | How to get equivalent hourly rate (EHR) |
|---|---|---|
| Monthly-paid (covers 365/yr: workdays + rest days + regular holidays) | Rank-and-file office staff | EHR = (Monthly Rate × 12) ÷ 365 ÷ 8 |
| Daily-paid (paid only on days actually worked plus mandated holiday/rest pay) | Factory, construction, security guards | EHR = Daily Rate ÷ 8 |
| Fluctuating-workweek / Results-oriented | Sales, field personnel | Usually not hour-based; tardiness concept rarely applies unless hours are determinable. |
Tip: Some employers use 313 days (365 − 52 rest days) when the monthly salary excludes rest days. The policy must state which divisor is used and apply it consistently.
2. Deduct Pro-rata
Deduction = EHR × (Minutes late ÷ 60)Rounding rules (best practice):
| Late/under minutes | Recorded as | Rationale |
|---|---|---|
| 1–5 | 0 minutes (grace period) | Employee-morale policy |
| 6–15 | 15 minutes | Aligns to ¼-hour clocking increments |
| >15 exact | Actual minutes, or next 15-min block | Must be clearly stated |
3. Interaction with Overtime
Undertime cannot be netted against overtime rendered on the same day unless there is an express, voluntary arrangement (no offset rule, Art. 83 IRR).
VI. Due-Process Requirements for Habitual Tardiness
- First notice – Specify each incident (date, minutes late, policy violated).
- Ample opportunity to explain – Written explanation or hearing.
- Second notice – Decision imposing penalty (suspension/dismissal) proportional to gravity and after considering length of service and record (Sy doctrine).
Failure to observe the twin-notice rule makes the employer liable for nominal damages even if the dismissal is substantively valid (Jaka Food Processing, G.R. 151378, 10 Mar 2005).
VII. Effect on Statutory & Voluntary Benefits
| Benefit | Is it reduced by tardiness/undertime? | Notes |
|---|---|---|
| 13th-month pay (P.D. 851) | Yes – computed on basic salary earned within the calendar year | Less hours worked → lower accrual |
| SSS, PhilHealth, Pag-IBIG contributions | No – based on fixed monthly salary credit brackets | Even with absences, remit full employer share |
| Service Incentive Leave (SIL) | No – accrues based on length of service | But SIL conversion is based on basic pay rate |
| Holiday Pay / Rest-Day Pay | Yes – employee must be present or on leave with pay the day immediately preceding the holiday to qualify | |
| Performance Bonus / Attendance Bonus | Depends on company policy or CBA | Must be uniformly applied |
VIII. Special Work Arrangements
- Flexible Working Time / Core-Hours Labor Advisory No. 02-04 allows flexitime if majority of employees agree and productivity is preserved. Core-hour lateness may still be deducted.
- Compressed Workweek (CWW) Under DOLE Guidelines (1998 & DO 02-19), hours beyond 8 in a CWW day are not overtime if the weekly total is 48; however, deductions for late arrival on a CWW day are computed on the CWW-hourly rate.
- Telecommuting / Hybrid R.A. 11165: Remote workers must receive “a rate not less than that paid to comparable on-site employees.” Employers may track log-ins or output; deductions for failure to meet agreed login time or deliverables must follow the same policy applied on-site.
IX. Public-Sector Nuances
Civil Service Commission (CSC) Memorandum Circular No. 11-2004 allows a grace period of 15 minutes but requires tardiness beyond the grace to be charged against leave credits or deducted from salary. Private employers often adopt similar leniency but are not legally compelled.
X. Employer Compliance Checklist
| ✔ | Action item |
|---|---|
| 📄 | Issue a written time & attendance policy (define official time, grace period, rounding, disciplinary ladder). |
| 🕒 | Install reliable timekeeping system (biometrics, web log-in, mobile GPS) and keep logs for 3 years (Art. 111-C [122]). |
| 💵 | Use the correct hourly divisor consistently; reflect each deduction on the payslip (RA 10361 & DO 209-20). |
| 📢 | Orient employees and obtain acknowledgment; for CBAs, discuss in labor-management council. |
| 📊 | Periodically audit payroll to avoid over- or under-deductions; rectify in the next cut-off to avoid Art. 116 infractions. |
| 📝 | Observe twin-notice due process for habitual offenders; keep documentary trail. |
XI. Employee Remedies
- Plant-level – Grievance machinery or HR appeal.
- DOLE Single-Entry Approach (SEnA) – Free 30-day mediation.
- NLRC arbitration – For claims > ₱5,000 or involving dismissal.
- Small-claims wage complaints – Regional DOLE office for money claims ≤ ₱5,000 (Art. 129 [128]).
Retaliatory dismissal for filing a complaint constitutes illegal dismissal with full back wages and reinstatement or separation pay in lieu thereof.
XII. Tax & Accounting Treatment
- Deductions for unworked hours simply reduce gross taxable compensation; no special tax adjustment is required.
- Employers must keep monthly alpha-lists reflecting actual pay; material discrepancies may trigger BIR audit.
XIII. Emerging Trends & Pending Bills (as of May 2025)
| Legislative proposal | Status | Impact on tardiness deductions |
|---|---|---|
| House Bill 9776 – “Expanded Flexi-Time Act” | Pending 2nd Reading | Would institutionalize employee choice of start time within a 2-hour bandwidth; deductions restricted during grace bandwidth |
| Senate Bill 2150 – “Right to Disconnect Act” | Committee Report | May affect remote workers’ definition of “working hours” and valid undertime |
XIV. Conclusion
Salary deductions for tardiness and undertime in the Philippines rest on the universally accepted “no work, no pay” doctrine, but they operate within a tight lattice of statutory safeguards and due-process norms. For employers, meticulous documentation, transparent policies, and consistent computation prevent disputes. For employees, understanding the rules clarifies legitimate pay reductions and empowers them to challenge abuses. As work patterns evolve—flexitime, remote work, compressed weeks—the fundamental principle endures: compensation is earned one hour at a time, but fairness is measured in every minute.
This article is for general information only and is not a substitute for formal legal advice. Consult a Philippine labor-law specialist or the Department of Labor and Employment for guidance on specific cases.