The integrity of a worker’s wage is a fundamental pillar of Philippine labor law. Under the principle of "a fair day's wage for a fair day's work," the Labor Code of the Philippines establishes strict boundaries to ensure that employees actually receive the compensation they have earned. This article outlines the specific legal prohibitions and the very narrow exceptions regarding salary deductions.
The General Rule: Prohibition of Deductions
As a general rule, Article 113 of the Labor Code (as amended) prohibits employers from making deductions from the wages of their employees. The law is designed to prevent "kickbacks," "company store" abuses, and arbitrary penalties that diminish an employee's take-home pay.
The Supreme Court of the Philippines has consistently held that any deduction not specifically authorized by law or regulation is illegal, even if the employee ostensibly "consented" to it under duress or as a condition of employment.
The Exhaustive List of Authorized Deductions
Deductions are only permitted in the following specific instances:
- Mandatory Statutory Contributions: Deductions for premiums to the Social Security System (SSS), Philippine Health Insurance Corporation (PhilHealth), and the Home Development Mutual Fund (Pag-IBIG), as well as withholding taxes.
- Insurance Premiums: When the employer is authorized in writing by the employee to pay premiums on the employee's insurance life, health, or other similar insurance.
- Union Dues: In cases where the right to check-off has been recognized by the employer or authorized in writing by the individual employee.
- Debts Due to the Employer: Deductions for debts of the employee to the employer which are "due and demandable."
- Agency Fees: Deductions from non-union members who benefit from a Collective Bargaining Agreement (CBA), provided the amount does not exceed the dues paid by union members.
- Specific Cases Authorized by the Secretary of Labor: Any other deductions that may be permitted under regulations issued by the Department of Labor and Employment (DOLE).
Prohibited Acts and Practice
1. Labor Deposits and "Bonds"
Under Article 114, no employer shall require an employee to make deposits from which deductions shall be made for the reimbursement of loss or damage to tools, materials, or equipment supplied by the employer.
- The Exception: Deposits are only allowed in specific trades or occupations where the practice of making deductions or requiring deposits is a recognized custom (e.g., certain delivery services), or when the Secretary of Labor determines it is necessary. Even then, the deduction must be fair and reasonable and cannot exceed 20% of the employee's weekly wage.
2. Deduction for "Loss or Damage" (Strict Requirements)
An employer cannot simply subtract the cost of broken equipment or lost inventory from a paycheck. For a deduction for loss or damage to be legal, the following conditions must be met:
- The employee is clearly shown to be responsible for the loss/damage.
- The employee is given a fair opportunity to show cause why the deduction should not be made (due process).
- The amount of the deduction is fair and reasonable and shall not exceed the actual loss or damage.
- The deduction does not exceed 20% of the employee's wages in a week.
3. Withholding for Resignation or "CBA" Fees
It is illegal to withhold an employee's final pay as a penalty for resigning without sufficient notice, unless there is a clear, liquidated damages clause in the contract that does not violate public policy. Furthermore, an employer cannot deduct "recruitment fees" or "placement fees" from an employee’s salary after they have started working.
4. The "Kickback" Prohibition (Article 116)
It is unlawful for any person, directly or indirectly, to withhold any amount from the wages of a worker or induce such worker to give up any part of their wages by force, stealth, intimidation, threat, or by any other means whatsoever without the worker’s consent.
Legal Consequences of Illegal Deductions
Employers who violate these provisions may be subject to:
- Civil Liability: Payment of the full amount illegally deducted plus legal interest.
- Administrative Fines: Penalties imposed by DOLE during routine inspections.
- Criminal Liability: In extreme cases involving fraud or coercion, criminal charges may be filed under the Labor Code or the Revised Penal Code.
| Prohibited Action | Legal Basis |
|---|---|
| Charging for uniforms (unless mandated by custom/DOLE) | DOLE Advisory No. 11, Series of 2014 |
| Deducting for "shortages" without due process | Labor Code, Art. 114 |
| Mandatory "Donations" to company charities | Labor Code, Art. 116 |
| Requiring "cash bonds" for office staff | Labor Code, Art. 114 |
Summary of Protections
The law ensures that the worker’s wage is protected from the employer’s superior bargaining position. Any deduction that does not fall under the statutory exceptions—regardless of whether it is labeled as a "penalty," "fine," or "reimbursement"—is generally viewed with extreme disfavor by Philippine Labor Arbiter and the Courts.