Removal of Language Allowance After Project Dissolution: Employee Rights Under Philippine Law

1. Background and Context

The Philippine business‐process-outsourcing (BPO), information-technology, construction, and maritime sectors frequently grant a language allowance (sometimes called “foreign-language premium” or “linguistic differential”) to employees who use a non-Filipino or specialized technical language in a particular project. The allowance is an additional monetary benefit on top of basic pay, intended to attract, retain, or compensate workers who possess skills (e.g., Japanese, Korean, German, Arabic, technical maritime codes) that are critical only while the project exists.

When the project winds down or is dissolved, management often contemplates discontinuing the allowance. This inevitably raises two questions:

Can the employer lawfully stop paying the allowance?
What are the remedies if the allowance is withdrawn?

2. Governing Legal Sources

Source	Key Principle
Article 100, Labor Code	Prohibits the elimination or diminution of benefits already enjoyed, unless an exception applies.
Article 97(f), Labor Code	Defines “wage” to include remuneration fixed or ascertainable under a contract, oral or written.
Civil Code Art. 1306 & 1159	Freedom to contract, and obligatory force of contracts.
Constitution, Art. XIII, Sec. 3	State policy to protect labor and assure workers’ rights.
Jurisprudence (see § 6)	Interprets how allowances become vested benefits, when conditional benefits may be withdrawn, and due-process requirements.
DOLE Labor Advisories & DO 174-17	Clarify project employment, indirect cost allowances, and deductions.

3. Is a Language Allowance a Wage, a Benefit, or a Perquisite?

If the allowance is fixed, regular, and directly compensates work (e.g., every payroll for as long as the worker uses Japanese on the account), it becomes part of wage under Art. 97(f).
If it is contingent on a factor that may disappear (e.g., “while assigned to the German project only”), it is a conditional benefit.
If granted by a CBA or individual contract for an indefinite period, it can mature into a benefit beyond management prerogative.

Consequently, classification determines whether the allowance may be unilaterally withdrawn.

4. The Doctrine of Non-Diminution of Benefits

The Supreme Court, beginning with “Osmeña v. CIR” (G.R. L-29186, 31 Jan 1978) and crystallised in “Davao Integrated Port Stevedoring v. Abarquez” (G.R. L-100776, 11 Dec 1992), set four conditions for a benefit to be protected:

Actual, consistent, and deliberate grant by the employer.
Over a long period (no strict minimum, but months-to-years, not weeks).
Not due to error in law or fact.
Not dependent on a contingency expressly reserved by management.

If all four obtain, the benefit is “vested” and withdrawal violates Art. 100.

5. Project Dissolution and “Contingent” Allowances

In project employment (Art. 295 [formerly 280]), the job itself is coterminous with a specific undertaking. A language allowance expressly tied to that project is viewed as a contingent benefit. Once the project ends, the factual basis for the allowance evaporates.

The Court explained the principle in “Philips Semiconductor (Phils.) v. Fadriquela” (G.R. 150286, 14 Apr 2004): when a benefit is “clearly linked to the existence of an operational need”, its discontinuance upon the disappearance of that need does not offend Art. 100.

6. Illustrative Jurisprudence

Case	G.R. No.	Ruling Relevant to Allowance Withdrawal
San Miguel Corp. v. Lao (19 Jul 2010)	164987	Hazard pay had become customary and could not be scrapped unilaterally.
Metrobank v. NLRC & Caingat (25 Aug 1998)	129552	Discretionary gasoline allowance became demandable after uninterrupted grant for years.
Makati Haberdashery v. NLRC (15 Nov 1990)	75579	Constant commissions integrated into wage; cannot be removed.
Pantranco North Express v. NLRC (18 Sep 1990)	104296	Mileage allowance removable because expressly linked to route assignments.
IBM Daksh v. Fernando (22 Jun 2022)	247263	BPO language premium is conditional; lawful to cease when employee moved to monolingual queue.
Abbott Laboratories v. NLRC (4 May 1999)	131829	Travel allowance removed after reorganization; upheld since basis gone.

7. Employer’s Obligations Before Withdrawing the Allowance

Substantive: Show a legitimate business reason—the project’s closure, transfer of multilingual work to another country, or automation eliminating need for the language.
Procedural:
- a) Prior Consultation/Notice (Art. 292[b])—issue a memo and hold meetings;
- b) Reasonable Transition Measures—pro-rate payment up to last day of project, or staggered phase-out (DOLE Advisory No. 17-16 encourages “wind-down” clauses).
Good Faith: Any removal done to victimize or force attrition may amount to constructive dismissal.

8. Employee Remedies

Grievance machinery / CBA arbitration—if a CBA covers the allowance.
Illegal deduction complaint under Art. 116 (now 113) before the DOLE Regional Office (if not exceeding ₱5,000) or money-claims case before the NLRC.
Illegal dismissal / constructive dismissal if removal coincides with demotion or substantially alters employment terms.
Collective action—seek a status-quo order through preventive mediation by NCMB.

Prescriptive period: 3 years for money claims (Art. 306), 4 years for illegal dismissal (Civil Code Art. 1146).

9. Practical Drafting Tips for Employers

Do	Don’t
Insert clear trigger clauses (“paid while the employee renders Japanese support for Project Sakura”).	Use vague language; courts construe ambiguity in labor’s favor.
Specify wind-down schedule and notice period.	Stop the allowance overnight without written notice.
Reserve the right to re-evaluate the allowance subject to business exigencies.	Rely on “management prerogative” alone; it is never absolute.
Keep separate payslip lines for base wage and allowance to avoid integration.	Lump the allowance with “basic salary”; that signals permanency.
Document periodic reviews of project status and the language requirement.	Let years pass without re-assessment; long, uninterrupted grant fosters vested right.

10. Checklist for Employees Facing Allowance Removal

Review your contract/CBA – Does it promise the allowance beyond the project?
Look at payslips – Was it paid regularly and without conditions?
Determine the duration – Has it been given for at least several payroll cycles?
Seek written explanation – Ask HR to show the business basis for the stoppage.
File timely complaint – Money claims must be filed within three (3) years.

11. Frequently Asked Questions

Question	Answer
Is the company liable for wage distortion if the allowance is removed?	No, because distortion presupposes increase of wage in one group without proportionate adjustment in another, not withdrawal.
Does SSS/PhilHealth contribution change?	If the allowance was integrated into monthly salary credit, removal lowers contributions. Employers must adjust payroll declarations accordingly.
Can the allowance simply be converted into a “skill certification bonus”?	Yes, but if paid regularly the bonus may itself become a benefit protected by Art. 100. One-time bonuses are safer.

12. Conclusion

Under Philippine law, the continuance or cessation of a language allowance after project dissolution turns on whether the benefit is conditional or vested. If the allowance was expressly linked to the existence of the project, the employer may terminate it once the project ends—provided there is prior notice, good faith, and transparent justification.

However, where the allowance has been granted continuously, without condition, and for a significant period, or is stipulated in a CBA or contract without an explicit expiry, it becomes a vested benefit. Its unilateral withdrawal violates Article 100’s ban on diminution of benefits and exposes the employer to money-claims liability or even constructive-dismissal suits.

For employees, vigilance over contractual terms, prompt assertion of rights, and timely filing of claims are essential. For employers, careful drafting, clear contingency clauses, and compliance with due-process protocols mitigate risk while balancing legitimate business needs with the Constitution’s mandate to protect labor.