In the Philippine employment landscape, the intersection of wages and leave credits is governed by the Labor Code of the Philippines and various Republic Acts. Understanding the limitations on what an employer can deduct—and what they are required to pay during absences—is essential for ensuring compliance and protecting worker rights.
1. The General Rule on Wage Deductions
Under Article 113 of the Labor Code, the general rule is that employers are prohibited from making deductions from the wages of their employees. There are only three specific exceptions where deductions are legal:
- Insurance Premiums: When the employee is insured by the employer with their consent.
- Union Dues: In cases where the right to check-off has been recognized by the employer or authorized in writing by the employee.
- Legal Mandates: Deductions authorized by law, such as SSS, PhilHealth, Pag-IBIG contributions, and Withholding Tax.
Prohibited Deductions (Labor Code Art. 114 & 115)
Employers cannot require employees to make "deposits" for the loss or damage of tools or equipment unless it is a recognized practice in that specific trade (like in certain service industries) and the deduction is "fair and reasonable." Furthermore, it is illegal to deduct wages to pay for a "kickback" or any consideration for the privilege of being employed.
2. Payments During Vacation Leave
In the Philippines, there is no specific law mandating "Vacation Leave" (VL) for private-sector employees, with one major exception: the Service Incentive Leave (SIL).
Service Incentive Leave (SIL)
Under Article 95 of the Labor Code, every employee who has rendered at least one year of service is entitled to a yearly service incentive leave of five (5) days with pay.
- Commutation: If unused at the end of the year, the SIL must be converted into its cash equivalent based on the salary rate at the time of conversion.
- Company Policy: Most companies offer VLs beyond the mandatory 5-day SIL. Once these are granted through a Collective Bargaining Agreement (CBA) or established company policy, they become "vested rights" and cannot be unilaterally withdrawn by the employer.
3. Payments During Sick Leave
Similar to vacation leave, the Labor Code does not explicitly mandate paid "Sick Leave" (SL) for private-sector employees. This is usually a matter of voluntary employer policy or CBA negotiations.
Sickness Benefit (SSS Law)
While the employer might not pay the salary directly, the Social Security Act (RA 11199) provides for a Sickness Benefit.
- If an employee has used up all their company-provided sick leaves, the SSS provides a daily cash allowance for the number of days they are unable to work due to illness or injury.
- The employer must advance this payment and later seek reimbursement from the SSS.
4. Statutory Special Leaves (With Pay)
Beyond VL and SL, Philippine law mandates several specific leaves that must be paid:
| Leave Type | Duration | Legal Basis |
|---|---|---|
| Maternity Leave | 105 Days (120 if Solo Parent) | RA 11210 |
| Paternity Leave | 7 Days | RA 8187 |
| Solo Parent Leave | 7 Days | RA 8972 |
| VAWC Leave | Up to 10 Days | RA 9262 |
| Gynecological Leave | Up to 2 Months | RA 9710 (Magna Carta of Women) |
5. The "No Work, No Pay" Principle
The fundamental principle in Philippine labor law regarding absences is "A fair day's wage for a fair day's labor."
- Unpaid Leaves: If an employee has exhausted all their leave credits (SIL, VL, or SL), any further absence is generally considered "Leave Without Pay." The employer is not making a "deduction" in the legal sense; rather, they are simply not paying for time not worked.
- Tardiness and Undertime: Deductions for tardiness or undertime must be proportional to the actual time lost. Employers cannot impose "penal" deductions (e.g., deducting one hour of pay for 5 minutes of tardiness) as this violates the rule on payment of wages.
6. Unauthorized Deductions and Recourse
If an employer makes unauthorized deductions from an employee's salary or refuses to pay mandatory leave benefits, it is considered a money claim under the jurisdiction of the National Labor Relations Commission (NLRC).
- Non-Diminution of Benefits: Under Article 100, any benefit or practice currently enjoyed by employees cannot be reduced or eliminated by the employer if it has become a "consistent company practice" over a significant period. This includes the computation of leave conversions and holiday pay.