In the Philippine employment landscape, the intersection of payroll and leave management is governed by the Labor Code, Civil Service rules (for public sectors), and established jurisprudence. A common point of confusion arises when an employee incurs "Leave Without Pay" (LWOP) despite having "Approved Credits," or conversely, when an employer deducts salary for absences that should have been covered by earned leaves.
1. The Core Principle: "A Fair Day's Wage for a Fair Day's Work"
The fundamental doctrine in Philippine labor law is "no work, no pay." If an employee does not render service, the employer is generally not obligated to pay wages for that period, unless a specific law or company policy (like paid vacation or sick leave) provides otherwise.
- LWOP (Leave Without Pay): Occurs when an employee is absent but has either exhausted their paid leave credits or chooses not to use them (if allowed), resulting in a salary deduction.
- Paid Leave: A contractual or legal benefit where the employer agrees to pay the employee despite their absence.
2. Approved Credits vs. Salary Deductions
If an employee has Approved Credits (Vacation Leave, Sick Leave, or Mandated Leaves), a salary deduction for an absence is generally considered illegal or a "diminution of benefits," provided the employee followed the company's notification and approval procedures.
When Deductions are Legal
- Exhaustion of Credits: Once the allocated 5 days of Service Incentive Leave (SIL) or additional company-provided leaves are used up, any further absence is automatically LWOP.
- Unapproved Absence: Even if an employee has credits, if the leave was not "approved" (e.g., AWOL or failure to file the form within the required timeframe), the employer may treat the day as unpaid and, in some cases, a disciplinary matter.
- Specific Request: An employee may opt to save their credits for a future date and voluntarily take a day as LWOP, though this is subject to management discretion.
When Deductions are Illegal
If an employee has available credits and the leave was duly approved as "Paid Leave," any deduction from the basic salary violates the Labor Code. Under Article 113, deductions from wages are only allowed in specific scenarios (e.g., insurance premiums, union dues, or debts to the employer with written consent).
3. Statutory Leaves in the Philippines
Under Philippine law, several leaves are mandatory. Deducting salary for these, provided the criteria are met, is a violation of labor standards:
| Leave Type | Duration | Legal Basis |
|---|---|---|
| Service Incentive Leave (SIL) | 5 days per year | Labor Code, Art. 95 |
| Maternity Leave | 105 days (Paid) | RA 11210 |
| Paternity Leave | 7 days (Paid) | RA 8187 |
| Solo Parent Leave | 7 days (Paid) | RA 8972 / RA 11861 |
| VAWC Leave | Up to 10 days (Paid) | RA 9262 |
| Special Leave (Gynecological) | Up to 2 months (Paid) | RA 9710 |
Note: For private sector employees, Sick Leave (SL) and Vacation Leave (VL) beyond the 5-day SIL are not mandated by the Labor Code; they are usually matters of Company Policy or a Collective Bargaining Agreement (CBA). Once granted via contract, they become enforceable rights.
4. Computation of Deductions
When an LWOP deduction is validly applied, the formula typically used is:
Employers must ensure that the deduction does not affect the 13th Month Pay calculation, as that is based on the total basic salary earned during the calendar year. Therefore, while the monthly take-home pay decreases, the 13th-month pay is naturally reduced because the "total basic salary" for the year is lower.
5. Jurisprudence and Diminution of Benefits
Article 100 of the Labor Code prohibits the elimination or diminution of existing benefits. If a company has a long-standing practice of allowing employees to use leave credits to cover absences, they cannot suddenly deduct salary for those absences without valid cause or a change in the CBA.
In Arco Management Co., Inc. vs. NLRC, the court emphasized that benefits voluntarily granted by an employer cannot be unilaterally withdrawn if they have ripened into a company practice.
6. Public Sector Variance (CSC Rules)
For government employees, the Civil Service Commission (CSC) rules are stricter.
- Rule XVI of the Omnibus Rules on Leave states that leaves without pay shall not exceed one year.
- If a government employee is absent without approved leave, they receive no pay, and if the absence exceeds 30 days without notice, they may be dropped from the rolls.
- Unlike the private sector, government employees usually "earn" leave credits monthly (1.25 days for VL and 1.25 days for SL). If they haven't "earned" the credit yet, the absence is LWOP.
7. Administrative Remedies
If an employer erroneously deducts salary for an absence that was covered by approved credits:
- Internal Grievance: The employee should present the "Approved Leave Request" to the HR/Payroll department.
- SENA (Single Entry Approach): If unresolved, the employee may file a request for assistance with the Department of Labor and Employment (DOLE) for mediation.
- Labor Arbiter: For significant or recurring illegal deductions, a formal case for "Underpayment of Wages" or "Illegal Deduction" can be filed with the National Labor Relations Commission (NLRC).