Salary Deductions for Absences Including Allowances and Benefits

Salary Deductions for Absences Including Allowances and Benefits: A Comprehensive Overview in the Philippine Legal Context

Introduction

In the Philippine labor landscape, the principle of "no work, no pay" serves as a foundational rule governing compensation for employees. This concept, enshrined in the country's labor laws, allows employers to deduct from an employee's salary for days or hours not worked due to absences, tardiness, or undertime. However, such deductions must comply with strict legal parameters to avoid violating workers' rights. The topic of salary deductions for absences extends beyond basic wages to include allowances and benefits, which can be affected depending on their nature, the type of absence, and applicable laws or agreements.

This article provides an exhaustive examination of the subject under Philippine law, drawing from the Labor Code of the Philippines (Presidential Decree No. 442, as amended), Department of Labor and Employment (DOLE) regulations, Supreme Court jurisprudence, and related statutes. It covers the legal framework, permissible deductions, impacts on various compensation components, exceptions, procedural requirements, and remedies for disputes. The discussion aims to balance employer prerogatives with employee protections, emphasizing fair labor practices.

Legal Basis for Salary Deductions

The Philippine Labor Code forms the primary legal backbone for wage-related matters. Key provisions include:

• Article 82: Defines "wage" as remuneration for services rendered, implying that compensation is tied to actual work performed. This supports the "no work, no pay" doctrine, where absences without entitlement to paid leave result in non-payment for the unworked period.

• Article 113: Prohibits arbitrary deductions from wages, allowing them only in specific cases such as:

  • Insurance premiums (e.g., SSS, PhilHealth, Pag-IBIG).
  • Union dues with check-off authorization.
  • Deductions authorized by law or DOLE regulations.
  • With the employee's written consent for payment of debts or other obligations.

  Importantly, deductions for absences are not classified as "arbitrary deductions" under Article 113 but as adjustments for non-performance of work. They are permissible under the general principle of equity in labor relations.

• Article 94-95: Mandates paid rest days, holidays, and service incentive leaves, but unexcused absences on regular workdays allow for deductions.

• DOLE Department Order No. 18-02 (Rules Implementing Articles 106-109 on Contracting): Reinforces that deductions must not undermine minimum wage requirements.

Supreme Court decisions, such as in Santos v. NLRC (G.R. No. 76790, 1988), affirm that employers may deduct for unauthorized absences, provided they do not contravene labor standards. Additionally, the Omnibus Rules Implementing the Labor Code (Book III, Rule X) detail computation methods for daily rates and deductions.

Collective Bargaining Agreements (CBAs) or company policies may provide more favorable terms, but they cannot be less than statutory minimums (Article 227).

Deductions for Absences: Types and Computation

Absences can be categorized as excused (with pay) or unexcused (without pay), directly influencing deductions.

Types of Absences

• Excused Absences (No Deduction):

  • Paid leaves: Vacation leave (at least 5 days for employees with 1 year of service, per Article 95), sick leave (if provided by CBA or company policy, as it's not mandatory under law unless in specific industries), maternity/paternity leave (Expanded Maternity Leave Law, RA 11210; Solo Parents' Welfare Act, RA 8972).
  • Special leaves: Bereavement, emergency, or calamity leaves under DOLE advisories.
  • Suspensions due to employer fault or force majeure (e.g., typhoons, if work is impossible).

• Unexcused Absences (With Deduction):

  • Unauthorized leaves, habitual absenteeism, or absences exceeding entitled paid leaves.
  • Tardiness and undertime: Deducted proportionally (e.g., per minute or hour).

• Suspensions as Discipline: Under Article 277, employers may suspend employees for just causes (e.g., willful disobedience), during which no pay is due. This is not a deduction but a penalty, limited to 30 days without pay per offense.

Computation of Deductions

For monthly-paid employees, salaries are typically fixed, but deductions for absences are pro-rated based on the daily equivalent rate. Common formulas include:

• Daily Rate Calculation:

  • Factor 365: Monthly salary × 12 ÷ 365 (includes all days, used for 13th month pay computations under PD 851).
  • Factor 313: Monthly salary × 12 ÷ 313 (excludes Sundays and holidays, common for regular wage calculations).
  • Factor 251: For employees working 6 days a week, excluding rest days.

  Deduction = Daily rate × Number of absent days (or fractional hours for tardiness, e.g., hourly rate = daily rate ÷ 8).

• For Hourly or Daily-Paid Employees: Deduction is straightforward—non-payment for unworked hours/days.

Deductions must not reduce wages below the regional minimum wage (Wage Orders issued by Regional Tripartite Wages and Productivity Boards). If an absence causes the effective wage to fall below minimum, the employer may need to absorb the difference.

Impact on Allowances

Allowances are supplementary payments beyond basic salary, and their deductibility for absences varies based on their classification.

Types of Allowances

• Fixed Allowances: These are non-diminishable and often integrated into the basic wage. Examples:

  • Cost-of-Living Allowance (COLA): Under various Wage Orders (e.g., Wage Order No. NCR-23), COLA is part of the minimum wage and not deductible for absences, as it compensates for living expenses regardless of work performed.
  • Representation and Transportation Allowance (RATA): For government employees (under RA 6758), these are fixed and non-deductible unless specified otherwise.

• Variable or Performance-Based Allowances: Tied to actual work or output.

  • Productivity incentives or attendance bonuses: Fully deductible or forfeited for absences, as they reward presence and performance.
  • Meal or housing allowances: If provided as a fringe benefit, they may be prorated or withheld for absent days if company policy stipulates.

• De Minimis Benefits: Under Revenue Regulations No. 10-2008 (amended by RR 1-2015), small-value allowances (e.g., rice subsidy up to PHP 1,500/month) are tax-exempt and generally not deductible for absences, as they are welfare-oriented.

In private sector CBAs, allowances may be protected from deductions if deemed "regular and customary." Jurisprudence like Bankard Employees Union v. NLRC (G.R. No. 171664, 2013) holds that allowances forming part of compensation packages cannot be arbitrarily reduced.

For absences, if an allowance is computed based on days worked (e.g., commission-based), it is proportionally reduced. However, fixed allowances remain intact unless the absence leads to termination or disciplinary action affecting the entire package.

Impact on Benefits

Benefits encompass statutory and non-statutory entitlements, and absences can indirectly or directly affect them.

Statutory Benefits

• Social Security System (SSS) Contributions and Benefits: Contributions are based on monthly salary credit, which may be adjusted if absences reduce earnings. Benefits like sickness (RA 11199) require a minimum number of contributions and are prorated if absences exceed covered periods. Unexcused absences do not count toward qualifying days for benefits.

• PhilHealth and Pag-IBIG: Similar to SSS, contributions are salary-based. Absences reducing salary lower contributions, potentially affecting benefit eligibility (e.g., Pag-IBIG loans require continuous contributions).

• 13th Month Pay (PD 851): Computed as 1/12 of the basic salary earned within the calendar year. Absences without pay reduce the base salary, thus lowering the 13th month pay. However, paid leaves are included in the computation.

• Holiday Pay and Premium Pay (Article 94): Absences on holidays result in no holiday pay unless the "no work, no pay" is waived by policy. If absent the day before a holiday, holiday pay may be forfeited.

• Retirement Pay (Article 287): Based on creditable service years. Prolonged absences may interrupt service continuity, reducing accrued benefits.

Non-Statutory Benefits

• Bonuses and Profit-Sharing: Often discretionary; absences can lead to forfeiture if tied to attendance (e.g., perfect attendance bonus).
• Health Insurance or HMO: Employer-provided; premiums may continue, but claims for absence-related illnesses depend on policy terms.
• Educational or Training Allowances: If absences occur during training, reimbursements may be clawed back.

In cases of illness-related absences, the Employees' Compensation Commission (PD 626) provides benefits if work-related, without deduction from salary.

Exceptions and Special Cases

• Force Majeure: Absences due to natural disasters (e.g., under DOLE Labor Advisory No. 17-20 on COVID-19) may not warrant deductions if work is suspended.
• Union Activities: Absences for negotiations or grievances (Article 242) are paid.
• Probationary Employees: Same rules apply, but frequent absences may justify non-regularization.
• Piece-Rate Workers: No fixed salary; payment is output-based, so absences mean zero pay without deductions per se.
• Government Employees: Governed by Civil Service rules (RA 6713); deductions follow similar principles but with additional oversight from the CSC.
• Overseas Filipino Workers (OFWs): Migrant Workers Act (RA 8042) protects against unjust deductions; absences must be documented.

Procedural Requirements: Employers must issue notices for deductions, maintain records (pay slips per Article 113), and allow due process for disciplinary absences ( twin-notice rule under DOLE Department Order 147-15).

Remedies for Disputes

Employees can file complaints with DOLE for illegal deductions (Article 129 for money claims up to PHP 5,000; NLRC for larger amounts). Penalties for violations include fines (Article 288) or backwages. Mediation via Single Entry Approach (SEnA) is encouraged.

Conclusion

Salary deductions for absences in the Philippines embody the balance between labor productivity and worker welfare. While employers have the right to enforce "no work, no pay," deductions must be fair, lawful, and non-arbitrary, extending cautiously to allowances and benefits. Fixed components like COLA remain protected, while variable ones are more susceptible. Compliance with the Labor Code, DOLE issuances, and jurisprudence ensures equitable treatment. Employers should foster clear policies, and employees should understand their rights to prevent conflicts. Ultimately, this framework promotes a just work environment, aligning with the constitutional mandate for social justice in labor relations (Article XIII, Section 3, 1987 Constitution).