Philippine Labor Law Rules, Common Workplace Policies, and When Deductions Become Unlawful

1) The situation

A common workplace dispute looks like this:

An employee is absent due to illness or injury.
The employee later presents a medical certificate (med cert).
The employee did not file a leave application on time (or at all) under company procedure.
The employer treats the day(s) as “unfiled,” “AWOL,” or “unauthorized,” and deducts pay.

Whether that deduction is legal in the Philippines depends on what the “deduction” really is, what leave benefits apply, and what the company policy/CBA requires—all viewed through the basic rules on wages, leave benefits, and management prerogative.

2) Start with the baseline: “No work, no pay”

In Philippine private employment, the default rule is the “no work, no pay” principle: if no work is performed, the employee generally is not entitled to wages for that day unless a law, a contract, a collective bargaining agreement (CBA), or a company policy grants payment (e.g., paid leave, holiday pay rules, special leave benefits).

So even with a med cert, the core question is:

Was the employee entitled to be paid for the day of absence? If not, the employer paying nothing for that day is usually not an unlawful “deduction”—it’s simply non-payment for time not worked.

But this changes if the employee had a paid leave entitlement (statutory or company-granted) and met the conditions to use it.

3) “Deduction” vs. “unearned wages”: why the label matters

Philippine labor standards restrict wage deductions and withholding of wages. The Labor Code generally prohibits unauthorized deductions and withholding, allowing them only in limited circumstances (e.g., those authorized by law, regulations, or with employee authorization, subject to rules).

However, many absence disputes are not truly “deductions” in the strict sense. They are often:

Non-payment of wages because the employee did not work, or
Charging an absence to unpaid leave due to failure to comply with leave rules.

Where it becomes legally problematic is when the employer:

Refuses to pay a day that should have been paid (because the employee had leave credits or a statutory benefit and complied substantially), or
Imposes extra monetary penalties disguised as “deductions” (e.g., deducting more than the wage equivalent of the unworked day, “fines,” double deductions, or forcing the employee to pay a penalty through payroll without legal basis).

4) What the law actually guarantees: paid sick leave is not automatic in the private sector

A critical Philippine-context point: there is no general statutory paid sick leave for all private-sector employees simply because they are ill and can prove it with a med cert.

What may apply instead:

A. Service Incentive Leave (SIL) – 5 days with pay

Qualified employees are entitled to at least five (5) days SIL with pay per year after the required service period, unless exempted by law/rules (e.g., certain establishments and categories may be excluded). SIL can generally be used for vacation or sick leave, subject to reasonable company procedure.

Key implications:

If the employee has unused SIL credits and is eligible, the absence may be payable if properly charged to SIL.
But employers may require leave filing (including retroactive filing within a set period for emergencies).

B. Company policy / employment contract / CBA sick leave benefits

Most paid sick leave in the private sector exists because:

the company grants it (HR policy/handbook), or
it is negotiated in a CBA, or
it is part of an individual contract.

If the benefit exists, the employer must follow its own rules consistently and in good faith.

C. SSS Sickness Benefit (not wages, but a statutory cash benefit)

For qualifying SSS members, sickness of sufficient duration and proper documentation may entitle the employee to an SSS sickness benefit, typically where the sickness/injury causes incapacity for work for at least four (4) days and other requirements are met.

Important distinctions:

This is not “salary” granted by the employer; it’s a social security benefit (with employer participation in filing and advance payment in many cases).
If the absence is covered by SSS sickness benefit, the employee may still receive compensation even if the employer does not pay wages for that day—depending on coordination with company sick leave benefits and policy.

D. Special statutory leaves that can intersect with medical documentation

Some leaves are statutory and often require medical certification or documentation, such as:

Special Leave Benefit for Women (gynecological surgery-related leave under the Magna Carta of Women),
Expanded Maternity Leave (medical-related documentation),
Other special leaves (e.g., VAWC leave, solo parent leave) that have their own documentary requirements (not always “medical certificate,” but documentation-based).

These are different from ordinary “sick leave,” and each has its own rules.

5) What a medical certificate does—and does not—do

A medical certificate is powerful evidence that:

the employee was ill or injured,
the employee may have been medically advised to rest, and
the absence may be justified.

But a med cert does not automatically convert an absence into “paid leave.” It usually affects two separate issues:

Justification/excuse for absence (discipline issue) A valid medical reason can mean the absence is not willful and may not be treated as misconduct.
Eligibility to use paid leave credits (compensation issue) A med cert may be a required document to qualify for paid sick leave credits under policy/CBA, or to support an SSS sickness claim.

So the employer may still lawfully say:

“Your absence is excused, but it is without pay because you have no paid leave credits (or did not comply with requirements to use them).”

The dispute typically arises when the employee does have credits or statutory entitlements, yet pay is still withheld due to “unfiled leave.”

6) Leave filing rules: management prerogative, but not unlimited

Employers in the Philippines generally have the right (management prerogative) to impose reasonable rules on attendance, leave filing, and documentation, such as:

advance filing for planned leave,
immediate notice for emergency sick leave,
retroactive filing within a set window (e.g., within 24–72 hours upon return),
required med cert for sick leave beyond a certain number of days,
verification by a company-accredited physician in defined cases,
fit-to-work clearance for certain illnesses or after hospitalization.

These rules are usually enforceable if they are:

reasonable,
clearly communicated,
consistently applied,
not contrary to law, morals, public policy, or due process standards.

Common lawful approach: For sudden illness, many policies allow post-facto filing upon return to work, supported by a med cert. Where the policy is silent, practice and fairness often fill the gaps.

Where conflict starts: An employer may deny payment because “leave was not filed,” even if the employee later submits a valid med cert. Whether that denial is valid depends on the source of the paid benefit and whether compliance failure is material and willful.

7) When “deducting pay” is generally lawful, even with a medical certificate

Scenario 1: No paid leave entitlement exists

If the employee:

is not yet eligible for SIL (e.g., not qualified by length of service), and
has no company-granted sick leave credits, and
does not qualify for SSS sickness benefit (e.g., only 1–3 days illness or requirements unmet),

then the employer may treat the absence as unpaid even if medically justified.

Scenario 2: Employee has leave credits, but policy requires timely filing and the employee did not comply without a compelling reason

If paid sick leave is a company benefit, the employer can condition its use on reasonable procedures. If the employee:

failed to notify,
failed to file within the allowed retroactive period,
submitted an insufficient or unverifiable med cert,
refused required verification steps (within reason),

the employer may deny charging the day to paid leave credits and treat it as unpaid—provided the policy is clear and applied fairly.

Scenario 3: The employer is not “deducting” wages earned; it’s not paying for a day not worked

For daily-paid employees, this is straightforward. For monthly-paid employees, the employer may compute the value of the absence and reflect it as a salary adjustment, provided it is truly just the equivalent pay for time not worked, not an additional penalty.

8) When the “deduction” becomes illegal or highly contestable

A. The employee had a clear paid entitlement and substantially complied

Examples:

The employee has available SIL or sick leave credits.
The employee submitted a med cert and complied with required notice as soon as practicable (e.g., hospitalization, emergency).
The employer denies pay solely due to a technicality, despite good-faith compliance and a legitimate medical reason.

If the entitlement is part of compensation (policy/CBA/contract), unjustified denial can be treated as withholding of wages/benefits due, leading to a money claim.

B. The employer imposes a monetary penalty through payroll beyond the unworked day

Red flags:

Deducting more than the wage for the day(s) missed.
“Fines,” “penalty deductions,” “disciplinary deductions” taken from wages without legal basis.
Automatic deductions for alleged policy violations without due process.

Even when the absence is unauthorized, discipline is typically handled through administrative sanctions (warning/suspension, etc.) with due process—not payroll fines that function as unauthorized deductions.

C. Discriminatory or inconsistent application

If the employer:

routinely allows retroactive filing for some employees but not others,
singles out a worker,
changes enforcement only when relations sour,
applies rules in a way that appears retaliatory,

that pattern can strengthen claims of unfair labor practice (in union contexts), bad faith, or constructive dismissal arguments (in severe cases), aside from wage claims.

D. The employer refuses to process SSS sickness benefit properly

Where the employee is eligible, the employer has responsibilities in certification/processing. An employer’s unjustified refusal to assist/comply can expose it to administrative issues and employee complaints.

9) AWOL vs. sick leave: discipline is separate from pay, but they overlap

Employers often label unfiled absences as AWOL. In practice:

AWOL is a policy concept used to flag unauthorized absence.
Illness supported by medical documentation may defeat the idea that the employee “abandoned” work or willfully violated attendance rules—especially if the employee communicated promptly.

Discipline rules still require due process, particularly for suspension or termination:

notice of the charge,
opportunity to explain,
a decision based on evidence.

Even if the employer can treat the day as unpaid, branding a medically supported absence as misconduct without a fair process can create separate legal exposure.

10) Payroll knock-on effects: holidays, 13th month pay, and leave conversions

A. Regular holidays and special non-working days

Regular holiday pay has its own eligibility rules (often tied to attendance or being on leave with pay on the day immediately preceding the holiday for certain daily-paid arrangements). If the absence is treated as unpaid, it may affect entitlement depending on classification and pay scheme.
Special non-working days generally follow “no work, no pay” unless company policy, CBA, or a favorable practice provides otherwise.

Monthly-paid employees are commonly treated differently in computation because monthly salary typically covers holidays and rest days, but employers may still deduct for absences based on internal payroll rules—this is an area where payroll practice must match the legally compliant pay scheme and consistently applied policy.

B. 13th month pay

The 13th month pay is based on basic salary earned during the year.

Unpaid absences reduce the basic salary earned, and typically reduce 13th month pay correspondingly.
Paid leave (e.g., sick leave with pay, SIL used) usually remains part of basic salary paid and therefore is typically included.

C. SIL conversion to cash

Unused SIL is commonly convertible to cash (especially upon separation, and often by policy at year-end). If an employer improperly refuses to let an employee use SIL for a legitimate sick day (when policy allows it), it can distort both wages due and later cash conversion computations.

11) Practical compliance guidance: what “good practice” looks like

For employers

Write clear sick leave procedures: notice, retroactive filing, med cert standards, verification rules.
Include an emergency/hospitalization exception and allow reasonable retroactive filing.
Train supervisors to document calls/texts and treat illness communications consistently.
Avoid “penalty deductions” from wages; separate payroll adjustments from discipline.
Handle medical information with confidentiality and data privacy safeguards; request only what is necessary to administer benefits and workplace safety.

For employees

Notify the employer as soon as practicable (call/text/email per policy).
Secure a med cert with clear dates of advised rest/incapacity.
File the leave form retroactively immediately upon return (or have a representative file if policy permits).
If eligible for SSS sickness benefit, comply with SSS and employer documentary requirements promptly.
Keep copies of submissions and proof of transmission/receipt.

12) Dispute pathways in the Philippines

When disputes happen, common routes include:

Internal HR grievance procedures (fastest, least adversarial if handled well).
DOLE Single Entry Approach (SEnA) for conciliation-mediation of money claims and workplace disputes.
Labor Arbiter/NLRC for money claims, illegal deductions/withholding, and related employment disputes, depending on jurisdictional rules and the nature of the claim.

The strength of a claim often turns on documentation: policy provisions, leave balances, payroll records, med cert authenticity, notice communications, and proof of consistent practice.

13) Concrete scenarios (how outcomes usually differ)

Example 1: Daily-paid employee, 1-day flu, med cert submitted, no sick leave benefit

Absence is excused medically, but typically unpaid under “no work, no pay.”
Deduction is usually lawful.

Example 2: Employee has 10 company sick leave credits; policy allows retroactive filing within 3 days; employee files on day 2 with med cert

Employer should normally pay by charging to sick leave credits.
If employer still deducts, it can be treated as withholding a benefit due under policy.

Example 3: Policy requires prior filing for all leave, but employee was rushed to ER and notified the supervisor; med cert shows ER consult and advised rest

Strict denial of pay despite available credits may be contestable if the policy has no reasonable emergency exception or if past practice allows retroactive filing.
At minimum, treating it as misconduct without due process is risky.

Example 4: Employer deducts two days’ pay as “penalty” for one day unfiled sick absence

High risk of being treated as an unauthorized wage deduction (a monetary fine taken from wages), separate from the “no work, no pay” principle.

Example 5: Employee is sick for 7 days and eligible for SSS sickness benefit; employer refuses to process despite complete documents

The employee may pursue administrative/labor remedies. Even if wages aren’t paid, the statutory benefit process should not be obstructed.

14) Bottom line rules to remember

A medical certificate justifies the absence; it does not automatically make it paid.
In private employment, paid sick leave generally comes from SIL, company policy, CBA, contract, or SSS benefits—not from a blanket legal rule.
Employers may require leave filing and documentation, but the rules must be reasonable, clear, and consistently applied.
Paying nothing for an unworked day is often lawful; taking extra money as punishment through payroll is where legality collapses.
Where paid leave credits or statutory benefits exist and requirements are met, refusal to pay can become withholding of wages/benefits due.