May the employer convert the holiday pay to other benefits?
During the long Christmas holidays, some businesses operated on regular holidays resulting in work being rendered by their employees. Although the law expressly requires that holiday pay should be paid, businesses looking to save tend to pay their employees through other benefits instead of the statutory monetary benefit. May businesses do so?
The law specifically mandates the payment of holiday pay (Article 94, Labor Code).
By way of summary, the Department of Labor and Employment (DOLE) has issued Labor Advisory No. 09-14 reminding employers to comply with the holiday pay rules. Below is the computation:
- If the employee did not work, he/she shall be entitled to be paid 100% of his/her salary for that day [(Daily Rate + COLA) x 100%];
- For work done during the regular holiday, the employee shall be paid 200% of his/her regular salary for that day for the first eight hours [(Daily Rate + COLA) x 200%];
- For work done in excess of eight hours (overtime work), he /she shall be paid an additional 30% of his/her hourly rate on said day (Hourly Rate of the Basic Daily Wage x 200% x 130% x number of hours worked);
- For work done during a regular holiday that also falls on his/her rest day, he/she shall be paid an additional 30% of his/her daily rate of 200% [(Daily Rate + COLA) x 200%] + [30% (Daily Rate x 200%)]; and
- For work done in excess of eight hours (overtime work) during a regular holiday that also falls on his/her rest day, he/she shall be paid an additional 30% of his/her hourly rate on said day (Hourly Rate of the Basic Daily Wage x 200% x 130% x 130% x number of hours worked).
In the above computations, COLA refers to Cost of Living Allowance.
Holiday pay is a statutory monetary benefit. It is called a statutory monetary benefit because the law itself (i.e. a statute through the Labor Code) requires that such benefit is owing to the employee.
While it is a statutory monetary benefit, may the employer and the employee agree that the holiday pay be paid through other benefits?
No, the employer and the employee cannot agree that holiday pay be paid through other benefits. As a statutory monetary benefit, the law expressly mandates the observance of the payment of the holiday pay . This is in accordance with the constitutional mandate affording full protection to labor, as well as those provided in labor laws and policies. Further, in line with the Labor Code provision that wages have to be paid in legal tender, the employer has to pay the employee in cash as the employer is prohibited from paying through promissory notes, vouchers, coupons, tokens, tickets, chits, or any object other than legal tender, even when expressly requested by the employee (Paragraph 1, Article 102, Ibid.).
What if the benefit is more valuable or favorable than the holiday pay?
No, the labor law and policy on the matter is clear that the employer has to pay in legal tender even if expressly requested by the employee (Ibid.). The tenor of the law is categorical.
While the law requires that holiday pay be paid, it is not due to all employees. There are only certain employees who are covered or entitled to receive that statutory monetary benefit.
All employees in all establishments and undertakings, whether for profit or not, are entitled to holiday pay except the following:
- Government employees;
- Managerial employees;
- Officers or members of a managerial staff;
- Field personnel;
- Members of the family of the employer who are dependent on him for support;
- Domestic helpers;
- Persons in the personal service of another; and
- Workers who are paid by results as determined by the DOLE Secretary (Paragraph 1, Article 82, Ibid.).
If an employee falls in the above list of exemptions, then he/she is not entitled to the statutory monetary benefit of a holiday pay.
Businesses and employers who fail to comply with the payment of holiday pay will be opening themselves to liabilities, including but not limited to administrative, civil, and even criminal.
For administrative liabilities, the Department of Labor and Employment (DOLE) may sanction employers for their failure to comply with labor laws. These may be in the form of administrative penalties or fines.
As for civil liabilities, the employer may face a labor complaint which could result in a judgment award requiring the business to pay the holiday pay. In addition, if the withholding of the payment was done in bad faith, the employer may also be liable for moral and exemplary damages. Further, the employer may be also be directed to pay the attorney’s fees of the employees.
As for criminal liabilities, Labor Code violations may result in the following penalties: (a) fine not less than P1,000.00 but not more than P10,000.00; (b) imprisonment of not less than 3 months but not more than 3 years; or (c) both fine and imprisonment at the discretion of the court. It is the guilty officer/s who will be liable.
Best Legal Practices
Business should comply with the rule on holiday pay. The holiday pay should be paid in legal tender or in cash.
The computation for holiday pay as stated by the law should be complied unless there is a more favorable one provided for in the employment contract, collective bargaining agreement (CBA), or company policy or practice.
Proper documentation should be observed when making payments of holiday pay. Proof of receipt thereof should be signed by the employee. Afterwards, payment records should be in placed in safekeeping ready for access in the unlikely event of a labor complaint. It is, after all, the employer who has the burden to prove payment.