LABOR LAW AND SOCIAL LEGISLATIONS

BOOK III
CONDITIONS OF EMPLOYMENT

TITLE 1: Working Conditions and Rest Periods

Chapter 1: Hours of work

What is the coverage of Book III, Title 1 of the Labor code?

The provisions of this Title shall apply to employees in all establishments and undertakings
whether for profit or not, but not to the following:
1. Government employees
*Note: Government employees are governed by the Civil Service rules and
regulations, not by the Labor Code except employees of government agencies and
government corporations that are incorporated under the Corporation Code. To
them the Labor Code applies.
2. Managerial employees
*Note: “managerial employees” refer to those whose primary duty consists of the
management of the establishment in which they are employed or of a department
or subdivision thereof, and to other officers or members of the managerial staff.
3. Field personnel
*Note: “Field personnel” shall refer to nonagricultural employees who regularly
perform their duties away from the principal place of business or branch office of
the employer and whose actual hours of work in the field cannot be determined
with reasonable certainty.
4. Members of the family of the employer who are dependent on him for support
*Note: The members of the family of the employer dependent upon him for support
include husband and wife, parents and children, other ascendants and
descendants, brothers and sisters whether full or half blood.
5. Domestic helpers and persons in the personal service of another
* Domestic helpers are governed by the Kasambahay law.
6. Workers who are paid by results as determined by the Secretary of Labor in
appropriate regulations.

Who is considered an employee?

Under the SSS law, an employee is defined as any person who performs services for an
employer in which either or both mental and physical efforts are used and who receives
compensation for such services, where there is an employer-employee relationship.

How do we determine the existence of employer-employee relationship?

In determining the existence of employer-employee relationship, the elements that are
generally considered comprises the so-called “four-fold test” namely:
1. The selection and engagement of the employee
2. The payment of wages
3. The power of dismissal; and

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 4. The employer’s power to control the employee with respect to the means and
methods by which the work is to be accomplished. It is the so-called “control test”
that is the most important element.

How many hours is considered the normal number of hours of work?

The normal hours of work of any employee shall not exceed eight (8) hours

Health personnel in cities and municipalities with a population of at least one million
(1,000,000) or in hospitals and clinics with a bed capacity of at least one hundred (100)
shall hold regular office hours for eight (8) hours a day, for five (5) days a week, exclusive of
time for meals, except where the exigencies of the service require that such personnel
work for six (6) days or forty-eight (48) hours, in which case they shall be entitled to an
additional compensation of at least thirty percent (30%) of their regular wage for work on
the sixth day.

“health personnel” shall include: resident physicians, nurses, nutritionists, dieticians,

pharmacists, social workers, laboratory technicians, paramedical technicians,
psychologists, midwives, attendants and all other hospital or clinic personnel.

What is meant by “hours worked”

Hours worked shall include (a) all time during which an employee is required to be on duty
or to be at a prescribed workplace, and (b) all time during which an employee is suffered
or permitted to work.
Rest periods of short duration during working hours shall be counted as hours worked.

How do we know whether hours worked is compensable or not?

Under the implementing rules, the following general principles shall govern in determining
whether the time spent by an employee is considered compensable hours worked:
(a) All hours are hours worked which the employee is required to give to his employer,
regardless of whether or not such hours are spent in productive labor or involve physical or
mental exertion;
(b) An employee need not leave the premises of the workplace in order that his rest
period shall not be counted, it being enough that he stops working, may rest completely
and may leave his workplace, to go elsewhere, whether within or outside the premises of
his workplace;
(c) If the work performed was necessary, or it benefited the employer, or the employee
could not abandon his work at the end of his normal working hours because he had no
replacement, all time spent for such work shall be considered as hours worked, if the work
was with the knowledge of his employer or immediate supervisor;
(d) The time during which an employee is inactive by reason of interruptions in his work
beyond his control shall be considered time either if the imminence of the resumption of
work requires the employee’s presence at the place of work or if the interval is too brief to
be utilized effectively and gainfully in the employee’s own interest.

Is time spent during lectures, meetings or training programs considered as compensable

working time?
Attendance at lectures, meetings, training programs, and similar activities need not be
counted as working time if the following three criteria are met:

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 1. Attendance is outside of the employee’s regular working hours;
2. Attendance is in fact voluntary; and
3. The employee does not perform any productive work during such attendance.

Are meal periods compensable working time?

Meal periods are generally not compensable working time. The Labor Code provides that
Subject to such regulations as the Secretary of Labor may prescribe, it shall be the duty of
every employer to give his employees not less than sixty
(60) minutes time-off for their regular meals.

The implementing rules allow the meal time to be less than 60 minutes, under specified
cases and in no case shorter than 20 minutes. But such shortened meal time should be with
full pay, and, of course, the time when the employee cannot eat, because he is still
working, should also be paid.

What is night shift differential?

The Labor Code provides: Every employee shall be paid a night shift differential of not less
than ten percent (10%) of his regular wage for each hour of work performed between ten
o’clock in the evening and six o’clock in the morning.

What is the reason for the payment of night shift differential?

The reason behind NSD is to give premium to night work when an employee is supposed to
be sleeping. An employee who works at night has lesser energy and can easily contract a
desease.

How is NSD computed?

The computation is:
NSD pay = (Basic pay/8) x 110% (for each hour between 10:00 pm to 6:00 am)

For example, an employee hourly rate is Php 57.00/hour and working from 10pm to 6am,
the NSD shall be computed as follows:

NSD = P57.00 x 10% x 8 hours = P45.60

The worker’s total pay for that day will be P_____ computed as follows:
P57.00 x 110% x 8 = P501.60 or
(57.00 x 8 hours) + 45.60 = P 501.60

*Note: only the hours worked between 10:00 pm to 6:00 pm is entitled to NSD.

May work be performed beyond eight (8) hours a day?

Yes, provided the worker is paid an overtime pay. The Labor Code provides: Work may be
performed beyond eight (8) hours a day provided that the employee is paid for the
overtime work an additional compensation equivalent to his regular wage plus at least
twenty-five (25%) percent thereof. Work performed beyond eight hours on a holiday or rest
day shall be paid an additional compensation equivalent to the rate of the first eight hours
on a holiday or rest day plus at least thirty (30%) percent thereof.

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 How is Overtime pay computed?
The computation is:
1. For OT on ordinary day: Basic wage x 125%
2. For OT on a holiday or on his rest day: Holiday/Rest day pay x 130%

For example:
An employee whose hourly rate is P100 and who worked overtime for 2 hours on a regular
day will be paid P125 per hour of work performed beyond 8 hours or P250 for the 2 hours of
overtime work, computed as follows:

P100 x 125% x 2 hours = P250

He will take home a total pay of P1,050 computed as follows:

(P100 x 8 hours) + P250 = P1,050

If the employee worked overtime on his rest day, he is entitled to a total pay of P1,378
computed as follows:

a. Compute the hourly rate on a rest day: P100 x 130 = P130

b. Compute the Overtime pay: P130 x 130% = P169
c. Multiply the overtime pay by the number of hours worked beyond 8 hours: P169 x 2 =
P338
d. Compute his total pay for the entire day: (P130 x 8 hours) + P338 = P1,378

Is the employee entitled to overtime pay if he is already entitled to night shift differential?
Yes, the employee is entitled to both OT and NSD. The receipt of overtime pay will not
preclude the right to night differential pay. The latter is payment for work done during the
night while the other is payment for the excess of the regular eight-hour work.

The computation of NSD and OT on a regular day is based on the regular basic pay. What
does regular basic pay mean?
It means regular basic pay and necessarily excludes money received in different concepts
such as Christmas bonus and other fringe benefits. The COLA shall not be included in the
computation of overtime pay. However, the premium pay for work performed on rest days,
special days, or regular holidays is included as part of the regular rate of the employee in
the computation of overtime pay for overtime work rendered on said days.

Can the employer and employee stipulate or agree to a different OT rate?

The employees and employer may stipulate in their collective agreement the payment of
overtime work at rates higher (but not lower) than those provided by law.

Can the right to claim overtime pay be waived by the worker?

Generally, the right cannot be waived because overtime pay is in the category of benefits
for it is governed by law not by agreement of the parties. However in the following
instances, the waiver of overtime pay is allowed:
1. . When the alleged waiver of overtime pay is in consideration of benefits and
privileges which may be more than what will accrue to them in overtime pay.

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 2. When the employer and employee agree that the overtime pay is already built in
the basic pay. However, this agreement of base pay with integrated overtime pay
must firstly be reduced into a clear written agreement knowingly and freely entered
into by the employee, and, secondly, the mathematical result shows that the
agreed legal wage rate and the overtime pay, computed separately, are equal to
or higher than the separate amounts legally due.
3. When the employer and employee agree to a “Compressed Work Week”
arrangement. Under this scheme, the number of work days is reduced but the
number of work hours in a day is increased to more than eight, but no overtime pay
may be claimed. Thus, a CWW scheme is an alternative arrangement whereby the
normal workweek is reduced to less than six days but the total number of normal
work hours per week shall remain at 48 hours. The normal workday is increased to
more than eight hours without corresponding overtime premium. . But, although
encouraged, adoption of the CWW scheme is valid only if the conditions stated in
the Advisory are observed; otherwise, overtime pay may still be claimed.
4. The conditions are:
a. The scheme is expressly and voluntarily supported by majority of the employees
affected.
b. In firms using substances, or operating in conditions that are hazardous to health,
a certification is needed from an accredited safety organization or the firm’s
safety committee that work beyond eight hours is within the limits or levels of
exposure set by DOLE’s occupational safety and health standards.
c. The DOLE regional office is duty notified.

If adopted according to the preceding conditions, the CWW arrangement produces the
following effects:
1. Unless there is a more favorable practice existing in the firm, work beyond eight
hours will not be compensable by overtime premium, provided the total number of
hours worked per day shall not exceed twelve (12) hours. In any case, any work
performed beyond 12 hours a day or 48 hours a week shall be subject to overtime
premium.
2. Consistent with Articles 85 of the Labor Code, employees under a CWW scheme are
entitled to meal periods of not less than sixty (60) minutes. The right of employees to
rest day as well as to holiday pay, rest day pay or leaves in accordance with law or
applicable collective bargaining agreement or company practice, shall not be
impaired.
3. Adoption of the CWW scheme shall in no case result in diminution of existing
benefits. Reversion to the normal eight-hour workday shall not constitute a
diminution of benefits. The reversion shall be considered a legitimate exercise of
management prerogative, provided that the employer shall give the employees
prior notice of such reversion within a reasonable period of time.

Can undertime be offset by overtime?

Undertime work on any particular day shall not be offset by overtime work on any other
day. Permission given to the employee to go on leave on some other day of the week shall
not exempt the employer from paying the additional compensation required by law.

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 Can the employer legally compel his workers to render overtime work?
ART. 89 of the Labor Code provide:
Any employee may be required by the employer to perform overtime work in any of the
following cases:
a. When the country is at war or when any other national or local emergency has
been declared by the National Assembly or the Chief Executive;
b. When it is necessary to prevent loss of life or property or in case of imminent danger
to public safety due to an actual or impending emergency in the locality caused by
serious accidents, fire, flood, typhoon, earthquake, epidemic, or other disaster or
calamity;
c. When there is urgent work to be performed on machines, installations, or equipment,
in order to avoid serious loss or damage to the employer or some other cause of
similar nature;
d. When the work is necessary to prevent loss or damage to perishable goods; and
e. Where the completion or continuation of the work started before the eighth hour is
necessary to prevent serious obstruction or prejudice to the business or operations of
the employer.

Any employee required to render overtime work under this Article shall be paid the
additional compensation required in this Chapter.

In addition to the instances mentioned in Article 89, the Rules Implementing the Labor
Code authorizes compulsory overtime work when it is necessary “to avail of favorable
weather or environmental conditions where performance or quality of work is dependent
thereon.

Chapter 2: Weekly Rest Periods

Are workers entitled to a weekly rest day?

Article 91 of the Labor Code provides that:
a. It shall be the duty of every employer, whether operating for profit or not, to provide
each of his employees a rest period of not less than twenty-four (24) consecutive
hours after every six (6) consecutive normal work days.
b. The employer shall determine and schedule the weekly rest day of his employees
subject to collective bargaining agreement and to such rules and regulations as the
Secretary of Labor may provide. However, the employer shall respect the
preference of employees as to their weekly rest day when such preference is based
on religious grounds.

Can the employer compel the employee to work on his rest day?
The employer may require his employees to work on any day:
a. In case of actual or impending emergencies caused by serious accident, fire, flood,
typhoon, earthquake, epidemic or other disaster or calamity to prevent loss of life
and property, or imminent danger to public safety;
b. In cases of urgent work to be performed on the machinery, equipment, or
installation, to avoid serious loss which the employer would otherwise suffer;
c. In the event of abnormal pressure of work due to special circumstances, where the
employer cannot ordinarily be expected to resort to other measures;

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 d. To prevent loss or damage to perishable goods;
e. Where the nature of the work requires continuous operations and the stoppage of
work may result in irreparable injury or loss to the employer; and
f. Under other circumstances analogous or similar to the foregoing as determined by
the Secretary of Labor.

Should the rest day be always a Sunday?

No. All establishments and enterprises may operate or open business on Sundays and
holidays provided that the employees are given the weekly rest day and the benefits
provided under the law. However, the preference of the employee as to his weekly day of
rest shall be respected by the employer if the same is based on religious grounds. The
employee shall make known his preference to the employer in writing at least seven days
before the desired effectivity of the initial rest day so preferred.

Should the employee compelled to work on his rest day be compensated?

Yes. Article 93 of the Labor Code provides for COMPENSATION FOR REST DAY, SUNDAY OR
HOLIDAY WORK:
(a) Where an employee is made or permitted to work on his scheduled rest day, he
shall be paid an additional compensation of at least thirty percent (30%) of his regular
wage. An employee shall be entitled to such additional compensation for work performed
on Sunday only when it is his established rest day.
(b) When the nature of the work of the employee is such that he has no regular
workdays and no regular rest days can be scheduled, he shall be paid an additional
compensation of at least thirty percent (30%) of his regular wage for work performed on
Sundays and holidays.
(c) Work performed on any special holiday shall be paid an additional compensation
of at least thirty percent (30%) of the regular wage of the employee. Where such holiday
work falls on the employee’s scheduled rest day, he shall be entitled to an additional
compensation of at least fifty percent (50%) of his regular wage.
(d) Where the collective bargaining agreement or other applicable employment
contract stipulates the payment of a higher premium pay than that prescribed under this
Article, the employer shall pay such higher rate.

How shall the employee’s compensation be computed?

The compensation for work performed on an employee’s rest day or holiday shall be
computed as follows:

COLA shall not be included in the computation of premium pay.

a. For work performed on rest days or on special days: Plus 30% of the daily basic rate
of 100% or a total of 130%.
b. For work performed on a rest day which is also a special day: Plus 50% of the daily
basic rate of 100% or a total of 150%.
c. For work performed on a regular holiday which is also the employee’s rest day (not
applicable to employees who are not covered by the holiday-pay rule): Plus 30% of
the regular holiday rate of 200% based on his/her daily basic wage rate or a total of
260%.
d. If the CBA or other employment contract provide for higher premiums, then such
higher rate shall apply

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 Chapter 3: Holidays, Service Incentive Leaves and Service Charges.

What is Holiday pay?

Holiday pay is a form of premium accorded to an employee who does not work on regular
holidays. Article 94 provides that every worker shall be paid his regular daily wage during
regular holidays, except in retail and service establishments regularly employing less than
ten (10) workers

Can an employer require an employee to work on any holiday?

The employer may require an employee to work on any holiday but such employee shall
be paid a compensation equivalent to twice his regular rate.

What are the regular holidays?

Unless otherwise modified by law, order, or proclamation, the following are the twelve (12)
regular holidays in a year under Executive Order No. 292 (Administrative Code of 1987), as
amended by R.A. No. 9849:
New Year’s Day January 1
Maundy Thursday Movable Date
Good Friday Movable Date
Araw ng Kagitingan April 9
Labor Day May 1
Independence Day June 12
National Heroes’ Day Last Sunday of August
Eidl Fitr Movable Date
Eidl Adha Movable Date
Bonifacio Day November 30
Christmas Day December 25
Rizal Day December 30

What are special holidays?

The following are the usual special non-working days:
Chinese New Year Movable date
Ninoy Aquino day August 21
EDSA day February 25
Black Saturday Movable date
All Saints day November 1
Feast of the Immaculate Conception December 8

Who are entitled to holiday pay?

This holiday pay benefit applies to all employees except:
1. Government employees, whether employed by the National Government or any of
its political subdivisions, including those employed in government-owned and/or
controlled corporations with original charters or created under special laws;
2. Those of retail and service establishments regularly employing less than ten (10)
workers;
3. Househelpers and persons in the personal service of another;
4. Managerial employees, if they meet all of the following conditions:

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 a. Their primary duty is to manage the establishment in which they are employed or
of a department or subdivision thereof;
b. They customarily and regularly direct the work of two or more employees therein;
c. They have the authority to hire or fire other employees of lower rank; or their
suggestions and recommendations as to hiring, firing, and promotion, or any
other change of status of other employees are given particular weight.
5. Officers or members of a managerial staff, if they perform the following duties and
responsibilities:
a. Primarily perform work directly related to management policies of their employer;
b. Customarily and regularly exercise discretion and independent judgment;
c. Regularly and directly assist a proprietor or managerial employee in the
management of the establishment or subdivision thereof in which he or she is
employed; or (b) executed, under general supervision, work along specialized or
technical lines requiring special training, experience, or knowledge; or (c)
execute, under general supervision, special assignments and tasks; and
d. Do not devote more than twenty percent (20%) of their hours worked in a
workweek to activities which are not directly and closely related to the
performance of the work described in paragraphs a, b, and c above.
6. Field personnel and other employees whose time and performance is unsupervised
by the employer, including those who are engaged on task or contract basis, purely
commission basis or those who are paid a fixed amount for performing work
irrespective of the time consumed in the performance thereof.

How is the holiday pay computed?

To guide the computation of wages on legal holidays and on special days,
the DOLE issued Memorandum Circular No. 1, dated 8 March 2004 which is reproduced
below. Among the regular holidays, Eidul Fitr and Eidul Adha should be added.
“Pursuant to the provisions of the Labor Code, as amended in relation to the observance
of declared holidays and in response to the queries received every time a Presidential
Proclamation or a law is enacted by Congress which declares certain days either as a
regular holiday, a special holiday or a special working holiday, the following guidelines shall
be observed by all employers in the private sector:
1) For regular holidays as provided for under EO 203 (incorporated in EO 292) as
amended by R.A. No. 9177. [See list of twelve legal holidays, above.]
a) If it is an employee’s regular workday If unworked — 100%
If worked: 1st 8 hrs. — 200%
Excess of 8 hours — plus 30% of hourly rate on said day
b) If it is an employee’s rest day
If unworked — 100%
If worked: 1st 8 hrs. — plus 30% of 200%
Excess of 8 hrs — plus 30% of hourly rate on said day
2) For declared special days such as Special Non-Working Day, Special Public Holiday,
Special National Holiday, in addition to the three nationwide special [nonworking] days,
the following rules shall apply:
a) If unworked —No pay, unless there is a favorable company policy, practice
or collective bargaining agreement (CBA) granting payment of wages, on
special days even if unworked.
b) If worked: 8 hrs. — plus 30% of the daily rate of 100%

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 Excess of 8 hrs. — plus 30% of hourly rate on said day
c) Falling on the employee’s rest day and if worked — 1st 8 hrs. — plus 50% of
the daily rate of 100%
Excess of 8 hrs. — plus 30% of hourly rate on said day
3) For those declared as special working holidays, the following rules shall apply:
For work performed, an employee is entitled only to his basic rate. No premium pay is
required since work performed on said days is considered work on ordinary working days.”

How much is a worker entitled to on a double holiday?

The covered employee is entitled to at least two hundred percent (200%) of his/her basic
wage even if said holiday is unworked. He/she is entitled to compensation equivalent to at
least 300% of his/her basic wage if he/she worked on that day. If that day happens to be
the employee’s scheduled rest day, and he/she is permitted or suffered to work, he/she is
entitled to an additional 30% of his wage for that day, that is, 300% of his daily rate, or a
total of 390%

What are the effects of absences on holiday pay?

The following are the effects of absences on holiday pay:
a. If an employee is on leave of absence with pay, he is entitled to holiday pay.
b. If an employee is on leave of absence without pay on the day immediately
preceding the regular holiday, he is not entitled to holiday pay.
c. If the day immediately preceding the holiday is a non-working day or the scheduled
rest day of an employee, he is not considered to be on leave of absence on that
day, in which case he shall be entitled to holiday pay if the employee should work
on the day immediately preceding the non-working day or rest day.
d. If there are two successive regular holidays like Holy Thursday and Good Friday, an
employee is not entitled to holiday pay for both holidays if he absents himself from
work without pay on the day immediately preceding the first regular holiday. But if
he works on the first holiday, hi is entitled to holiday pay on the second holiday.

What are the ruled on holiday pay of certain types of employees?

The following are the holiday pay of certain types of employees:
1. Private school teachers including faculty members of colleges and universities, may
not be paid for the regular holidays during semestral vacations. They shall however
be paid for the regular holidays during Christmas vacation;
2. Where a covered employee is paid by results or output, such as payment on
piecework, his holiday pay shall not be less than his average daily earnings for the
last 7 actual working days preceding the regular holiday; provided, however, that in
no case shall the holiday pay be less than the applicable statutory minimum wage
rate.
3. Seasonal workers may not be paid the required holiday pay during off-season when
they are not at work.
4. Workers who have no regular working days shall be entitled to the benefits.

What is service incentive leave (SIL)?

Article 95 of the Labor Code provides that:

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 (a) Every employee who has rendered at least one year of service shall be entitled to a
yearly service incentive leave of five days with pay.
(b) This provision shall not apply to those who are already enjoying the benefit herein
provided, those enjoying vacation leave with pay of at least five days and those
employed in establishments regularly employing less than ten employees or in
establishments exempted from granting this benefit by the Secretary of Labor after
considering the viability or financial condition of such establishment.
(c) The grant of benefit in excess of that provided herein shall not be made a subject of
arbitration or any court of administrative action.

*Notes:
- If unused at the end of the year, this benefit is convertible to its cash equivalent.
- The phrase “one year of service” means service within twelve (12) months, whether
continuous or broken, reckoned from the date the employee started working. The period
includes authorized absences, unworked weekly rest days, and paid regular holidays. If
through individual or collective bargaining, company practice or policy, the period of
working days is less than twelve (12) months, said period shall be considered as one year
for the purpose of determining the entitlement to the service incentive leave.
- This rule does not apply to the employees enumerated in Article 82 as well as
employees in establishments regularly employing less than 10 employees.
- The SIL is in addition to the leave benefits provided by other laws such as paternity,
maternity, solo parent, battered women, and special leave of women under the magna
carta for women.

What are service charges?

All service charges collected by hotels, restaurants and similar establishments shall be
distributed at the rate of eighty-five percent (85%) for all covered employees and fifteen
percent (15%) for management. The share of the employees shall be equally distributed
among them. In case the service charge is abolished, the share of the covered employees
shall be considered integrated in their wages.

*Notes:
- The Rule applies to all employees of covered employers, regardless of their
positions, designations or employment status, and irrespective of the method by which their
wages are paid, except to managerial employees. Section 3 of Rule VI allows
management to retain the 15% to answer for losses and breakages and for distribution to
managerial employees, at the discretion of management in the latter case
- In case the service charge is abolished, the share of covered employees shall be
considered integrated in their wages. The basis of the amount to be integrated shall be the
average monthly share of each employee for the past twelve (12) months immediately
preceding the abolition or withdrawal of such charges.
- Tips are handled similarly as service charges. If a restaurant or similar establishment
does not collect service charges but has a practice or policy of monitoring and pooling
the tips given by customers, the pooled tips should be monitored, accounted and
distributed in the same manner as the service charges. In many restaurants, a waiter must
drop in a tip box the tips he received; otherwise, he commits “tip pocketing,” a serious
offense of dishonesty that may cost him his job.

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