R.A. 6727 “Wage Rationalization Act”

Question 1

•Agriculture
-farming in all its branches

•Retail establishment
-principally engaged in the sale of goods to end-users

-regularly engages in wholesale activities loses its retail character

•Service establishment
-principally engaged in the sale of service to individuals

Answer 1

Basis for wage classification:

(R.A. 6727 or the Wage Rationalization Act is a law that sets the basis for determining minimum wages in the Philippines. It classifies businesses into categories to determine appropriate wages for workers in different industries.) bestie

-Agriculture
Includes activities related to farming, like planting, harvesting, and livestock raising.

-Retail Establishments
Businesses that mainly sell goods directly to consumers (end-users).

However, if the business regularly sells goods in bulk to other businesses (wholesaling), it is no longer considered a retail business.

-Service Establishments
Businesses that primarily provide services to individuals, like salons, repair shops, or clinics.

Question 2

authorized to determine the DAILY MINIMUM WAGES in different regions based on established criteria

Answer 2

Regional Tripartite Wages and Productivity Boards (RTWPBs)

Question 3

-prescribe daily minimum wage rates per industry per locality within the region

-depends on the number of workers and the capitalization of enterprises

-provide bases and procedure for application for exemption from compliance

Answer 3

Regional Wage Orders

(Regional Wage Orders set the minimum daily wages for workers in different industries within a specific region.)

•Wage rates vary by region and industry
-The minimum wage depends on the type of work and where it’s done.

•Factors considered
-The number of workers and the size of the business (its capital or investment) affect the wage rate.

•Exemptions
-There are rules that allow some businesses to apply for exemptions if they cannot meet the required wage.

This system ensures wages are fair but also considers the unique conditions of each region and business.

Question 4

wage increases apply to:

-private sector workers receiving daily minimum wage rates or those receiving up to a certain daily wage ceiling

-EXCEPT: workers of Barangay Micro Business Enterprises (BMBEs) with
Certificate of Authority

an establishment may be exempted from compliance with a Wage Order for at most 1 year

Answer 4

Coverage

Who gets wage increases?
- Workers in the private sector earning the minimum daily wage or slightly above it.

Who is exempted?
- Employees of small businesses registered as Barangay Micro Business Enterprises (BMBEs) with a Certificate of Authority.

Exemptions for businesses:
- A business can apply to be exempt from following the wage order, but only for up to 1 year.)

Question 5

basis of minimum wage is normal working hours of 8 hours a day

•Hours worked
-all time during which an employee is required to be on duty or is permitted to
work

Answer 5

Rules in Determining Compensable Working Hours

Question 6

•All hours are hours worked regardless of whether or not the hours are spent in
productive labor or involve physical or mental exertion

•Rest period is considered when the employee stops working. Employee does
not need to leave the premises during rest period

•The work performed was necessary, benefited the employer, or employee could
not abandon his work at the end of his normal working hours due to no
replacement, the hours spent is considered work hours, provided that it is upon the knowledge of the employer

•time during which an employee is inactive due to interruptions in their work beyond their control shall be considered working time

Answer 6

Principles in determining hours worked

1. All hours count as work hours
   
   • Even if the task isn’t physically or mentally demanding, the time spent on it is still considered work.
2. Rest periods
   
   • Breaks are considered rest, even if the employee stays at work and doesn’t leave the premises.
3. Extra work beyond regular hours
   
   • If an employee works extra because the task is important, benefits the employer, or they couldn’t leave due to no replacement, this time counts as work hours—as long as the employer knows about it.
4. Unplanned interruptions
   
   • If work is paused due to situations beyond the employee’s control, this idle time still counts as working hours.

Question 7

-waiting time = working time if employee is obligated to wait as part of their work or as tasked by the employer

-being on call is considered working

Answer 7

Treatment on waiting time

Question 8

•Attendance in such activities are not counted as working time if all conditions
are met:

-attendance is outside employee’s regular working hours

-attendance is voluntary

-employee does not perform productive work during attendance

Answer 8

Attendance at lectures, meetings, training programs, etc.

Attendance at lectures, meetings, or training programs is not considered working time if these conditions are met:

1. The activity happens outside regular work hours.
2. The employee attends voluntarily (it’s not required).
3. The employee isn’t doing any actual work during the activity.

Question 9

•employees are entitled to NOT LESS THAN 1 hour time-off for regular meals, except:

-work is non-manual work or does not involve strenuous physical exertion

-the establishment regularly operates more than 16 hours a day

-in case of emergencies or urgent work to be performed on machineries to avoid serious loss

-the work is necessary to prevent serious loss of perishable goods

•employees falling onto the aforementioned conditions can be given at least 20 minutes meal period, provided that the shorter meal period is credited as
compensable hours worked

•rest periods of 5 to 20 minutes are considered as compensable working time

Answer 9

Meal and Rest Periods

Meal and Rest Periods:

1. Regular Meal Breaks
   
   • Employees get at least 1 hour for meals unless:
     
     • The work is light and not physically tiring.
     • The workplace operates more than 16 hours a day.
     • There’s an emergency or urgent work needed to fix equipment.
     • The work prevents the loss of perishable goods.
2. Shorter Meal Breaks
   
   • If the above exceptions apply, employees can have at least a 20-minute meal break. This shorter break counts as paid work time.
3. Rest Breaks
   
   • Short breaks of 5 to 20 minutes are considered paid working hours.

Question 10

•Monthly-paid

-paid every day of the month

-including unworked rest days, special days, and regular holidays

-365 days in a year is used in determining the equivalent monthly salary

•Daily-paid
paid on the days they actually worked and on unworked regular holidays

Answer 10

Monthly-Paid Employees and Daily-Paid Employees

Here’s a simpler explanation:

Monthly-paid employees
- Get paid every day of the month, regardless of whether they work or not.
- This includes rest days, special days, and regular holidays.
- The salary is calculated based on 365 days in a year.

Daily-paid employees
- Only get paid for the days they actually work.
- They are also paid for regular holidays, even if they don’t work those days.

Question 11

•Monthly-paid
-Factor 365 days in a year is used in determining annual and monthly salary

Applicable Daily Rate(ADR) x 365
———————————————— =EEMR
12 months

Answer 11

Estimated Equivalent Monthly Rate (EEMR)

Question 12

•Daily-paid
-for those who are required to work everyday, including Sundays or rest days,
special days, and regular holidays

Applicable Daily Rate(ADR) x 395.7
———————————————— =EEMR
12 months

-for those who do not work and are not considered paid on Sundays or rest days

Applicable Daily Rate(ADR) x 313
———————————————— =EEMR
12 months

-for those who do not work and are not considered paid on Saturdays and Sundays
or rest days

Applicable Daily Rate(ADR) x 261
———————————————— =EEMR
12 months

Question 13

-employer may provide subsidized meals and snacks to employees

-subsidy must be at least 30% of the fair and reasonable value of the facilities

-employer may deduct at most 70% of the value of the meals and snacks enjoyed by
employees

Answer 13

Subsidized Meals and Snacks

Apologies for the confusion! Let me clarify:

• The employer covers at least 30% of the meal/snack cost.
• The employee pays the remaining part, which can be up to 70%.

So, if the total value of a meal is, say, ₱100, the employer will pay ₱30, and the employee will pay the remaining ₱70. In other words, the employee is paying the larger portion (up to 70%) of the cost, not a smaller portion.

Does that make it clearer?

Question 14

receive wage in accordance with the prescribed minimum wage applicable in retail and service establishments under existing Wage Orders

Answer 14

Wage of Kasambahay Working as Salesclerk

If a kasambahay (household worker) is working as a salesclerk, they should be paid according to the minimum wage set for workers in retail and service establishments, as specified in the current wage laws.

In other words, even if they are a kasambahay, if they’re working in a retail or service job, they get the minimum wage that applies to those types of businesses.

Question 15

-in reducing regular working days to prevent losses, employers may deduct wages corresponding to days taken off from the workweek

-consistent with “No Work, No Pay”

Answer 15

Effect of Reduction of Workdays on Wages

If an employer reduces the number of working days (for example, to prevent losses), they can deduct the wages for the days the employee doesn’t work.

This follows the “No Work, No Pay” rule, which means if the employee doesn’t work on those days, they won’t get paid for them.

In short: fewer workdays = less pay for those days not worked.

Question 16

-fine of P25,000 to P100,000

-imprisonment of 2 to 4 years

-employer is ordered to pay double the unpaid benefits owed to employees

Answer 16

Penalty for Violation of Prescribed Adjustments in Wage Rates

Question 17

-business enterprises engaged in the production, processing, or manufacturing of products or commodities

-total assets, excluding land, are less than 3M pesos are not covered by the Minimum
Wage Law

-all employees are still entitled to benefits such as SSS and PhilHealth

-BMBE workers and owners shall agree on the acceptable wage rates

Answer 17

Barangay Micro Business Enterprises (BMBEs)

Barangay Micro Business Enterprises (BMBEs) are small businesses that produce, process, or make products.

• If their total assets (not including land) are less than ₱3 million, they don’t have to follow the Minimum Wage Law.
• However, employees are still entitled to benefits like SSS (Social Security) and PhilHealth (health insurance).
• The wages for BMBE workers are agreed upon between the business owner and the employee, instead of following the usual minimum wage rules.

In short, small businesses with assets under ₱3 million don’t have to follow the minimum wage law, but employees still get benefits, and wages are agreed on by both the employer and employee.

Question 18

-they receive at least the prescribed minimum wage for the normal working hours not exceeding 8 hours a day

-it could be a proportion for work less than normal working hours

Answer 18

Wage of Workers Paid by Results

Workers who are paid by results (such as commission-based workers) should still receive at least the minimum wage for the normal 8-hour workday.

• If they work less than 8 hours, they can be paid a proportional amount based on the hours they worked.

For example, if someone works only 4 hours, they should receive a proportional wage based on half of the minimum wage for a full 8-hour day.

In short: Workers paid by results still get the minimum wage for 8 hours or a proportion of it if they work fewer hours.

Question 19

-Wage of apprentices and learners = at least 75% of minimum wage rates

-apprentices and learners should be those covered by Technical Education and Skills
Development Authority (TESDA)

-PWDs are entitled to the same terms and compensation as a qualified able-bodied
person

Answer 19

Wage of Apprentices, Learners and Persons with Disability

Question 20

all private establishments are required to submit an annual report on a verified itemized listing of their labor component and corresponding salaries and wages

Answer 20

Annual Establishment Report on Wages

The term “annual” in the context of the report means that it’s required once every year.

So, private businesses must submit this report once a year, showing the wages & salaries and roles of their employees for that year.

It’s an annual requirement to track and verify that businesses are properly compensating their employees according to the law.

Question 21

—income payments are exempted from requirement of withholding tax on compensation:

-for minimum wage earners (MWEs) who work in the private sector and being paid
the statutory minimum wage

•holiday pay, overtime pay, night shift differential pay, and hazard pay earned
by MWE is covered by tax exemption

•hazard pay
amount paid to MWEs who are exposed to great danger

—annual salary does not exceed P250,000

Answer 21

Coverage from Income Tax

Income tax exemption applies to minimum wage earners (MWEs) who work in the private sector and are paid the statutory minimum wage. This means:

• MWEs don’t have to pay income tax on their regular salary as long as they earn the minimum wage.
• Holiday pay, overtime pay, night shift pay, and hazard pay are also tax-exempt for MWEs.
• Hazard pay is the extra money given to MWEs who work in dangerous conditions.
• The tax exemption also applies if their total annual salary is ₱250,000 or less.

In short: MWEs are not required to pay income tax on their wages, holiday pay, overtime, night shift, hazard pay, and if their annual salary is under ₱250,000.

note: only to those working in the private sector.