Holidays are a significant aspect of Philippine culture; foreign employers have a particular responsibility to uphold the rules enforced by The Labor Code, even if they are not wholly familiar with the holiday itself. Employers need to know the pay rates of holidays when handling any business in the Philippines.
Holidays allow both employees and employers time to enjoy all the event offers. During these events, laws in the Philippines require employers to compensate employees during these specific dates despite not reporting for work. This article presents a guide on giving a correct calculation of your employee’s wages for proper payment during holidays.
Importance of Holiday wage pay
Adhering to the country’s holiday pay rules is an essential aspect of the corporate environment, and, as an employer, you are duty-bound to pay your employees properly, lest you get penalised for violating the holiday rules enforced by the country’s Labor Code and avoid incurring salary disputes with your workers. In contrast, as an employee, it is your right to be correctly compensated if you decide to work during a holiday for a pay bonus.
Should issues arise with holiday wage payment, it is best to contact a payroll outsourcing service company like Mazars. These firms also occasionally provide monthly updates reporting on upcoming holiday wages or tax updates. A short guide was created to help employers avoid payroll issues, holding the basic general knowledge needed for correct holiday wage pay in the Philippines and more accessible information to understand these rules better.
What is a Holiday Pay in the Philippines?
Holiday pay is defined as paying employees a regular daily average wage during an unworked holiday. It is a legislated benefit enacted as part of the state’s constitutional imperative toward protecting Filipino labour. “It is also intended to enable the worker to participate in the national celebrations held during the days identified with great historical and cultural significance,“ as mentioned by the Asian Transmission Corporation v. CA (Commonwealth Act), G.R. No. 144664, 15 March 2004).
In the Philippines, holiday pay is considered a legally mandated benefit that all employers must pay to their employees on holidays, whether they worked during that time.
But there are certain employees exempt from holiday pay; this benefit does not apply to the following employees:
- Government Employees
- Housekeepers or individuals personally serving another (Kasambahays)
- Managerial Employees
- Officers and staff members of managerial staff that are compliant with the Labor Code conditions
- Retail workers and service establishments with less than ten (10) workers
- The Employer’s family members are currently dependent on the employer for support
- Employees under contract, undergoing a task, or those currently under commission and are unsupervised by their respective employers
Note that there is a difference in the payments rates for the various kinds of holidays in the Philippines, divided between regular holidays and special non-working holidays.
Special Employee groups
Holiday wage pay rules are applied differently toward certain specific groups in the company. These include the following:
Piece-rate workers must be given holiday pay that must not be less than their daily earnings for the last seven (7) days of actual work after the preceding regular holiday. However, the holiday cannot be less than the applicable minimum wage rate, as said in the Department of Labour and Employment (DOLE) Handbook, Rule IV, Book III, Omnibus Rules Implementing the Labour Code.
Seasonal Workers are not entitled to holiday wages during regular holidays in the off-season.
Workers without regular holidays are entitled to holiday pay.
Computing the Holiday Pay in the Philippines
The computation for the holiday wage rates was issued by the Department of Labor and Employment (DOLE) on Memorandum Circular No. 1 of March 8, 2004. It is currently implementing two separate groups of holidays rules, one for regular holidays and another for special non-working holidays.
A. Employee wage payment for regular holidays
As of 2022, there are ten (10) actively enforced regular holidays; there previously used to be thirteen (13), but due to the economic effects of the Covid-19 virus, the government opted to remove three holidays to revitalise the Philippine economy following Proclamation No. 1107. The regular holidays for 2022 are the following:
- Jan. 1 (Saturday) - New Year's Day
- April 9 (Saturday) - Araw ng Kagitingan (Day of Valor)
- April 14 - Maundy Thursday
- April 15 - Good Friday
- May 1 (Sunday) - Labor Day
- June 12 (Sunday) - Independence Day
- Aug. 29 (Monday) - National Heroes' Day
- Nov. 30 (Wednesday) - Bonifacio Day
- Dec. 25 (Sunday) - Christmas Day
- Dec. 30 (Friday) - Rizal Day
Employees who did not report for work during a regular holiday are still beholden to receiving their full 100% salary for that day and should not be given reduced pay for not working during the holiday.
Employees who reported for work on a regular holiday must be paid double their salary. The computation for the pay wage is as follows:
(Basic Wage + Cost-of-Living Allowance) X 200%
If Daily Rate is 2,000: [2,000 x 2 = PHP 4,000]
Employees who work overtime during a regular holiday, with the first eight (8) hours being given a 200% bonus, while those working for extra hours being given a plus 30% hourly rate on that same day, with basic wage added with cost-of-living allowance.
Hourly rate x 200% x 130% x number of hours worked.
If Daily Rate is 150, and worked overtime for two hours: PHP 150x 2 x 1.30 x 10 hours = PHP 3,900
Employees who report for work on their rest day (Saturday or Sunday) during a regular holiday will be given a 30% bonus of their 200% salary and 200% compensation.
Rest day hours
[(Basic wage + COLA) x 200%] + [30% (Basic wage x 200%)]
If Daily Rate is PHP 1,000:
[PHP 2,000] + [0.30 x PHP 2,000]
PHP 2,000 + PHP 600 = PHP 2,600
Employees who report for work and go overtime on their rest day (Saturday or Sunday) on a regular holiday will be given a 30% bonus of their 200% salary and 200% compensation and receive an added 30% hourly rate.
Rest day with overtime hours
Hourly rate x 200% x 130% x 130% x number of hours worked
If the Hourly Rate is PHP 150:
B. Special Holiday Pay Computation
The Philippines also has six (6) days counted as special non-working holidays; as of 2022, these include the following:
- Feb. 1 (Tuesday) - Chinese New Year
- Feb. 25 (Friday) - EDSA People Power Revolution Anniversary
- April 16 - Black Saturday
- Aug. 21 (Sunday) - Ninoy Aquino Day
- Nov. 1 (Tuesday) - All Saints' Day
- Dec. 8 (Thursday) - Feast of the Immaculate Conception of Mary
Employees who did not report for work during a special non-working holiday are subject to the “no work, no pay rule” this will take effect until the employer implements a policy or collective bargaining agreement (CBA) allowing payment during these dates.
Employees who report for work during a special non-working holiday must be provided with an added 30% of their basic wage for their first eight hours worked. To correctly compute this wage payment, consider the following formula.
(Basic Wage x 130%) + COLA
If the daily rate is 1,000 (no COLA), your holiday pay is:
Employees who work overtime during a special non-working holiday will receive an added 30% on their hourly rate. The computation is as follows:
Hourly rate of the basic wage x 130% x 130% x number of hours worked.
If the Hourly Rate is PHP150, with 2 hours of overtime, holiday pay is:
Employees who report for work on their rest day (Saturday or Sunday) during a special non-working holiday will be given an added 50% bonus of their basic wage for their first eight (8) hours. The computation for this instance can be seen below:
Rest day hours
(Daily rate × 150%) + COLA
If the daily rate is 1,000 (no COLA), your holiday pay is:
Employees who work overtime on their rest day (Saturday or Sunday) during a special non-working holiday will receive an added 30% hourly rate and other bonuses. The computation for this holiday pay is as follows:
Hourly rate of the basic wage x 150% x 130% x number of hours worked
If the Hourly Rate is PHP 150, with 2 hours of overtime, holiday pay is:
PHP 150 x 1.50 x 1.30 x 10 hours = PHP 2,925
Holiday wage pay Rules
A. Holiday Absences
Suppose an absent employee is paid on the workday once the day after a regular holiday. In that case, they are entitled to holiday pay, as said in the DOLE Handbook, Rule IV, Book III, Omnibus Rules Implementing the Labor Code.
If an employee is absent the day after a regular holiday, they will be paid if they applied for their leave credits for that day’s absence and were approved by the management. If no leave credit is applied, they will not be paid. If they are not paid on the workday after the holiday, they will not be spent.
The same rule on absences applies to the following regular holidays or two/more holidays lining up after another (e.g., Maundy Thursday and Good Friday). When absent employees are paid after the regular holiday, they will be paid for the regular holidays. If they are not paid after a regular holiday, they will not be given a holiday for the following regular holidays.
But in the case when an absent employee is not paid on the workday after a regular holiday but reports for work on the first regular holiday during successive regular holidays, they will be paid for the next holiday/s even without having to work.
B. Temporary Periodic Shutdown during Holidays
Because of Covid-19, DOLE quoted a piece in their handbook, saying that “In cases of temporary or periodic shutdown and temporary cessation of work of an establishment, as a yearly inventory or when the repair or cleaning of machinery and equipment is undertaken, the regular holidays falling within the period shall be compensated following the rules implementing the Labor Code, as amended.”
DOLE then explains that employers can use a temporary work suspension (TWS) to suspend work on their establishment for a legitimate business decision; it cannot be exceeded by six (6) months.
C. On holiday wage taxability
Regarding taxability, it is said that the minimum wage workers (MWE) are exempt from paying their withholding taxes for their holiday pay. This rule also applies to benefits such as overtime pay, hazard pay, and night differential pay.
Payroll services and management with Mazars
Organising each employee’s salary can become a hassle and take excessive time if left unattended. However, you can make salary distribution much easier by using the services of a reliable payroll outsourcing company. Mazars computes special rates, payroll wages, income taxes, and contributions. Other benefits include dealing with employee payments and mandatory requirements from government institutions.