DOLE mulls allowing small firms to forgo 13th month pay

MANILA, Philippines — Bad news for employees looking forward for their 13th month pay in December: the labor department is considering allowing businesses under a cash crunch to forgo giving the much-awaited holiday benefit.

“When it comes to the 13th month pay, maybe we can exempt MSMEs (micro, small and medium enterprises),” Labor Secretary Silvestre Bello III said in an online briefing. “We’re still studying this and it will be subject of a tripartite consultation.”

While Presidential Decree No. 851 mandates employers to give workers a 13th month pay, equivalent to a full month’s basic salary for employees with at least 1 year of service, the law’s implementing rules and regulations were more lenient and exempt “distressed employers” from the requirement.

Similar with any reprieve extended these hard times, the plan to waive the 13th month pay payout is meant to allow firms to save up in resources and help them keep their businesses running. If the plan pushes through, Bello said guidelines will be issued.

“We have to come up with an advisory to determine the meaning of a distressed company or distressed business establishment so that they can be exempt from payment,” Bello said.

Sought for comment, Sergio Ortiz-Luis Jr., president of Employers Confederation of the Philippines Inc., an industry group, said allowing select firms to skip handing out the 13th month pay is normal practice.

“It’s normal to give out exemptions, and so much more now because of the pandemic, a lot of businesses are finding it difficult. So a lot of businesses would not be able to give out [the 13th month pay,]” Ortiz-Luis said in a phone interview.

Representatives from labor groups have not responded to request for comment as of this posting.

Pending a decision on the matter however, Bello has urged enterprises and labor groups to negotiate, and possibly defer the 13th month pay, instead of forgoing it completely.

“To me that might be the more acceptable formula to address the issue of the payment of the 13th month pay,” he told reporters.

According to Bello, the health crisis has so far displaced around 3.5 million workers, including 1.9 million who were temporarily furloughed while businesses were shuttered at the height of lockdowns from March to June.

6-month period mulled extended

Some workers falling under this category, under current existing labor laws, may be rehired within 6 months from unwarranted business closure. Otherwise, firms may let them go completely after half a year. Bello said he wants this changed to 9 months. 

If granted together with the trade department, workers will then have an additional 3 months before their employers can either rehire them or ultimately, terminate them.

But Ortiz-Luis said employers would prefer a longer extension of another half since firms are still in the middle of crafting business plans to navigate through the pandemic. 

“A lot of employees would just get terminated if you don’t extend it for longer,” he said.