Fixing the Minimum Wage in the Philippines

Calls for the increase of minimum wages have surfaced with the constant increase of oil prices. This increase in the prices of gasoline and diesel almost always have the effect of raising all prices of goods and commodities. How is minimum wage fixed? What is the process in fixing the minimum wage? Let’s have a brief discussion on minimum wage determination.

The Wage Order

The Regional Board shall investigate and study all pertinent facts, and based on certain standards and criteria, shall proceed to determine if there’s a need to issue a Wage Order, which naturally fixes the minimum wage in the region. The Wage Order takes effect after 15 days from its complete publication in at least 1 newspaper of general circulation in the region. (Art. 123, Labor Code, as amended by Republic Act No. 6727, also known as the Wage Rationalization Act)

The Wage Order covers all private employees in the region. Of course, government employees are not covered by the increase prescribed in a Wage Order.

One-Year Period for Wage Increase

As a general rule, a Wage Order can only be issued once a year, which means that there could only be one wage increase every year. No petition for wage increase may be entertained within the 12-month period from effectivity of the Wage Order. By way of exception, however, a wage increase within the 12-month period is allowed when there is a supervening condition, such as an extraordinary increase in prices of petroleum products and basic goods and services. The Regional Wage Boards determines the existence of supervening condition, to be confirmed by the National Wages and Productivity Council (NWPC).

Regional Wage Boards

The Regional Tripartite Wages and Productivity Boards (RTWP), also referred to as the Regional Board or Regional Wage Board, has the authority to determine and fix minimum wage rates applicable in their regions, provinces or industries therein, and to issue the corresponding Wage Orders.

The Regional Wage Boards may initiate a new round of study for minimum wage increase. It may do so, on its own, even without a petition for wage increase.

Public hearings and consultations

The regional wage boards cannot issue a Wage Order without conducting public hearings/consultations, giving notices to employees’ and employers’ groups, provincial, city and municipal officials and other interested parties.

Standards/criteria for minimum wage fixing

The level of wages under a Wage Order must be “nearly adequate as is economically feasible to maintain the minimum standards of living necessary for the health, efficiency and general well-being of the employees within the framework of the national economic and social development program.” (Art. 124, Labor Code)

Among the relevant factors to be considered in fixing the regional minimum wages are the following:

1. The demand for living wages;

2. Wage adjustment vis-à-vis the consumer price index;

3. The cost of living and changes or increases therein;

4. The needs of workers and their families;

5. The need to induce industries to invest in the countryside;

6. Improvements in standards of living;

7. The prevailing wage levels;

8. Fair return of the capital invested and capacity to pay of employers;

9. Effects on employment generation and family income; and

10. The equitable distribution of income and wealth along the imperatives of economic and social , development.

What is the composition of the RTWP?

Each Regional Board shall be composed of the Regional Director of the Department of Labor and Employment (DOLE) as chairman, the Regional Directors of the National Economic and Development Authority (NEDA) and the Department of Trade and Industry (DTI) as vice-chairmen and two (2) members each from workers’ and employers’ sectors who shall be appointed by the President of the Philippines, upon the recommendation of the Secretary of Labor and Employment, to be made on the basis of the list of nominees submitted by the workers’ and employers’ sectors, respectively, and who shall serve for a term of five (5) years.

Freedom to bargain

The minimum wage provided in the Wage Order must be observed by both the employer and the employee. In other words, the employer cannot pay an amount lower than, and the employee cannot legally demand an amount higher than, the amount fixed in the Wage Order. However, both the employees and employers in particular firms or enterprises or industries are allowed to bargain or negotiate for higher wages.

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