Compensation and Benefits on Statutory Standpoint
Compensation and benefits program inside the company is a challenging task. Not only the this plan should attract, retain, and motivate employees but it must also comply with what is provided by law.
The objective generally is just to pay according to the purpose and not to underpay or overpay.
The post below is based on the book Guide on Employee Compensation and Benefits Volume One.
The law on compensation and benefits mandated under the Labor Code provides only the minimum requirements. Companies may give higher monthly salary and benefits to their employees. But it must be borne in mind that what is given beyond the minimum when intended to be permanent may not be taken back without the consent of employees, consistent with the principle of “non-diminution.”
Computation on holiday pay, rest day, overtime and night-shift differential, among others proves to be quite a challenge. Not so much with the mathematics involved but with the principle governing each concept and interpretation on difficult issues.
The discussion in the book provides explanation using the legal basis of every principle. For those not familiar with the legal language, the following concept on computation of premium pay and other benefits may help in understanding the succeeding disquisitions on the legal aspect.
Basic principles that must be remembered when dealing with rate and amount of pay during holiday, rest day, etc. are as follows:
- The daily rate of employees for work performed on a certain day changes depending on whether it is a regular work day, special day, rest day and regular holiday;
- There are only two rates of overtime work. First, 125% for overtime duty on regular working day. And second, 130% for work rendered on rest days, special days, regular holidays and on occasions when two or more of said holidays and rest days concur in one work day;
- The night-shift differential rate of 10% does not change no matter the type of working day. The reason the night differential payout changes is that the base, which is the working day (regular, special day, regular holiday, rest day, etc) also changes;
- The workday rate serves as basis for the computation of overtime and the night-work pay; and
- Overtime amount is computed first before the night-shift differential since the latter is always based on the former when they are present in the same period.
Once it is understood that the pay for certain days of work varies according to the law’s classification (regular work, rest day, special day, etc.), the next thing to take note of is that there are two types of work for purposes of understanding the overtime. The overtime work on regular work day and on rest day and holidays.
Just the same, in mastering the application of night-differential pay, the only thing to consider is whether the night work is performed during overtime or non-overtime hours. If it is performed during overtime period, the basis is the overtime rate, if not, then the basis is the hourly rate on regular working day.
The significance of knowing said principles is to acquire a mental framework so it becomes easy to deal with any situation concerning said subjects.
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