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Wage Deduction and Withholding

16 Oct

Wage Deduction and Withholding

By Labor Law , 12 Comments

Wage is defined as the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor and Employment, of board, lodging, or other facilities customarily furnished by the employer to the employee.

In relation thereto, “fair and reasonable value” shall not include any profit to the employer, or any person affiliated with the employer. Being the compensation of an employee for a hard day’s work, it should not be subjected to deductions other than those authorized by law.

Atty. Elvin discusses the highlights on wage deduction and withholding in his Youtube VLOG shown here: https://www.youtube.com/watch?v=aWOwwWI2SHQ

The Labor Code generally prohibits deductions from the wages of their employees, except in the following instances:

1) where the worker is insured with his consent by the employer, and the deduction is to recompense the employer for the amount paid by him as premium on the insurance;

2) for union dues, in cases where the right of the worker or his union to check-off has been recognized by the employer or authorized in writing by the individual worker concerned; and

3) the employer is authorized by law or regulations issued by the Secretary of Labor and Employment (Article 113, Labor Code).

The Civil Code provides an exception to the rule prohibiting wage deduction. Under Art. 1706, it states that withholding of the wages, except for a debt due, shall not be made by the employer. This is one of the laws referred in number of Article 113 of the Labor Code.

Further, on July 27, 2018, the DOLE issued Department Order 195, Series of 2018 amending Section 10 (b) (wage deduction) of Rule VIII (Payment of Wages) of the IRR of the Labor Code allowing deductions if with written authorization by the employees for the payment to the employer or third person and the employer agrees to do so, provided that the latter does not receive any pecuniary benefit, directly or

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indirectly, from the transaction.

Likewise, the cash deposit referred therein shall answer only for loss or damage of tools, materials, or equipment supplied by the employers. The DOLE opined that it is only in private security agency where the practice is only recognized and allowed.

For the security services, the requirement of cash bond is an accepted practice. However, a private security agency must observe the rules on the matter.

To validly deduct on account of loss or damage, the employer must establish:

1) The employee is clearly shown to be responsible for the loss or damage;

2) The employee is given reasonable opportunity to show cause why deductions should not be made;

3) The amount of such deduction is fair and reasonable and shall not exceed the actual loss of damage; and

4) The deduction from the wages of the employee does not exceed 20 % of the employee’s wages in a week.

The labor advisory also states that in the event that a private security agency requires a cash deposit from its employees, the maximum amount shall not exceed the employee’s one month basic salary. It further states that the full amount of cash deposit deducted shall be returned to the employee within ten (10) days from separation from the service.

It bears noting that the costs of PPEs, testing, and disinfection, especially with the COVID-19 pandemic shall not be charged against the employees in accordance with Joint Memorandum Circular 20 04-A of the DTI and DOLE.

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