Payroll Computation in the Philippines: August 2021 Public Holidays

Employers and HR Managers in the Philippines will have to carefully consider their payroll processing and compliance obligations for their employees for work performed during August.

Why?

There were two public holidays in the Philippines in August!

Furthermore, each holiday was a different category of public holiday, meaning that the payroll computation rules and requirements will also differ!

As per usual, the Department of Labor and Employment, or DOLE, have issued an Advisory explaining the implications of these public holidays for PH payroll and in particular, how employers should compute payroll and salaries to ensure that these two holidays have been taken into account.

So, here’s all you need to know about DOLE’s recent advisory and the processing of payroll for the month of August!

Background to Payroll and Public Holidays in the Philippines

Public holidays fall at various times throughout the calendar year in the Philippines.

In some cases, public holidays are clearly defined from the outset and fall at the same time every year. In other cases, public holidays in the Philippines might not be confirmed or declared until a short time, maybe weeks or days, before the public holiday falls.

As is the case in many countries around the world, there are specific rules and labor protections that apply and must be considered by employers when computing payroll and wages during a month in which a public holiday falls.

In these circumstances, there are two essential considerations for PH employers when it comes to public holidays and payroll processing in the Philippines:

1. PH Employers need to constantly monitor which days have been designated as public holidays, identify the specific category of public holiday and anticipate what impact this will have on employees and business operations; and
2. PH Employers must understand the various implications on their payroll computations and salaries for employees that work (or do not work) on a particular public holiday.

Point No. 2 above is our primary focus for this article!

Labor Advisory No. 15 Series of 2021

As mentioned above, during months when public holidays fall in the Philippines, either DOLE or the BIR will generally issue a Labor Advisory or a Revenue Memorandum outlining the specific payroll computations that should be applied by employers when paying employees for a period in which a public holiday falls.

In late August, DOLE released Labor Advisory No. 15 Series of 2021, entitled “Payment of Wages for the Special (Non-Working) Day on August 21, 2021 and Regular Holiday on August 30, 2021“.

Labor Advisory No. 15 Series of 2021 was issued pursuant to Proclamation No. 1107, issued by the President of the Philippines on 26 February, 2021.

Criteria for Computing Payroll on Public Holidays

There are various considerations that PH employers need to think about and identify when deciding how to apply the rules and guidelines around payment of wages for public holidays.

These include questions such as:

Did the employee actually work on the public holiday?

For how long did the employee work on the public holiday? Was it more or less hours than their standard working day?

Would the public holiday normally have been a rest day for the particular employee?

Are there any specific internal companies rules, policies or codes, or indeed, collective bargaining agreements, that might provide guidance or rules on how employees in the company should be paid for a public holiday?

As you will see from the rules contained in the latest DOLE Advisory outlined below, the above questions will all be very relevant to understand what “category” an employee falls into when deciding on what wages they should received for a period in which a public holiday falls.

Don’t Forget About the COLA!

The Cost of Living Allowance is often referred to as COLA.

When computing wages in the context of public holidays, the DOLE Advisories will regularly confirm that the COLA is to be included in the computation of holiday pay.

Labor Advisory No. 15 Series of 2021 is no different! As advised by DOLE, the COLA is to be included in the computations for the public holidays in August (see below).

21 August 2021 – Ninoy Aquino Day

Ninoy Aquino Day is a Special (Non-Working) Day! That means that there are specific rules that apply to this day and PH employers need to be aware of them!

Below are the payroll computation rules, outlined by DOLE, in relation to August 21, 2021 (Ninoy Aquino Day):

• Case 1 – The employee did not work. The “no work, no pay” principle will apply unless there is a separate company practice, contract or collective bargaining agreement that grants payment on a Special (Non-Working) Day.
• Case 2 – The employee did work. The employee will be entitled to an additional 30% of their standard wage for the first 8 hours of time that they worked. [(Basic Wage x 130%) + COLA].
• Case 3 – The employee worked more than 8 hours. The employee should receive an additional 30% of their standard hourly rate for that day. [Hourly rate of their basic wage x 130% x 130% x number of hours worked].
• Case 4 – The employee worked and it would usually have been the employee’s rest day – The employee is entitled to an additional 50% of their basic wage for the first 8 hours worked. [(Basic Wage x 150%) + COLA].
• Case 5 – The employee worked more than 8 hours and it would usually have been the employee’s rest day. The employee should receive an additional 30% of their hourly rate for that day. (Hourly Rate of Basic Wage x 150% x 130% x number of hours worked).

30 August 2021 – National Heroes Day

National Heroes Day is a Regular Holiday! That means that there are specific rules that apply to this day and PH employers must be aware of them!

Below are the payroll computation rules, outlined by DOLE, in relation to the Regular Holiday on August 30, 2021 (National Heroes Day):

• Case 1 – The employee did not work. 100% of their wages for that day (this will be subject always to any applicable labor law or DOLE laws). [(Basic Wage + COLA) x 100%].
• Case 2 – The employee did work. They should receive 200% of their standard basic wage for their first 8 hours of work. [(COLA + Basic Wage) x 200%].
• Case 3 – The employee worked more than 8 hours. They should receive 30% of their standard hourly rate. [Hourly rate of basic wage x 200% x 130% x the number of hours worked by the employee].
• Case 4 – The employee worked and it would usually have been the employee’s rest day. They should receive an additional 30% of his/her basic wage of 200%. [(COLA + Basic Wage) x 200%] +[30% (Basic Wage x 200%)].
• Case 5 – The employee worked more than 8 hours and it would usually have been the employee’s rest day. They are entitled to receive an additional 30% of their standard hourly rate. (Hourly Rate of Basic Wage x 200% x 130% x 130% x number of hours worked).

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