MSMEs guide to Labor Code of the Philippines

A business, whether micro, small or medium enterprises (MSMEs), for it to be successful needs the hiring of the best people and creating the right team for the company. When a company hires people, an employer-employee relationship is created. This relationship is governed by the Labor Code of the Philippines, a law that provides the fair and just practices of an employer-employee relationship.  

What is the Labor Code of the Philippines 

The Labor Code of the Philippines is the law that governs employment practices and labor relations in the country. Enacted in 1974, its guidelines detail the hiring and termination of employees, fair working hours, benefits and bonuses, labor unions guidelines, strike practices, just working conditions, and the like. 

Work hours 

Six consecutive 8-hour working days are the just work hours for employees. Employers are also given the responsibility to give its employees one rest day per week. Moreover, employers are to respect their employees’ weekly rest days if it is based on religious grounds. 

The time in which the employee is required to be on duty at a workplace, the time where the employee is permitted to work, and short rest periods during the duration of work are all counted as working hours. Also, employers are required to give at least a one-hour break for workers to have their regular meals. 

An employee can work more than eight hours a day and can even work on holidays or rest days if the additional hours are paid by the employer. An employee may be required to render emergency overtime work in the following cases: 

1. 1. When the country is at war or when any other national or local emergency has been declared by the National Assembly or the Chief Executive; 
   2. When it is necessary to prevent loss of life or property or in case of imminent danger to public safety due to an actual or impending emergency in the locality caused by serious accidents, fire, flood, typhoon, earthquake, epidemic, or other disaster or calamity; 
   3. When there is urgent work to be performed on machines, installations, or equipment, in order to avoid serious loss or damage to the employer or some other cause of similar nature; 
   4. When the work is necessary to prevent loss or damage to perishable goods; and 
   5. Where the completion or continuation of the work started before the eighth hour is necessary to prevent serious obstruction or prejudice to the business or operations of the employer.

The employer may also require an employee to work on a rest day or any day if the following conditions have been met: 

1. 1. In cases of actual or impending emergencies caused by serious accident, fire, flood, typhoon, earthquake, epidemic or other disaster or calamity to prevent loss of life and property, or imminent danger to public safety; 
   2. In cases of urgent work to be performed on the machinery, equipment, or installation, to avoid serious loss which the employer would otherwise suffer; 
   3. In the event of abnormal pressure of work due to special circumstances, where the employer cannot ordinarily be expected to resort to other measures; 
   4. To prevent loss or damage to perishable goods; 
   5. Where the nature of the work requires continuous operations and the stoppage of work may result in irreparable injury or loss to the employer; and 
   6. Under other circumstances analogous or similar to the foregoing as determined by the Secretary of Labor and Employment. 

It is the duty of the employer to provide compensation to its employees for these additional working hours in accordance with the law. 

Wages

Payments should be given directly to the employee every two weeks, except for cases where the employee has an authorized person to receive the payment; death; and special circumstances to be determined by the Secretary of Labor and Employment. 

Any payment that is any object other than legal tender such as promissory notes, tickets, vouchers, coupons are not to be considered as wages for any employee even if the employee requests for it. 

Health and Safety 

It is the employers responsibility to have emergency first aid supplies in the establishment, and to provide any medical assistance to an injured or sick employee, and to keep a record of all injuries, sickness, and death of their employees. 

Termination 

There are two types of employees: regular and casual employees. Regular employers are defined by the Code as: workers who are desirable and necessary for the operations of the company; or the employer has a fixed contract for the employee. Employees that do not fall under the aforementioned definition are considered as casual employees. A casual employee who has been working for at least one year for a specific company shall be considered regular employees regardless if their work is continuous or not, as long as their work exists.

In the case of regular employees, an employer cannot terminate an employee without just cause except for the following: 

1. 1. Serious misconduct or willful disobedience by the employee of the lawful orders of their employer or representative in connection with their work;
   2. Gross and habitual neglect by the employee of their duties;
   3. Fraud or willful breach by the employee of the trust reposed in him by their employer or duly authorized representative;
   4. Commission of a crime or offense by the employee against the person of their employer or any immediate member of their family or their duly authorized representatives; and
   5. Other causes that are analogous to the foregoing.

On the other hand, an employee can terminate their relationship with their employer without just cause by serving a written notice one month in advance. In cases where the employee deems to end their relationship with their employer, he/she is entitled to end it at any time, provided that the employee experienced any of the following: 

1. 1. Serious insult by the employer or their representative on the honor and person of the employee;
   2. Inhuman and unbearable treatment accorded the employee by the employer or their representative;
   3. Commission of a crime or offense by the employer or their representative against the person of the employee or any of the immediate members of their family; and
   4. Other causes analogous to any of the foregoing.

Retirement

An employee may retire upon reaching the stipulated age of retirement on their contract or Collective Bargaining Agreement (CBA). In the absence of any agreement or retirement plan, an employee may retire upon reaching the age of 60 while an employee who reaches the age of 65 is mandated to retire. 

Any employee who has been in continuous service for an employer for more than five years (where a fraction of six months is considered a year) is entitled to compensation (retirement or separation pay) of at least half of their monthly salary for every year of service.