A significant fraction of an employee’s salary goes to their basic needs. Meeting the minimum wage requirement can help companies ensure that their staff meet their basic necessities while stimulating economic growth.
Employees who receive the minimum wage are less likely to leave their current jobs to search for better opportunities. Moreover, minimum wage earners can also provide greater social stability to their communities.
But how do we exactly define the minimum wage, and how much does it translate to? Let’s take a look.
What is a Minimum Wage?
A minimum wage is the lowest amount an employee may receive as mandated by law. In the Philippines, the minimum wage rate will depend on the region, province, or locality, and the amount is set by the Regional Tripartite Wage and Productivity Board. They may determine and adjust the minimum wage every three years.
When setting the minimum wage, the Regional Board considers these factors:
- The needs of workers and their families
- The capacity of the employer to pay
- Comparable wage and income
- Requirements of economic and social conditions
Why Set a Minimum Wage?
Setting a minimum wage promotes the right to equal remuneration and protects workers against unfair compensation. The minimum wage policy can also help overcome poverty and reduce inequality between different wage-earning groups (like males and females).
More importantly, the minimum wage ensures that all employees have enough income for their cost of living.
What is the Current Minimum Wage in Metro Manila?
In 2018, the Department of Labor and Employment (DOLE) increased the minimum wage in Metro Manila by ₱25 (from the previous ₱475). The DOLE Wage Order No. 22 set the minimum wage rates at ₱500 to ₱537.
The minimum wage rate for agricultural workers, manufacturing firms (with a maximum of 10 workers), and retail or service firms (with a maximum of 15 workers) is ₱500. Meanwhile, non-agricultural workers will receive ₱537.
Wage Order No. 22 also states that employees in Manila will receive a ₱10 cost of living allowance (COLA) as part of their basic pay. COLA covers workers who work in areas with a higher cost of living. Integrating COLA into basic pay translates to higher overtime and 13th month pay.
Minimum Wage Rates Adjusted for Inflation
The current minimum wage rates in Metro Manila are called nominal wages. These wage rates are a fixed amount set by the Philippine government.
The real minimum wage, on the other hand, is the amount adjusted for inflation. For instance, NCR’s non-agricultural workers usually receive ₱428.23 per day instead of ₱537. When adjusted for inflation, agricultural workers in Manila (plantation and non-plantation workers) have a minimum wage of ₱398.72.
How Has COVID-19 Affected Minimum Wage Rates?
Despite calls for a higher minimum wage, DOLE shares that companies affected by the current pandemic won’t be able to increase the minimum wage threshold just yet. Labor Secretary Silvestre H. Bello III warned that if DOLE approves another wage hike, the increase will most likely affect small to and medium-sized enterprises that are already struggling to survive due to the pandemic.
The DOLE asserts that there should still be a balance between the interests of employees and companies before approving a minimum wage hike.
Who Can Earn Minimum Wage in the Philippines?
The minimum wage policy applies to all workers working in the private sector, regardless of their designation, status of employment, and the method they receive payment.
Who’s Exempted from Receiving It?
Some employees aren’t entitled to the current minimum wage rate. For example, kasambahays or domestic workers, those employed in the personal services of another party, and workers of Barangay Micro Business Enterprises (BMBEs) won’t receive the minimum wage.
Moreover, the Philippine Regional Boards may exclude some businesses from providing minimum wage. These include:
- Distressed businesses
- New business enterprises
- Companies in the service or retail sector with a minimum of 10 employees
- Organizations adversely affected by calamities
- Other companies stated by the Board
Ensure Proper Compensation for Your Employees
Complying with the minimum wage requirement can help you ensure that your workforce can meet their basic, day-to-day needs. Consider adopting a streamlined payroll system to ensure the proper salary computation.
Address challenges in payroll, employee engagement, performance management, and stay business growth-ready with the holistic Sprout Ecosystem platform. Learn more about our suite of tools here, and visit our blog page for more labor updates.
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