Are you in Cebu and wondering what the minimum wage will be like in 2023?
In this article, we'll provide an overview of the current minimum wage in Cebu, what could be expected in the near future, and what you need to know as an employer.
Continue reading to find out more.
What is Minimum Wage?
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The National Wages and Productivity Commission (NWPC) and Regional Tripartite Wages and Productivity Board (RTWPB) in different regions are responsible for setting the minimum wage rates.
As a result, each region establishes its own minimum wage, considering various factors such as cost of living allowances and the prices of goods and commodities.
Furthermore, the same board sets different minimum wages based on industry classifications, including non-agricultural, agricultural, retail and service establishments, and manufacturing. This ensures that fair wages are maintained across various sectors.
How is Minimum Wage Determined?
In 2012, the Department of Labor and Employment (DOLE) implemented the two-tiered wage system (2TWS) to address the unintended consequences of mandated minimum wage, enhance coverage for vulnerable sectors, and foster productivity improvement and gain-sharing.
How Does the 2TWS Work?
- TIER 1
The minimum wage rates are determined by various factors, including the poverty threshold, prevailing wage rates from the Labor Force Survey, and socio-economic indicators such as inflation, employment figures, and the Gross Regional Domestic Product.
- TIER 2
In addition to the minimum wage, there is a system of voluntary productivity-based pay that incentivizes workers and businesses to enhance their competitiveness and productivity. This system rewards employees with supplementary pay based on the quality of their performance, motivating them to excel in their work.
How Is the Mandatory Minimum Wage Set?
Four key factors are crucial in determining the minimum wage rate. They are as follows:
- Needs of workers and their families: Living wage demand, wage adjustments in line with the consumer price index (CPI), cost of living and its fluctuations, workers' and their families' requirements, and enhancements in living standards.
- Capacity to pay: Employers' capacity to pay, a fair return on capital invested, and productivity.
- Comparable wages and incomes: Current wage levels
- Requirements of economic and social development: The need to incentivize industries to invest in rural areas, the impact on employment and family income, fair distribution of income and wealth in line with economic and social development imperatives.
Based on these considerations, regional boards establish the minimum wage at least once a year.
What is the Current Minimum Wage in Cebu?
Last June 14, 2022, the Regional Tripartite Wages and Productivity Board - Region IV (RTWPB-7) implemented a ₱31 increase in the daily minimum wage for private workers and ₱500 monthly increase for domestic workers.
The current minimum wage rate in Central Visayas, which includes Cebu, is set at ₱435 per day for non-agricultural sector workers and ₱425 for workers in the agriculture and non-agriculture sectors with less than 10 workers under Wage Order No. ROVII-23.
For domestic workers in Cebu, the current minimum wage is set at ₱5,500 per month, as per Wage Order No. ROVII-D.W.03.
Here's a simple breakdown that summarizes the new minimum wage rates.
|Sectors/Industry||Previous Minimum Wage||Wage Increase||New Minimum Wage Rate|
|Agriculture & Non-Agriculture With Less Than 10 Workers||₱394||₱31||₱425|
A table illustrating the new minimum wage rates in Cebu for 2023
The Reason Behind the Increase
According to a Rappler report, Evita Mendoza-Balane, a lawyer and the OIC board secretary of RTWPB-7, explained that the board determined the amount of ₱31 after considering multiple factors, including the poverty threshold, consumer price index, and inflation rate.
The ₱31 increase is the highest in Region-7 since 1989, surpassing the previous ₱25 approved back then.
Balane further mentioned that negotiations and consultations were conducted among the labor sector, management, and relevant government agencies before the board's final approval.
Image from CDN
To give context: the average inflation in the region from January to December 2022 was recorded at 6.6%. Rising housing prices, gas, electricity, water, other fuels, restaurants, and accommodation services influenced the increased inflation in Central Visayas.
PSA-7 reported that the provinces of Bohol and Cebu had the highest inflation rates in Central Visayas.
Increasing the minimum wage in the region is incredibly important to protect vulnerable workers from receiving unfairly low pay.
The Future of Minimum Wage in Cebu
The Regional Tripartite Wages and Productivity Board-7 is set to hold public hearings regarding wage hike petitions submitted by labor groups in Cebu. Earlier this year, 20 labor groups in Cebu filed petitions for wage increases in February and April.
Workers in Cebu argue that the wage recovery is a temporary solution to address the declining value of wages in Central Visayas. They emphasize that the daily minimum wage in Cebu is insufficient to cover the high cost of living and rising prices of goods.
According to a report from SunStar/Cebu, an increase will be implemented in Central Visayas this September. The wage and productivity board chairperson has announced this but mentioned that the exact amount is still being deliberated.
What Does Cebu's Minimum Wage Increase Mean for Employers?
For employers, the minimum wage increase means adjusting their payroll budget accordingly. DOLE-7 reminds employers that they must pay workers the mandated minimum wage, as failure or refusal to comply will result in both civil and criminal offenses.
Consequently, an employer may be sued for underpayment and held accountable for double indemnity. Double indemnity means compensating the employee with twice the unpaid benefits owed, including the prescribed wage rate adjustments the employer failed to provide upon the wage order's implementation, excluding other wage-related benefits.
Furthermore, an employer may face a fine ranging from ₱25,000 to ₱100,000, imprisonment from 2 to 4 years, or both if a criminal action is initiated against the responsible officers, including the President, Vice-President, CEO, or GM. Probation is not permissible for those found guilty.
Ensure Wage Compliance with Sprout
Sprout Solutions is committed to helping employers ensure compliance with labor laws. Our industry-leading payroll software is designed to handle the complexities of payroll processing and provide updated government reports.
We also offer Sprout HR, which helps employers build, grow, and elevate their human resource management practice. Not to mention, Sprout HR is certified by DOLE so that employers can be assured of legal compliance.
With Sprout Solutions, employers can easily stay ahead of the changing laws and regulations and manage their operations.
Contact us today to learn how we can help you ensure wage compliance.
To know more about minimum wages in the Philippines, visit our blog page.