Payment of Wages

FORM: LEGAL TENDER

ART. 102. Forms of payment. - No employer shall pay the wages of an employee by means of promissory
notes, vouchers, coupons, tokens, tickets, chits, or any object other than legal tender, even when
expressly requested by the employee.

Payment of wages by check or money order shall be allowed when such manner of payment is
customary on the date of effectivity of this Code, or is necessary because of special circumstances as
specified in appropriate regulations to be issued by the Secretary of Labor and Employment or as
stipulated in a collective bargaining agreement.

 The wages will have to be paid in the form of legal tender.

LEGAL TENDER

 Is that currency which has been made suitable by law for the purpose of a tender of payment of
debts.

 All notes and coins issued by the Central Bank are legal tender.

Q: The payment of wages in the form of cash considered legal tender?

A: YES.

Q: Can the employer pay the employee partly in cash and partly in kind?
A: Generally NO. But there are cases decided by the Supreme Court wherein such is allowed, such as
payment for facilities.

Q: Can the employer pay the employee in the form other than cash?
A: YES, through money order or check. This is by way of exception, the rules allow the employer to
pay employees’ wages in these forms. Note the instances.

Note: Payment of wages by bank checks, postal checks or money order is allowed.

Art. 1705 (CC). The laborer's wages shall be paid in legal currency.

Art. 288 (RPC). Other similar coercions; (Compulsory purchase of merchandise and payment of wages by
means of tokens.) — The penalty of arresto mayor or a fine ranging from 200 to 500 pesos, or both, shall
be imposed upon any person, agent or officer, of any association or corporation who shall force or
compel, directly or indirectly, or shall knowingly permit any laborer or employee employed by him or by
such firm or corporation to be forced or compelled, to purchase merchandise or commodities of any
kind.
The same penalties shall be imposed upon any person who shall pay the wages due a laborer or
employee employed by him, by means of tokens or objects other than the legal tender currency of the
laborer or employee.

EXCEPTIONS:

IRR, RULE VIII, BOOK III, SEC 2

SECTION 2. Payment by check. — Payment of wages by bank checks, postal checks or money orders is
allowed where such manner of wage payment is customary on the date of the effectivity of the Code,
where it is so stipulated in a collective bargaining agreement, or where all of the following conditions
are met:

(a) There is a bank or other facility for encashment within a radius of one (1) kilometer from the
workplace;

(b) The employer or any of his agents or representatives does not receive any pecuniary benefit directly
or indirectly from the arrangement;

(c) The employees are given reasonable time during banking hours to withdraw their wages from the
bank which time shall be considered as compensable hours worked if done during working hours; and

(d) The payment by check is with the written consent of the employees concerned if there is no
collective agreement authorizing the payment of wages by bank checks.

Payment of wages by bank checks, postal checks or money orders is allowed:

1. Where such manner of wage payment is customary on the date of effectivity of the Code
(November 1, 1974); or
2. Where it is stipulated in a collective agreement; or
3. Where all the following conditions are met:

a. There is a bank or other facility for encashment within a radius of 1 kilometer from the
workplace;

b. The employer, or any of his agents or representatives, does not receive any pecuniary benefit
directly or indirectly from the arrangement;

c. The employees are given reasonable time during banking hours to withdraw their wages from
the bank which time shall be considered compensable hours worked if done during working
hours; and
 d. The payment by check is with the written consent of the employees concerned if there is no
collective agreement authorizing the payment of wages by bank checks.

 If all of these conditions are met, the employer can validly, by himself, pay wages by checks.

 Note the differences of the instances in the rules that allow payment by check and place of payment,
because that is usually the mistake of students when they interchange the instances and of course,
these being different, they will end up wrong.

 Note that the employer should not enter into an arrangement with the bank that the employer will
receive commission if the employer pays in the form of check. There should be no pecuniary benefit
from this arrangement of payment through check.

PLACE OF PAYMENT

ART. 104. Place of payment. - Payment of wages shall be made at or near the place of undertaking,
except as otherwise provided by such regulations as the Secretary of Labor and Employment may
prescribe under conditions to ensure greater protection of wages.

Q: Is there an instance when the employer may be allowed to pay the employees’ wage other than at
the place of undertaking?

A: Yes.

EXCEPTIONS

A. IRR, Rule VIII, Book III, Sec 4

Section 4. Place of Payment.-

(a) As a general rule, the place of payment shall be at or near the place of undertaking. Payment in a
place other than the workplace shall be permissible only under the following circumstances:

1. When payment cannot be effected at or near the place of work by reason of the deterioration of
peace and order conditions, or by reason of actual or impending emergencies caused by fire, flood,
epidemic or other calamity rendering payment thereat impossible;

2. When the employer provides for transportation to the employees back and forth; and

3. Under any other analogous circumstances; provided that the time spent by the employees in
collecting their wages shall be considered as compensable hours worked.
(b) No employer shall pay his employees in any bar, night or day club, drinking establishment, massage
clinic, dance hall, or other similar places or in places where games are played with stakes of money or
things representing money except in the case of persons employed in said places.

 Payment in recreational places prohibited.

B. RA 6727 THRU BANKS

Sec. 7. Upon written petition of the majority of the employees or workers concerned, all private
establishments, companies, businesses, and other entities with twenty-five (25) or more employees and
located within one (1) kilometer radius to a commercial, savings or rural bank shall pay the wages and
other benefits of their employees through any of said banks and within the period for payment of wages
fixed by Presidential Decree No. 442, as amended, otherwise known as the Labor Code of the
Philippines.

SO, the following conditions must concur for the valid payment of wages thru banks:

1. upon written permission of the majority of the employees or workers concerned;

2. all private establishments, companies, businesses, and other entities with at least 25 or more
employees;
3. located within 1 kilometer radius to a commercial, savings or rural bank shall pay wages or
benefits of their employees through any of the banks;
4. within the period of payment of wages fixed by PD 442, the Labor Code, as amended

Q: Is the employer allowed by existing rules and regulations to pay the employees’ wage through the
facility of the ATM?

A: YES, note the conditions [RA 6727 Sec 7]

Q: When we say ATM, is that the same as the payment of wages through the banks?

A: That may or may not be different. There is an ATM in a bank, but an ATM is not always located in a
bank.

Q: Is it possible to pay the employee’s wage through the facilities in a bank?

A: YES, note the conditions [RA 6727 Sec 7]

PAYMENT OF WAGES THROUGH BANKS IN CASH, ALL OF THESE MUST CONCUR

Section 7, RA 6727
(1) Upon written permission of the majority of the employees or workers concerned;
(2) All private establishments, companies, businesses, and other entities with at least 25 or more
employees; and
(3) Located within 1 kilometer radius to a commercial, savings, or rural bank shall pay wages or benefits
of their employees through any of said banks;
(4) Within the period of payment of wages fixed by PD 442, the Labor Code, as amended.

 Wages shall be paid at least once every two (2) weeks or twice a month at intervals not exceeding
sixteen (16) days [Art 103 ]

LABOR ADVISORY ON PAYMENT OF SALARIES THROUGH AUTOMATED TELLER MACHINE (ATM)

[Issued by then Secretary Leonardo Quisumbing]
Article 104, as amended, requires that payment of wages shall be made at or near the place of
undertaking, except as otherwise provided by such regulations as the Secretary of Labor may prescribe
under conditions that would ensure prompt payment and protection of wages.
Based on Article 104, as well as the provisions of Section 4, Rule VIII, Book III of the IRR and considering
present-day circumstances, practices and technology, employers may adopt a system of payment other
than in the workplace, such as through ATMs of banks, provided that the following CONDITIONS are
met:
(1) The ATM system of payment is with the written consent of the employees concerned.
(2) The employees are given reasonable time to withdraw their wages from the bank facilities which
time, if done during working hours, shall be considered as compensable hours worked.
(3) The system shall allow workers to receive their wages within the period or frequency and in the
amount prescribed under the Labor Code.
(4) There is a bank or ATM facility within a radius of 1 kilometer to the place of work.
(5) Upon request of the concerned employee/s, the employer shall issue a record of payment of
wages, benefits and deductions for a particular period.
(6) There shall be no additional expenses and no diminution of benefits and privileges as a result of
the ATM system of payment.
(7) The employer shall assume responsibility in case the wage protection provisions of law and
regulations are not complied with under the arrangement.

 The point here is that, if the employer elects to pay the employee’s wage through the ATM, there
should be no diminution of the employee’s wage. The employees can also demand from the
employer proof of how much they are paid including the itemized deductions. In other words, it will
not dispense with the requirement of the pay slip. Remember that the employers decide on their
own without the employees’ consent to pay their wages through the ATM facilities, evidently in
violation or non-conformity with the guidelines issued by the DOLE. If that happens, then the remedy
of the employees would be to report it to the DOLE for an inspection and for the correction of that
 particular system. The DOLE, in the exercise of its visitorial and enforcement power can order the
employer to correct any deficiency in that kind of practice.

PAYEE

ART. 105. Direct payment of wages. - Wages shall be paid directly to the workers to whom they are
due, except:

(a) In cases of force majeure rendering such payment impossible or under other special circumstances to
be determined by the Secretary of Labor and Employment in appropriate regulations, in which case, the
worker may be paid through another person under written authority given by the worker for the
purpose; or

(b) Where the worker has died, in which case, the employer may pay the wages of the deceased worker
to the heirs of the latter without the necessity of intestate proceedings. The claimants, if they are all of
age, shall execute an affidavit attesting to their relationship to the deceased and the fact that they are
his heirs, to the exclusion of all other persons. If any of the heirs is a minor, the affidavit shall be
executed on his behalf by his natural guardian or next-of-kin. The affidavit shall be presented to the
employer who shall make payment through the Secretary of Labor and Employment or his
representative. The representative of the Secretary of Labor and Employment shall act as referee in
dividing the amount paid among the heirs. The payment of wages under this Article shall absolve the
employer of any further liability with respect to the amount paid.

TO WHOM SHOULD THE WAGE BE PAID?

Article 105 provides that wages should be paid directly to the employees. This is because it is the worker
who earns that money and it should be paid directly to him and not to his girlfriend, not to his lola, or
whoever. Otherwise, it is not a valid payment. As learned in Civil Law, payment or performance is a
mode of extinguishing an obligation. And if there is an improper payment or performance, it will not
extinguish your obligation. That is how important this rule is.

EXCEPTIONS

IS IT POSSIBLE TO PAY THE WAGE TO OTHER THAN THE EMPLOYEE HIMSELF?

YES, note the circumstances provided in Article105:

(a) In cases of force majeure rendering such payment impossible; or

(b) Under special circumstances to be determined by the SOLE in appropriate regulations; or
(c) Where the worker has died.

Rule VIII, Book III, Sec 5

Sec. 5. Direct payment of wages.- Payment of wages shall be made direct to the employee entitled
thereto except in the following cases:

(a) Where the employer is authorized in writing by the employee to pay his wages to a member of his
family;

(b) Where payment to another person of any part of the employee’s wages is authorized by existing
law, including payments for the insurance premiums of the employee and union dues where the
right to check-off has been recognized by the employer in accordance with a collective agreement or
authorized in writing by the individual employees concerned; or

(c) In case of death of the employee as provided in the succeeding section.

SECTION 6. Wages of deceased employee. — The payment of the wages of a deceased employee shall
be made to his heirs without the necessity of intestate proceedings. When the heirs are of age, they
shall execute an affidavit attesting to their relationship to the deceased and the fact that they are his
heirs to the exclusion of all other persons. In case any of the heirs is a minor, such affidavit shall be
executed in his behalf by his natural guardian or next of kin. Upon presentation of the affidavit to the
employer, he shall make payment to the heirs as representative of the Secretary of Labor and
Employment.

 In cases of payment of deceased worker’s wages to his heirs, they do not need a court order,
because there is no need for an intestate proceeding. What they need is an AFFIDAVIT OF HEIRSHIP.
[Rule VIII, Book III, Sec 6]

 Also a valid payment: when the payment of the employees’ wage through any of the authorized
deductions, such as by virtue of a check-off provision, then that is also a valid form of payment. So if
there is a CBA where there is a check-off provision for union dues, the employer will pay a portion of
your salary directly to the union and it will no longer pass through you, and this is a valid form of
payment.

TIME/FREQUENCY OF PAYMENT
ART. 103. Time of payment. - Wages shall be paid at least once every two (2) weeks or twice a month at
intervals not exceeding sixteen (16) days. If on account of force majeure or circumstances beyond the
employer’s control, payment of wages on or within the time herein provided cannot be made, the
employer shall pay the wages immediately after such force majeure or circumstances have ceased. No
employer shall make payment with less frequency than once a month.

The payment of wages of employees engaged to perform a task which cannot be completed in two (2)
weeks shall be subject to the following conditions, in the absence of a collective bargaining agreement
or arbitration award:

(1) That payments are made at intervals not exceeding sixteen (16) days, in proportion
to the amount of work completed;

(2) That final settlement is made upon completion of the work.

BUT payment for example during the 10th day of the month (once only) but the salary is for the whole
month is legal because it benefits the employee.

Rule VIII, Book III, Sec 3

SECTION 3. Time of payment. — (a) Wages shall be paid not less than once every two (2) weeks or twice
a month at intervals not exceeding sixteen (16) days, unless payment cannot be made with such
regularity due to force majeure or circumstances beyond the employer's control in which case the
employer shall pay the wages immediately after such force majeure or circumstances have ceased.

b) In case of payment of wages by results involving work which cannot be finished in two (2) weeks,
payment shall be made at intervals not exceeding sixteen days in proportion to the amount of work
completed. Final settlement shall be made immediately upon completion of the work.

Rule: at least every 2 weeks or twice a month at intervals not exceeding 16 days.

Exception: in cases of force majeure or in circumstances beyond the employer’s control, wherein the
payment of wages on or within the time herein provided cannot be made, the employer shall pay the
wages immediately after such force majeure or circumstance have ceased.

FREQUENCY OF PAYMENT – HOW OFTEN?

Wages shall be paid at least once every 2 weeks or twice a month at intervals not exceeding 16 days. It
translates into twice a month!
EXCEPTION

In case of force majeure or in circumstances beyond the employer’s control, wherein the payment of
wages on or within the time herein provided cannot be made, the employer shall pay the wages
immediately after such force majeure or circumstances have ceased.