Cash Wage/Commission
35 Boie Takeda Chemicals, Inc. V. Hon. De La Serna
Dec. 10, 1993 | Narvasa, C.J. |
Doctrine: In remunerative schemes consisting of a fixed or
guaranteed wage plus commission, the fixed or guaranteed wage
is patently the “basic salary” for this is what the employee receives
for a standard work period. Commissions are given for extra efforts
exerted in consummating sales or other related transactions. They
are, as such, additional pay, which this Court has made clear do
not form part of the “basic salary.”
Facts:
 P.D. No. 851 provides for the Thirteen-Month Pay Law.
Under Sec. 1 of said law, “all employers are required to pay
all their employees receiving basic salary of not more than
P 1,000.00 a month, regardless of the nature of the
employment, and such should be paid on December 24 of
every year.”
 The Rules and Regulations Implementing P.D. 851
contained provisions defining “13-month pay” and “basic
salary” and the employers exempted from giving it and to
whom it is made applicable. Supplementary Rules and
Regulations Implementing P.D. 851 were subsequently
issued by Minister Ople which inter alia set items of
compensation not included in the computation of 13-month
pay. (overtime pay, earnings and other remunerations
which are not part of basic salary shall not be included in
the computation of 13-month pay).
 Pres. Corazon Aquino promulgated on August 13, 1985
M.O. No. 28, containing a single provision that modifies P.D.
851 by removing the salary ceiling of P 1,000.00 a month.
More than a year later, Revised Guidelines on the
Implementation of the 13-month pay law was promulgated
by the then Labor Secretary Franklin Drilon, among other
things, defined particularly what remunerative items were
and were not included in the concept of 13-month pay, and
specifically dealt with employees who are paid a fixed or
guaranteed wage plus commission or commissions were
included in the computation of 13th month pay)
 A routine inspection was conducted in the premises of
petitioner. Finding that petitioner had not been including
the commissions earned by its medical representatives in
the computation of their 1-month pay, a Notice of
Inspection Result was served on petitioner to effect
restitution or correction of “the underpayment of 13-month
pays for the years, 1986 to 1988 of Medical
representatives. Petitioner wrote the Labor Department
contesting the Notice of Inspection Results, and expressing
the view that the commission paid to its medical
representatives are not to be included in the computation
of the 13-moth pay since the law and its implementing
rules speak of REGULAR or BASIC salary and therefore
exclude all remunerations which are not part of the
REGULAR salary.
 Regional Dir. Luna Piezas issued an order for the payment
of underpaid 13-month pay for the years 1986, 1987 and
1988. A motion for reconsideration was filed and the then
Acting labor Secretary Dionisio de la Serna affirmed the
order with modification that the sales commission earned
of medical representatives before August 13, 1989
(effectivity date of MO 28 and its implementing guidelines)
shall be excluded in the computation of the 13-month pay.
 Similar routine inspection was conducted in the premises of
Phil. Fuji Xerox where it was found there was
underpayment of 13th month pay since commissions were
not included. In their almost identically-worded petitioner,
petitioners, through common counsel, attribute grave
abuse of discretion to respondent labor officials Hon.
Dionisio dela Serna and Undersecretary Cresenciano B.
Trajano.
Issue:
Whether or not commissions are included in the computat
ion of 13-month pay.
Held:
NO. The term “basic salary” is to be understood in its common,
generally accepted meaning, i.e., as a rate of pay for a standard
work period exclusive of such additional payments as bonuses and with the provisions of the law they are intended to carry
overtime into
Dispositive
 Contrary to respondent’s contention, M.O No. 28 did not
repeal, supersede or abrogate P.D. 851. As may be gleaned
WHEREFORE, the consolidated petitions are hereby GRANTED. The
from the language of MO No. 28, it merely “modified”
second paragraph of Section 5(a) of the Revised Guidelines on the
Section 1 of the decree by removing the P 1,000.00 salary
Implementation of the 13th Month Pay Law issued on November
ceiling. The concept of 13th Month pay as envisioned,
16, 1987 by then Labor Secretary Franklin M. Drilon is declared null
defined and implemented under P.D. 851 remained
and void as being violative of the law said Guidelines were issued
unaltered, and while entitlement to said benefit was no
to implement, hence issued with grave abuse of discretion
longer limited to employees receiving a monthly basic
correctible by the writ of prohibition and certiorari. The assailed
salary of not more than P 1,000.00 said benefit was, and
Orders of January 17, 1990 and October 10, 1991 based thereon
still is, to be computed on the basic salary of the
employee-recipient as provided under P.D. 851. are SET ASIDE. 

 Thus, the interpretation given to the term “basic salary”

was defined in PD 851 applies equally to “basic salary” Notes
under M.O. No. 28. The term “basic salary” is to be
understood in its common, generally accepted meaning,
i.e., as a rate of pay for a standard work period exclusive of
such additional payments as bonuses and overtime.

 In remunerative schemes consists of a fixed or guaranteed

wage plus commission, the fixed or guaranteed wage is
patently the “basic salary” for this is what the employee
receives for a standard work period.

 Commissions are given for extra efforts exerted in

consummating sales of other related transactions. They
are, as such, additional pay, which the SC has made clear
do not from part of the “basic salary.”

 Moreover, the Supreme Court said that, including

commissions in the computation of the 13th month pay,
the second paragraph of Section 5(a) of the Revised
Guidelines on the Implementation of the 13th Month Pay
Law unduly expanded the concept of "basic salary" as
defined in P.D. 851. It is a fundamental rule that
implementing rules cannot add to or detract from the
provisions of the law it is designed to implement.
Administrative regulations adopted under legislative
authority by a particular department must be in harmony