The Employer’s Guide to Labor Codes in the Philippines

What is the Philippine Labor Code?

The Philippine Labor Code is a comprehensive legal framework designed to regulate employment practices, labor relations, and company standards within the Philippines. Established to protect the rights and welfare of workers, the Code sets forth the legal standards for wages, working hours, benefits, and conditions of employment. 

It serves as the cornerstone for labor relations, providing mechanisms for dispute resolutions between employers and employees and ensuring fair labor practices. The Labor Code of the Philippines 2024 is dynamic, periodically updated to address the evolving needs of the workforce and the economy, making it essential for employers in medium-sized businesses across APAC to stay informed and compliant to foster a positive work environment. 

Who is covered under the Labor Code?

The Labor Code of the Philippines 2024 encompasses a wide range of individuals within the employment sphere, aiming to provide comprehensive protections and standards across various employment types. Specifically, it covers:

  • Regular employees: Those who perform activities necessary to the usual business operations of the employer, signifying a long-term relationship.
  • Project employees: Individuals with fixed employment for a specific project, of which the employer specifies the duration and scope at the engagement time.
  • Seasonal employees: Workers employed for tasks or activities that are seasonal in nature, and their employment is limited to the duration of the season.
  • Casual employees: Those engaged in work that is not part of the employer’s regular business and is only occasional or temporary.
  • Probationary employees: Employees on trial during a given period, allowing the employer to determine their suitability for regular employment based on standards made known to the employee at the time of engagement.

Additionally, the Labor Code provides specific provisions for domestic workers, known locally as “Kasambahay,” covering their rights and welfare distinctly.

However, the Labor Code excludes certain groups from its coverage, including government employees governed by civil service regulations, international organizations with diplomatic immunities, and individuals in the informal sector under specific conditions.

This broad coverage ensures that the vast majority of workers in the Philippines are protected under labor laws, promoting fair treatment in the company and providing mechanisms for resolving employment disputes. Understanding this coverage as HR teams and business owners is essential in developing policies compliant with the Labor Code of the Philippines 2024, fostering a sound and supportive work environment.

What are the types of employment?

Labor Code of the Philippines 2024

The Labor Code of the Philippines 2024 defines various types of employment to accommodate the diverse nature of work arrangements and industry practices. Understanding these classifications is crucial for HR teams and business owners to ensure compliance with labor standards and foster a productive work environment. Here’s a breakdown:

Regular employment

This type signifies a permanent employment status, where an employee performs tasks necessary to the business’s operation. The Labor Code ensures that regular employees are entitled to full benefits and job security, including the right to unionize and receive employer-contributed social, health, and welfare benefits.

Project employment

Employers hire project employees for specific projects or undertakings with predetermined durations. The employment automatically ends at the project’s conclusion. While project employees receive the same benefits as regular employees during their project’s term, they lack tenure security after the project finishes.

Seasonal employment

Similar to project employment, employers hire seasonal employees for work that aligns with the seasonality of the operation, and the employment lasts only as long as the season does. One may consider these employees as regular employees, but this status lasts only during the season of their employment.

Casual employment

Casual employment involves hiring workers for tasks not typically essential to the employer’s main business. Employers may consider a casual employee as a regular employee with respect to the performed activity if they work for at least one year, continuously or intermittently.

Fixed-period employment

Also known as term or contract employment, this arrangement involves an employee agreeing to provide services for a specific period. This type of employment remains valid only when based on the intrinsic quality of the work and not aimed at circumventing workers’ tenure rights.

For modern, medium-sized businesses in APAC with a progressive mindset, recognizing these employment types and their respective rights, benefits, and limitations is key to managing a happier team. Proper classification avoids legal pitfalls and fosters a better company culture by ensuring employee engagement under fair and clear terms.

What are the key provisions of the Labor Code?

The Labor Code of the Philippines 2024 provides a framework of rights and standards aimed at protecting workers while ensuring that employers can maintain a productive and efficient workforce. Here are some of the key provisions outlined in the labor code that HR teams and business owners should be aware of:

Minimum wage

The Labor Code of the Philippines 2024 requires employers to pay a minimum wage for workers, which varies across regions to account for the differential cost of living. Employers must comply with the Philippines minimum wage rates, ensuring that employees receive fair compensation for their labor.

Read next: Philippines Minimum Wage Guide for Employers

Working hours

Standard working hours are set at eight hours per day, for a total of 48 hours per week. Employers must compensate employees at a higher rate for hours worked beyond the standard, known as overtime pay.

Night shift differential

Employees who work between 10 PM and 6 AM are entitled to a night shift differential of at least 10% of their regular wage. This provision ensures fair compensation for workers contributing labor during less desirable hours.

Rest days

The Labor Code guarantees employees a minimum of one rest day after every six consecutive workdays. This provision enables them to rest, recover, and allocate time for personal activities or spending time with family, thereby helping to prevent employee burnout.

Maternity & paternity leave

Female employees are entitled to maternity leave benefits, while male employees can avail of paternity leave, supporting parents in balancing their work and family responsibilities.

Parental leave

In addition to maternity and paternity leave, the law allows qualified solo parents to take parental leave, acknowledging the unique challenges single-parent families face.

13th month pay

Employers must give their employees a 13th-month pay, equal to 1/12 of the total basic salary an employee earns within a calendar year, and pay it on or before December 24th each year. This practice serves as a meaningful way to recognize and reward employees for their hard work and dedication throughout the year, boosting employee morale and fostering a positive work environment. 

Read next: 12 Employee Recognition Examples to Keep Your Team Engaged All Year

Special leaves for women

Female employees are entitled to special leaves for reasons related to their health and safety, such as cases of gynecological disorders, provided that they have rendered at least six months of continuous aggregate employment.

Service incentive leave

Employees who have rendered at least one year of service are entitled to a yearly service incentive leave of five days with pay.

For businesses in the APAC region striving to cultivate a progressive company culture, adherence to these provisions is about valuing employee welfare and promoting a supportive and equitable work environment. Understanding and implementing these key provisions of the Labor Code of the Philippines 2024 can significantly contribute to fostering happier, more productive teams.

What are the three ways of termination under the Labor Code?

The Labor Code of the Philippines 2024 specifies conditions for terminating employment, protecting employees’ rights, and enabling employers to manage their workforce effectively. Understanding these conditions is crucial for HR teams and business owners to handle termination processes legally and ethically. Here are the three primary ways of termination as per the Labor Code of the Philippines 2024:

Termination for just cause

This refers to termination initiated by the employer due to actions of the employee that constitute a serious violation of company rules or standards. Examples include habitual neglect of duties, willful breach of trust, commission of a crime against the employer or any immediate family member, and other similar cases. The process requires due notice to the employee, providing an opportunity to explain or defend their actions.

Termination for authorized cause

This type of termination is due to operational requirements of the business such as installation of labor-saving devices, redundancy, retrenchment to prevent losses, closure or cessation of operation, and disease or illness of the employee that risks the health of the workforce. In such cases, the employer must give both the employees and the Department of Labor and Employment written notice at least 30 days before the termination takes effect, along with the appropriate separation pay as the law mandates.

Termination based on serious diseases or health conditions

When an employee cannot perform their duties due to a serious illness, the employer has the right to terminate employment to maintain operational productivity and protect the wellbeing of other employees. The Labor Code requires a medical certificate to support the termination decision, stating that the disease remains incurable within six months despite proper medical treatment. The employee is entitled to separation pay in accordance with the provisions of the Labor Code of the Philippines 2024.

Navigating the termination process and notice periods with fairness, compassion, and legality is paramount for fostering a better company culture and growing productive teams. Adhering to the Labor Code’s stipulations on termination reinforces your company’s commitment to ethical business practices and respect for individual rights.

Relevant reads: 10 Impactful Exit Interview Questions to Improve Your Employee Experience

Ways to Stay Compliant with the Labor Code

Labor Code of the Philippines 2024

Staying compliant with the Labor Code of the Philippines 2024 is essential for businesses in the APAC region, to avoid legal repercussions and foster a positive company culture that values fairness and respect for employees’ rights. Here are practical ways for HR teams and business owners to ensure compliance:

Stay updated on regulations

Labor laws and regulations can evolve, reflecting changes in the socio-economic landscape or in response to emerging company trends. It’s crucial for businesses to stay informed about these changes. You can achieve this by regularly consulting with labor law experts and participating in seminars and training sessions focused on labor law compliance.

Adopt clear and transparent policies

Developing and implementing company policies that align with the Labor Code of the Philippines 2024 is fundamental. These policies should cover all aspects of employment, from hiring to termination, and include detailed provisions for wages, benefits, working hours, leave entitlements, and grievance-handling procedures.

Leverage HR technology 

Modern HR tools can significantly aid in maintaining Labor Code compliance. These systems can help in maintaining accurate employee records, which are crucial for audit purposes and in case of labor disputes. Investing in the right HR software not only streamlines administrative tasks but also minimizes the risk of non-compliance.

Read next: Top 6 HRIS Philippines for 2024

For businesses aiming to cultivate a progressive and inclusive company culture, adherence to the Labor Code of the Philippines 2024 is non-negotiable. By staying informed, adopting clear policies, and utilizing technology, HR teams and business owners can ensure compliance and build stronger foundations for happier, more productive teams.

Building a Just and Equitable Work Environment

The Labor Code of the Philippines 2024 plays a crucial role in shaping a fair and equitable work environment by providing clear guidelines for employment practices. Organizations can ensure compliance with its provisions by implementing HRIS. 

With Omni’s all-in-one HR solution, you can enhance transparency and communication between employers and employees. Our self-service portals empower employees to access their work related information, including payslips, leave balances and company policies, fostering trust and engagement within the team and promoting a positive workplace culture.

Omni streamlines payroll processes, reducing manual errors and reducing the administrative burden on HR. With secure and centralized employee records, HR teams can easily store, update and share employee information across departments and with employees, ensuring compliance with the Labor Code of the Philippines 2024 at every step of the way. 

If you’d like to learn more about how Omni’s all-in-one HR software automates the entire end-to-end employee lifecycle, book a demo with our team.

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