CHAPTER TWO

PAYMENT OF WAGES

A. FORMS OF PAYMENT

A.1. Payment of wages should be in legal cur- rency

Summary of Principles

As a general rule, wages shall be paid only in legal currency

By way of exception, payment may be in the form of bank checks, postal checks or money
orders provided they are stipulated and in com- pliance with the Implementing Rules of the La-
bor Code

As a general rule, employee's signature should appear in the payroll as evidence of actual
payment. But absence thereof does not neces- sarily lead to the conclusion that wages were
not received by the employee.

In cases involving monetary claims, the burden of proving payment thereof rests on the em-
ployer. This is subject to certain exceptions

There is criminal liability for those found violat- ing the provision on payment of wages

101

Can employers pay their employees' salary by means of food coupons or meal vouchers only?
The answer is in the negative pursuant to the Labor Code. Thus:

"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 ten-
der, even when expressly requested by the em ployee." [Emphasis supplied]

The fact that the employee requests in writing that he be paid in such manner does not exempt
the employer from liability. Hence, the provision is a strong warning against any attempt to
circumvent the law on minimum wage and other benefits by paying an amount less than the
law's requirements.

This is echoed in the language of the implementing rules providing that as a general rule, wages
shall be paid in legal tender and the use of tokens, promissory notes, vouchers, coupons, or any
other form alleged to represent legal tender is absolutely prohibited even when expressly
requested by the employee."

For instance, the practice of paying employees the minimum wage by means of legal tender
combined with tuna liver and intestines runs counter to the abovecited provision of the Labor
Code. The fact that said method of paying the minimum wage was not only agreed upon by
both parties in the employment agreement but even expressly requested by employees, does
not shield the company from liability for salary differentials.

Payment of Wages

Being a general rule, there are exceptions to its appli- cation. Hence, 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
agree- ment, 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 represen- tatives does not receive any pecuniary
benefit directly or indirectly from the arrangement,
(c) The employees are given reasonable time dur- ing 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 con- sent of the employees concerned if there is
no collective agreement authorizing the payment of wages by bank checks.

A.2. Proof of service rendered by the employee

The age-old rule governing the relation between labor and capital, or management and
employee of a "fair day's wage for a fair day's labor" remains as the basic factor in determining
employees' wages. If there is no work per- formed by the employee there can be no wage or
pay unless, of course, the laborer was able, willing and ready to work but was illegally locked
out, suspended or dis missed, or otherwise illegally prevented from working

There must be competent proof such as time cards or office records to show that they actually
rendered com pensable service during the stated period to entitle them to wages.&

A.3. Evidence of payment of wages

How is payment of wages proven? What competent proof must be submitted to establish the
satisfaction of the obligation by the employer?

Supreme Court decisions point to payslips and payroll as among the pieces of evidence of
payment. This boils down to the evidentiary value of the documents presented as proof of
claim or defense.

Well-entrenched is the principle that in order to estab lish a case before judicial and quasi-
judicial bodies, it is necessary that allegations must be supported by substa tial evidence.
Substantial evidence is more than a mere scintilla. It means such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion.

A.3.1. Rule as to employee's signature on payroll

However, despite the absence of signature, one cannot make a conclusion that salaries and
benefits were not paid.

There is no hard-and-fast rule requiring that the em- ployee's signature in the payroll is the only
acceptable proof of payment. By implication, the employees, in signing the payslips with their
acknowledgment of full compensa- tion, unqualifiedly admit the receipt thereof.

A.3.2. Payslip may be proof of payment or underpayment

The payslips are original duplicates of computerized payslips issued by the employer to its
workers which contain entries such as pay date, employee's I.D. number, employee name,
category, basic rate, overtime hours and other relevant information, including an itemization of
earnings and deductions. The fact that the payslips are not authenticated will not militate
against the employee's claim, considering that in presenting the payslips, he has established the
fact of underpayment, and the burden has shifted to the employer to prove that complainant
was totally compensated for actual services rendered,

While ordinarily, payslip is only a statement of the gross monthly income of the employee, his
signature therein coupled by an acknowledgment of full compensation alter the legal
complexion of the document. The payslip becomes substantial proof of actual payment."1"

A.3.3. Employer must pay his employ. ees by means of payroll

The Omnibus Rules Implementing the Labor Code provides that every employer is required to
pay his em ployees by means of payroll.

A.3.4. What the payroll should contain

The payroll should show, among other things, the employee's rate of pay, deductions made and
the amount actually paid to the employee. Interestingly, the failure of the employer to present
the payroll to support his claim that the employee was not his worker, raises speculation that
the omitted evidence would be adverse to his case
Thus, the the following information and data shall be individually shown therein:

(1) Length of time to be paid;

(2) The rate of pay per month, week, day or hour piece, etc.;

(3) The amount due for regular work;

(4) The amount due for overtime work;

(5) Deductions made from the wages of the em ployees; and

(6) Amount actually paid.

Every employee in the payroll shall sign or place his thumbmark, as the case may be, at the end
of the line opposite his name where a blank space shall be provided for the purpose. His
signature shall be made in ink, or his thumbmark placed with the use of the regular stamping
ink and pad." 15

A.3.5.

Timekeeping requirement and methods

The basis of pay is the work rendered during the nor- mal hours of work. This means that
timekeeping is crucial in implementing payroll policies, subject to certain excep- tions involving
workers who are not required to keep time.

Thus, every employer shall keep an individual time record of all his employees bearing the
signature or thumbmark of the employee concerned for each daily entry therein by means of
any of the following methods:
(a) Through the use of bundy clock by means of which an employee can punch in his indi- vidual
card the time of arrival and departure from work;

(b) Through the employment of a timekeeper whose duty is to time in and out every em ployee
in a record book; and

(c) By furnishing the employees individually with a daily time record form in which they can
note the time of their respective arrival and departure from work.

A.3.6. Manner of accomplishing entries in the attendance record

All entries in time books and daily time records shall be accomplished in ink. All filled-up bundy
clock cards, timekeeper's books and daily time record forms shall be kept on file in
chronological order by the employer in or about the premises where the employee is
employed, and open to inspection and verification by the Department of Labor and
Employment as provided in the Implementing Rules.

A.3.7. Attendance record of managerial employees and field personnel.

Managerial employees, officers or members of the managerial staff, as well as non-agricultural

A.3.8. Attendance records of workers paid by results

Where the employees are paid on piece, pakiao, ta- kay, task, commission or other non-time
basis, the em- ployer shall keep production records showing their daily output, gross earnings
and the actual number of working hours spent by the employees on the job, bearing the
signature or thumbmark of the employee concerned."

Where, however, the minimum output rates of non- time workers have been fixed by the
Department of Labor and Employment or through certified collective agree- ments, or are in
compliance with the standards prescribed in Section 8, Rule VII of this Book, the employer may
dispense with the keeping of time records, except the daily production records showing their
output or the work accomplished and gross earnings.20

A.3.9. Preservation of employment records for 3 years

All employment records required to be kept and main- tained by employers shall be preserved
for at least three (3) years from the date of the last entry in the records.

A.3.10. Place to keep employment records

All employment records of the employees shall be kept and maintained by the employer in or
about the premises of the work place.

A.3.11. Meaning of premises of a workplace

The premises of a workplace shall be understood to mean the main or branch office of the
establishment, if any, depending upon where the employees are regularly assigned. The
keeping of the employee's records in another place is prohibited.

A.3.12. Entries in payroll enjoy the pre- sumption of regularity

In one case, the employee asserted that the payroll was merely fabricated for the purpose of
supporting his assertion before the NLRC. The Supreme Court did not agree. Entries in the
payroll, being entries in the course of business, enjoy the presumption of regularity under Rule
130, Section 43 of the Rules of Court. It is therefore incumbent upon the complainant to adduce
clear and convincing evidence in support of his claim of fabrication and to overcome such
presumption of regularity.

A.4. Employer has the burden of proof in monetary claims cases

It is settled that once the employee has set out with particularity in his complaint, position
paper, affidavits and other documents the labor standard benefits he is entitled to (such as his
entitlement to unpaid overtime pay, pre- mium pay for holiday and rest day and service
incentive leave pay) and for which he alleged that the employer failed to pay him, it becomes
the employer's burden prove that it has paid these money claims. One who pleads payment has
the burden of proving it. Further, it is well-entrenched rule that the burden of proving payment
thereof rests on the employer.

As in illegal dismissal cases, the general rule is that the burden rests on the defendant to prove
payment rather than on the plaintiff to prove non-payment of these money claims.

Generally a party who alleges payment as a defense has the burden of proving it. Particularly in
labor cases, the burden of proving payment of monetary claims rests on the employer.

The reason for the rule is that the pertinent personnel files, payrolls, records, remittances and
other similar documents-which will show that overtime, differentials, service incentive leave
and other claims of workers have been paid-are not in the possession of the worker but in the
custody and absolute control of the employer."

A.4.1. Mere denial of the claim will not discharge the employer's burden

If the company merely denies the employees claim for underpayment, without presenting any
controverting evidence to prove full payment, the claim for underpayment of the employee
shall stand.

The positive testimony of a creditor may be sufficient of itself to show non-payment, even
when met by indefinite testimony of the debtor. Similarly, the testimony of the debtor may also
be sufficient to show payment but where his testimony is contradicted by the other party or by
a disinterested witness, the issue may be determined against the debtor since he has the
burden of proof. The testimony of the debtor creating merely an inference of payment will not
be regarded as conclusive on that issue. Hence, for failure to present evidence to prove
payment, the company defaulted in its defense and in effect admitted the allegations of the
employees.
In a manner of speaking, the employer is the debtor I while the employee is the creditor in an
employment relationship insofar as the wage due the former is con- cerned. Being so, the
employer has the burden to prove payment of wages.

A.4.2.Case where the burden of proof lies with the employee

In a case where the employee asserted that he is en- titled to commissions and which the
employer denies, it was held that since there is no law which requires employ- ers to pay
commission, it is incumbent upon the employee to prove that there was indeed an agreement
between him and his employer for the payment thereof.

A.5.Criminal liability of employer who pays employees in prohibited forms

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 Philippines, unless expressly
requested by the laborer or employee shall suffer the penalty of arresto mayor or a fine ranging
from 200 to 500 pesos, or both.

The duration of imprisonment as penalty under ar- resto mayor is from one month and one day
to six months.

B. TIME OF PAYMENT

Time of payment of wages pertains to the frequency of payment. Usual period of payment is
every two (2) weeks or twice a month. In colloquial language, this is known as "15-30."

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 force majeure or circumstances mentioned refer to those beyond the employer's control.

B.1. Time within which to pay workers paid by results or on task basis

What is the interval of payment for employees paid by results? Are they covered by the same
"15-30" pay period?

The payment of wages of employees engaged to per- form 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 ex- ceeding sixteen (16) days, in proportion to
the amount of work completed;
(2) (2) That final settlement is made upon completion of the work.

B.2. Parties may stipulate shorter intervals of payment

It is worth noting that parties may stipulate a shorter interval such as daily, weekly or even
twice weekly. Again, the frequency and period mandated by law are just the minimum
requirements.

It is clear that the only limitation is that the intervals shall not exceed sixteen (16) days.

C. PLACE OF PAYMENT
D. In the past, prior to the advent of Automated Teller Machine (ATM), employers pay their
workers in the same place where they work, manually. Workers fall in line as they wait
their turn to be paid. Movies dating back to the Great Depression38 depict this kind of
labor environment.
E. With the healthier economic activities in the years that followed and the advancement
of computer technology, methods and practices in the payment of wages changed
dramatically.
F. Now, majority of companies pay wages through banks by crediting the amount into
employees's accounts which can be withdrawn through the ATM.
G. The Labor Code under Article 104 still provides for traditional manner of payment. It is
only in 1996 that the DOLE issued a Labor Advisory on the payment of salaries through
the ATM.
Thus, Article 104 of the Labor Code provides 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 and Em- ployment may prescribe under
conditions to ensure greater protection of wages." [Underlining supplied]

But the above provision is merely a general rule. It is subject to exceptions.

Payment in a place other than the work place shall be permissible only under the following
circumstances:

(a) 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;
(b) (b) When the employer provides free to the employees back and forth; and
(c) (c) Under any other analogous circumstances, Pro- vided, That the time spent by the
employees in collecting their wages shall be considered as compensable hours worked;

C.1. Prohibited place of payment

While the Implementing Rules state also other loca tions than the workplace which may be
used as venue for payment of wages, there are exceptions to this exception.

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.

C.2. Payment of wages through banks

Thus, in 1989, R.A. 672741 was passed providing that 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."

C.2.1. Bank certification on records of payment

Whenever applicable and upon request of a con- cerned worker or union, the bank shall issue a
certification of the record of payment of wages of a particular worker or workers for a
particular payroll period.

C.3. Payment of wages through ATM

At present, payment of salaries and wages is done through ATM. The big advantage to worker
for this method is that there are various machines available for this bank service. It is even
operating 24 hours unlike the bank payments allowed in 1989. The only problem is the fre-
quent offline status of the ATMs particularly during payday.

On November 25, 1996, a Labor Advisory on the payment of salaries through ATM was issued. It
provides based on Article 104 of the Labor Code as well as the provisions of Section 4, Rule VIII,
Book III of the Rules to Implement the Labor Code and considering the present- day
circumstances, practices and technology, employers may adopt a system other than in the
workplace, such as through automated teller machine (ATM) of banks, pro- vided that the
following conditions are met:

1. The ATM system of payment is with the written consent of the employees concerned;
2. 2. The employees are given reasonable time to withdraw their wages from the bank
facility which time, if done during working hours, shall be considered compensable
hours worked;
 3. 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. 4. There is a bank or ATM facility within a radius of one (1) kilometer to the place of
work;
5. 5. Upon request of the concerned employee/s, the employer shall issue a record of
payment of wages, benefits and deductions for particular period;
6. 6. There shall be additional expenses and no dimi- nution of benefits and privileges as a
result of the ATM system of payment; and
7. 7. The employer shall assume responsibility in case the wage protection provisions of
law and regulations are not complied with under the ar- rangement.

However, the main advantage of the ATM is also its failure. While it facilitates salary payments
due to its online once connection to online processes bogs down, ATM transaction dies out.

D. TO WHOM WAGES SHALL BE PAID

Wages should be paid directly to workers. But situa- tions like death of the employee or
disability such that he cannot acknowledge receipt thereof are always possibil- ity. In this case,
who shall receive his wages?

The general rule is that wages shall be paid directly to the workers to whom they are due.

The exceptions are as follows:

(a) In cases of force majeure rendering such pay- ment impossible or under other special
circum- stances to be determined by the Secretary of Labor and Employment in
appropriate regula- tions, in which case, the worker may be paid through another
person under written authority given by the worker for the purpose; or
(b) (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 ne- cessity 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 exclu- sion
of all other persons. If any of the heirs is a minor, the affidavit shall be executed on his
be- half 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.
(c) (c) Where the employer is authorized in writing by the employee to pay his wages to a
member of his family.
(d) (d) 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 recog nized by the employer in
accordance with a CBA or authorized in writing by the individual employees concerned.

D.1. Meaning of force majeure

Paragraph (a) of Article 105 mentions about force ma- jeure as one of the exceptions to direct
payment of wages to the employee.

Force majeure or caso fortuito in law refers to ex- traordinary events not foreseeable or
avoidable, "events that could not be foreseen, or which, though foreseen, were inevitable."

It is, therefore, not enough that the event should not have been foreseen or anticipated, as is
commonly be- lieved, but it must be one impossible to foresee or to avoid. The mere difficulty
to foresee the happening is not impos- sibility to foresee the same.49

D.2. How payment of wages is made to de- ceased employee

Succession comes into play once the person dies especially as regards his property.

The Labor Code itself provides the rules on payment of wages in case of the death of the
employee.

D.2.1. No need for intestate proceeding

The proceedings in the absence of a will are called "in- testate proceedings." To clarify, when a
person dies, he leaves his property behind. Sometimes during his lifetime, he executes a will
where he writes who shall inherit his property. Largely in the Philippines, the writing of a will is
not a popular practice. But it does not mean that there can be no proceedings without such
will. There is what is called an intestate proceeding for those who did not make a will.
Article 105 provides the rule on succession as to wages of the deceased employee even in the
absence of a will. Thus, where the worker has died, the employer may pay the wages of the
deceased worker to the heirs of the 50 latter without the necessity of intestate proceedings.

D.2.2. Rule if claimants are all of age

If claimants of the wages are all of age, they shall ex- ecute an affidavit attesting to their
relationship to the deceased and the fact that they are his heirs, to the exclusion of all other
persons.

D.2.3. Rule if any of the claimants is a minor

If any of the heirs is a minor, the affidavit shall be exe- cuted on his behalf by his natural
guardian or next-of-kin.

Under our law, a minor is a person who is below 18 years old.

Emancipation takes place by the attainment of major ity. Unless otherwise provided, majority
commences at the 53 age of eighteen years.

D.2.4. To whom shall the affidavit be presented

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.

D.2.5. Effect of payment by the employer to the Secretary of Labor

In short, once the employer has done the correct pro- cess of payment of wages of the
deceased employee, he cannot be held liable as to any further claims on such matter. It is
always possible that there could be other parties connected with the deceased who might be
inter- ested in the amount he left behind. The employer, who has complied with the procedure
in Article 105, will be shielded from any conflicting claims as he is absolved from further
liability.