Living allowance not included in 13th month pay

December 1, 2010

CITY OF SAN FERNANDO — The cost of living allowance (Cola) of minimum wage earners is not included in the computation of the 13th month pay, said the wage board.

The Regional Tripartite Wage and Productivity Board, which is under the Department of Labor and Employment’s National Wages and Productivity Commission, recently approved a P14 per day increase in Cola and was implemented last November 22.

But board secretary VI Elizabeth Teves said many employers and workers were confused as some sections of Wage Order RBIII-15 were apparently misinterpreted.

“A clause in there could have been read in a way that the wage increase will cover the 13th month pay of private firm employees, which is not so,” Teves told Sun.Star.

“It caused confusion among workers and employers because it appeared that it is mandatory that the cost of living allowance be included in the computation of the 13th month pay,” she added.

Teves said that under Presidential Decree (PD) 851 or the “Law on the 13th month pay,” allowances like Cola are not included in the computation.

“PD 851 states that the 13th month pay shall not be less than one twelfth (1/12) of the total basic salary. The ‘basic salary’ of an employee for the purpose of computing the thirteenth-month pay shall include all remunerations of earnings paid by his or her employer for services rendered,” said Teves.

The Cola, she added, does not include allowances and monetary benefits that are not considered or integrated as part of the regular or basic salary, such as the cash equivalent of unused vacation and sick leave credits, overtime, premium, night shift differential and holiday pay, and cost of living allowance.

However, Teves said these salary-related benefits should be included as part of the basic salary in the computation of the 13th month pay if these are treated as part of the basic salary of the employees, “through individual or collective agreement, company practice or salary.”

The RTWPB official also clarified that the recent increase was just P14 per day and not P24 per day as some sectors claimed.

The recent wage adjustment earned the ire of labor groups who called for a P75 across the board wage hike.

Some labor sector leaders said it was just for round trip fare but not enough to buy a kilo of rice. The business and employment sector on the other hand, said it was reasonable and fair enough. (Jovi T. De Leon)

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