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Commission-Based Pay in Philippine Jurisdiction
In Philippine Jurisdiction, employees paid purely on commission basis are excluded from the coverage of employees entitled for holiday pay (under the Labor Code) and 13th month pay (P.D. 851 - 13th month pay law). In this episode, we give guidance on how commission is treated as a manner of payment of wages. There are two kinds of commissions. The first kind is considered as wages. This is the case for employees who are partly or fully paid on commission basis. The second kind is considered as an incentive or reward for achieving targets or quotas.
The first kind of commission is a matter of contract between the employer and employee. Hence, the employer cannot unilaterally change or alter their agreement. Any new arrangement has to be voluntary on the part of both parties. If the employer alters unfavorably the commission arrangement without the employee's consent, then it's either a breach of contract or a violation of the principle of non-diminution of benefits.
As regards the second kind of commission, since it's a form of incentive or reward, it can be changed and altered by the employer unilaterally for as long as the employee's vested rights are not violated. However, the employer cannot unfavorably and unilaterally change the commission incentive arrangement in the middle of the year because it might prejudice the employees who have already exerted their best efforts and are looking forward to receive such commission incentive. It's like changing the rules in the middle of the game, which is unfair.
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By Marvyn GaerlanIn Philippine Jurisdiction, employees paid purely on commission basis are excluded from the coverage of employees entitled for holiday pay (under the Labor Code) and 13th month pay (P.D. 851 - 13th month pay law). In this episode, we give guidance on how commission is treated as a manner of payment of wages. There are two kinds of commissions. The first kind is considered as wages. This is the case for employees who are partly or fully paid on commission basis. The second kind is considered as an incentive or reward for achieving targets or quotas.
The first kind of commission is a matter of contract between the employer and employee. Hence, the employer cannot unilaterally change or alter their agreement. Any new arrangement has to be voluntary on the part of both parties. If the employer alters unfavorably the commission arrangement without the employee's consent, then it's either a breach of contract or a violation of the principle of non-diminution of benefits.
As regards the second kind of commission, since it's a form of incentive or reward, it can be changed and altered by the employer unilaterally for as long as the employee's vested rights are not violated. However, the employer cannot unfavorably and unilaterally change the commission incentive arrangement in the middle of the year because it might prejudice the employees who have already exerted their best efforts and are looking forward to receive such commission incentive. It's like changing the rules in the middle of the game, which is unfair.