The Secretary of Labor shall regulate the

payment of wages by results, including

pakyao, piecework and other nontime work,
in order to ensure the payment of fair and
reasonable wage rates, preferably through
time and motion studies or in consultation
with representatives of workers and
employers organizations.
PAYMENT BY RESULTS

- Generally, Article 101 speaks of workers
whose pay is calculated not on the basis of
time spent on the job but the quantity and
quality or the kind of work they turn out.

- Workers are paid by result; they do nontime
work.

- Number of hours of actual work cannot be
reasonably ascertained.
1. As to PRESENCE OF CONTROL

a. Those who work directly under the
supervision of their employer (usually
termed as piece-rate worker).
b. Those who work away from the employers
work premises and are not directly
supervised by the employer (usually termed
as task-based worker or pakyao).
2. As to RATE OF PAYMENT

a. Those who are paid piece rates as
prescribed in Peace Rate Orders by DOLE.

b. Those who are paid output rates which are
prescribed by the employer and are not yet
approved by the DOLE.

As to PRESENCE OF CONTROL

- In some instances, the term pakyao is used
interchangeably with piece-rate depending upon
the locality.

- Pakyao is usually used where the job to be
performed is in bulk or volumes which are
difficult to quantify (e.g. planting/harvesting per
hectare of land).

- Whereas in piece-rate, the production is by
piece, that is more or less regularly replicated
(e.g. shoes or garment factories).
Piece- work

- embodies control and
supervision as to how
the work is to be
performed

- work is done in the
company premises

- easily be counted

Pakyao

- no control , if any, is
merely over the result
of the work itself


- work away from
employers premises

- difficult to quantify

- LC deals with hours of work, weekly rest periods,
holidays, service incentive leaves and service
charges. It covers all employees in all
establishments, whether for profit or not EXCEPT
the following employees: (GoMaFiFaDoR)

1. Government employees
2. Managerial employees
3. Field Personnel
4. Members of the Family of the employer who are
dependent on him for support
5. Domestic helpers or persons in the personal
service of another
6. Workers paid by Result
Importance of determining the existence of E-E
relationship regarding Payment by Results

- In general, Labor standards and conditions apply
only if there is E-E relationship.
- Payment by result is not determinative of E-E
relationship.
- Thus, it is only a method of computing
compensation, not a basis for determining the
existence or absence of E-E relationship.

Four-fold Test (elements of E-E relationship) SWDC
1. Selection and engagement of employee
2. Payment of Wages
3. Power of Dismissal
4. Power to Control - Art. 101, Payment by
Results

As to RATE OF PAYMENT

- the vital point to consider in payment-by-
result arrangements is whether the output-
to-pay ratio is fair and reasonable. Output
pay rate should not prejudice both the
employer and employee.

- In other words, if the required number
(quota) is too high, the worker may not even
earn the minimum wage at the end of 8
hours, and this is unfair to the employee. On
the other hand, if the quota is too low, the
earnings will be disproportionately high for
the output, and this is unfair to the employer.

To illustrate:

In Malaybalay City, the minimum wage is
P310. Lets say a shoemaker at Rubbertex
Corp. earns P30 a pair. An ordinary
shoemaker of minimum skill/ability usually
makes 12 pairs for an eight-hour work. So he
gets P360 a day if he reaches his quota.

- if the required number (quota) is too high, the worker may not even
earn the minimum wage at the end of 8 hours, and this is unfair to
the employee. On the other hand, if the quota is too low, the
earnings will be disproportionately high for the output, and this is
unfair to the employer.


Implementing Rules in Book II, Rule VII-A, Section
5. Payment by Results

a) On petition of any interested party, upon its
initiative, the DOLE shall use all available
devices , including the use of time and motion
studies and consultation with representatives of
employers and workers organizations, to
determine whether the employees in any
industry or enterprise are being compensated
in accordance with the minimum wage
requirements of this Rule.

b) The basis for the establishment of rates for
piece, output or contract work shall be the
performance of an ordinary worker of minimum
skill or ability.
c) An ordinary worker of minimum skill or ability is
the average worker of the lowest producing
group representing 50% of the total number of
employees engaged in similar employment in a
particular establishment, excluding learners,
apprentices and handicapped workers employed
therein.
d) Where the output rates established by the
employer do not conform with the standards
prescribed herein, or with the rates prescribed by
the DOLE in an appropriate order, the employees
shall be entitled to the difference between the
amount to which they are entitled to receive
under such prescribed standards or rates and
that actually paid them by the employer.
a) Those who are paid piece rates as
prescribed in Peace Rate Orders by DOLE.

- Wages or earnings are determined by simply
multiplying the number of pieces produces by
the rate per piece.

- Workers are not covered for premium and
overtime payments. Whatever they produce
by the end of the day shall determine their
actual earnings even if the work exceeds 8
hours.

Example: 15 pairs X P30 = P450


b) Those who are paid output rates which are prescribed
by the employer and are not yet approved by the
DOLE.

- The number of pieces produced is multiplied by the
rate per piece as determined by the employer.

1. If the resulting amount is equivalent to or more
than the applicable statutory minimum daily rate in
relation to the number of hours worked, the worker
will receive such amount.
2. But if the amount is less than the applicable legal
rate, it is possible that the rates per piece are not in
accordance with the standards prescribed by the
rules implementing the LC; in that case, the
employer is required by law to pay the difference
between the resulting amount and the applicable
legal minimum rate.

Examples:1) 12 pairs X P35 = P420 above minimum
2) 12 pairs X P25 = P300 below minimum

ENTITLEMENT OF PRICE-RATE WORKERS TO NIGHT
DIFFERENTIAL (ND) AND SERVICE INCENTIVE LEAVE (SIL)

Note:
1. If performance is supervised and in the companys premises
entitled to ND and SIL.
2. If performance is unsupervised and done outside
- not entitled to ND and SIL.

YEARLY COMPUTATION OF SIL
(According Bureau of Working Conditions)
Average daily earnings during the particular year of
service which can be derived by dividing the amount earned
during the year by the actual number of working days or the
statutory minimum rate, whichever is higher.
Example:
P75,000 / 230 = P326 average daily earning
P75,000 / 310 = P242
Average daily earning = P326 x 5 = P1,630



COMPUTATION OF SERVICE INCENTIVE LEAVE PAY
(BWC Letter to Mr. A.B. Tan Sanchez, July 8,1987 )

Average monthly earning = total waged for 1 year
12

Daily earning = average monthly earning
30
Incentive leave pay = daily earning x 5 SIL

To illustrate:

Average monthly earning = 75,000
12

Daily earning = 6250
30
Incentive leave pay = 208 x 5 = P1040


ENTITLEMENT TO HOLIDAY PAY

- A piece-rate employee is entitled to the holiday pay
( Sec. 8 of Rule IV on Holiday Pay of Certain
Employees)

- Holiday pay of certain employees. xxx (b) where
a covered employee is paid by results or output,
such as payment on piece work, his holiday pay
shall not be less than his average daily earnings for
the last seven (7) actual working days immediately
preceding the regular holiday; Provided, however,
that in no case shall the holiday pay be less than
the applicable statutory minimum wage rate.

ENTITLEMENT TO 13
TH-
MONTH PAY

- P.D. No. 851 exempts from the payment of 13
th
-
month pay employers of those who are paid a fixed
amount for performing specific work, irrespective
of the time consumed in the performance thereof,
EXCEPT where the workers are paid on piece-rate
basis in which case the employer shall grant the
13
th
month pay to such workers.

- In order to be entitled to the 13
th
month pay, the
piece-rate worker should have rendered at least
one (1) month work or service during the calendar
year.
JURISPRUDENCE ON PIECE-RATE WORKERS
ENTITLEMENT TO STATUTORY BENEFITS:

The Makati Haberdashery Case (November
15, 1989)

The Labor Congress Case
(May 21, 1998)



Facts:
Workers of Makati haberdashery Inc. as
tailors, seamstresses, sewers, basters and
plantsadoras are paid on piece-rate basis and
daily allowance.
On July 20, 1984, Sandigan ng
Manggagawang Pilipino filed a complaint for
underpayment of the minimum wage, non
payment of OT, Holiday pay, Service Incentive
pay, 13
th
month pay, and benefits under wage
orders.


Labor Arbiter Dismissed the claims but
ruled that haberdashery violated the decrees on
the COLA, SIL pay and the 13
th
month pay.

The employer appealed to NLRC. Losing
there again, it went to the High Court alleging
the following errors:





1. That E-E relationship exists between
petitioner haberdashery and respondent
workers.

2. That respondent workers are entitled to
monetary claims despite the finding that they
are not entitled to minimum wage.

RULING:
The High Court ruled that the workers are
regular employees, although paid on piece-rate
basis.
Private respondents are entitled to:
Minimum Wage
COLA
13
th
month pay


SIL pay ( Sec. 1 [d] Rule V )
Holiday Pay - (Sec. 1 [e] Rule IV)
as piece-rate workers being paid at a
fixed amount for performing work irrespective
of time consumed in performance thereof; fall
under one of the exceptions stated in
Implementing Regulations, Book III, Labor code.


FACTS:
99 petitioners (employees of EFP) filed
money claims and violations of labor standards
laws and another petition seeking certification
of their union as their bargaining
representative.
The employer and petitioners executed a
MOA where employer agreed to bargain with
the union over the employees demands.


No bargaining took place but instead the
employees were dismissed allegedly for
abandoning their jobs.
The employees assisted by LCP Pres.
Benigno Navarro, complained of illegal
dismissal, asked for reinstatement with
backwages and pursued their claims for
statutory benefits and damages.
SC ruled that petitioners were indeed
regular employees.


Finding that dismissal was unjustified, the
court declared them entitled for reinstatement,
but, nevertheless, awarded separation pay.

Backwages were also awarded but
computation to be done by NLRC since
petitioners were paid on piece-rate basis.


RULING:
Other Benefits which the Petitioners were
also entitled:

Holiday pay
Premium pay
13
th
Month pay
Service Incentive Leave


In The Haberdashery case, holiday pay and
SIL were not entitled because the court did not
apply Sec. 8 (b) of rule IV that entitles piece-
rate workers to holiday pay. Instead the court
put them under Sec. 1 (e) of said rule.
By putting the piece-rate workers in sec. 1
(e) and not by applying sec. 8 (b) the court
failed to distinguish between pakyao or task
basis employees (usually unsupervised)and the
piece-rate workers (supervised).

Summation: Benefits payable to Piece-rate
Workers

1. The Applicable Statutory Minimum daily rate
2. Yearly SIL for 5 days with Pay
3. Night Shift Differential Pay
4. Holiday Pay
5. Meal and Rest Periods
6. Overtime Pay (conditional)
7. Premium Pay (conditional)
8. 13
th
month pay
9. Other benefits granted by law, by individual
or collective agreement or company policy or
agreement.