Exemptions to minimum wage

Persida Acosta

Persida Acosta

Dear PAO,
I plan to put up a small business. I’d like to ask if I am really obliged to pay the minimum wage. Frankly, I am not sure if the business I plan to start can cover the present minimum wage.        

Dear Kathie,
As a rule, employers are mandated by Republic Act (R.A.) No.6727 or the Wage Rationalization Act to pay the minimum wage to their employees. However, there are exceptions to this rule. There are instances where an employer is exempted from complying with the mandated minimum wage.

For one, the rules issued by the National Wages and Productivity Commission (NWCP) expressly provide exemption from payment of minimum wages to distressed establishments, new business enterprises (NBEs), retail/service establishments employing not more than ten (10) workers, and establishments adversely affected by natural calamities (Sec. 2, NWPC Guidelines No. 2, s. 2007). From your narration, your planned business endeavor may likely fall under the exemption given to NBEs, or retail/service establishments employing not more than ten (10) workers.

However, the exemption is not automatic. The owner of the establishment must file an application for exemption, together with supporting documents, with the appropriate Department of Labor and Employment (DOLE) Regional Board which will then review the application and determine whether the grant of exemption is warranted. Likewise, certain conditions must be satisfied. For NBEs, the establishment must be located outside the National Capital Region (NCR) and Export Processing Zones. It must also be established within two years from effectivity of the Order and must either be an agricultural establishment, whether plantation or non-plantation, or its total assets after financing must not exceed five million pesos (P5,000,000). On the other hand, an exemption may be granted to a retail/service establishments regularly employing not more than ten (10) workers, if the owner can prove that it is engaged in the retail sale of goods and/or services to end users for personal or household use, and it is regularly employing not more than ten (10) workers regardless of status, except the owner/s, for at least six (6) months in any calendar year (Sec. 3, Ibid.)

Additionally, a barangay micro business enterprise (BMBE) is granted, among others, an exemption from the coverage of the Minimum Wage Law (Sec. 8, R.A. No. 9178). A BMBE refers to any business entity or enterprise engaged in the production, processing or manufacturing of products or commodities, including agro-processing, trading and services, whose total assets including those arising from loans but exclusive of the land on which the particular business entity’s office, plant and equipment are situated, shall not be more than Three Million Pesos (P3,000,000) (Sec. 3, Id.). The employer, however, must grant the other benefits given to any regular employee such as social security and healthcare benefits. As with the other exceptions, the employer must register with the Office of the Treasurer of the appropriate city or municipality and secure Certificate of Authority in order to enjoy the privilege (Sec. 4, Id.).

We hope the foregoing opinion sufficiently addressed your concerns. Please bear in mind that this opinion is based on the facts you narrated and our appreciation of the same. Our opinion may vary if facts are changed or elaborated.

Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to dearpao@manilatimes.net


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