Rules for exemption from paying minimum wage (Part 2)

Persida Acosta

Persida Acosta

Dear PAO,
I am planning to start a small business but I am not sure if I could afford to pay the minimum wage to my employees. Is it possible to be exempted from the payment of minimum wage? If so, what are the requirements?

Dear Jess,
As discussed in yesterday’s article, Republic Act (RA) No. 6727 or the Wage Rationalization Act itself provides for exemption from compliance with the minimum wage. But aside from the exemptions provided by the said law, there is an additional exemption found in RA No. 9178, otherwise known as the Barangay Micro Business Enterprises (BMBE) Act of 2002.

Under the BMBE Law, a barangay micro business enterprise (BMBE) is granted, among others, exemption from the coverage of the Minimum Wage Law provided the employees are granted the same benefits given to any regular employee such as social security and healthcare benefits.

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 (P3,000,000.00). The “service” of business entity mentioned excludes those rendered by any one, who is a duly licensed government professional after having passed a government licensure examination, in connection with the exercise of one’s profession (Section 3(a), RA No. 9178).

To be considered a BMBE, one must register with the Office of the Treasurer of the appropriate city or municipality and secure a Certificate of Authority (Section 4, RA No. 9178). The applicant shall submit the duly filled out application form in triplicate, signed by the owner or manager of the entity (Section 5, DTI DAO No. 1, s. 2003). Any person, natural or juridical, or cooperative, or association, having the mentioned qualifications may apply for registration as BMBE (Section 5, RA No. 9178).

The Certificate of Authority will grant the entity the right to operate as a BMBE and to enjoy the benefits and privileges granted by the law to a BMBE (Section 3 (b), RA No. 9178). It will be effective for a period of two (2) years, renewable for a period of two (2) years for every renewal.

In addition to exemption from the minimum wage law, a BMBE is also entitled to exemption from tax for income arising from the operations of the enterprise (Section 7, RA No. 9178). A BMBE may likewise avail of the special credit windows which the law mandates the Land Bank of the Philippines (LBP), the Development Bank of the Philippines (DBP), the Small Business Guarantee and Finance Corporation (SBGFC), and the People’s Credit and Finance Corporation (PCFC), Government Service Insurance System (GSIS) and Social Security System (SSS) to set up to service the financing needs of BMBEs (Section 9, RA No. 9178).

If your planned business satisfies the conditions for registration as a BMBE, we recommend that you file an application with the appropriate city or municipal treasurer’s office to avail of the exemption from compliance with the Minimum Wage Law, as well as the other benefits and privileges accorded to a BMBE that are all aimed to encourage the growth and development of small businesses.

We hope that we were able to answer your queries. Please be reminded that this advice is based solely on the facts that you have narrated and our appreciation of the same. Our opinion may vary when other 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


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1 Comment

  1. Leizel M. Guinto on

    Dear PAO,

    We are currently operating food carts but we are confused on how the compensation and benefits of the sales assistants are addressed. We are a sole proprietor and we would like to be enlightened on how to handle legally and correctly the benefits and compensation of our employees. Currently, we have service agreement contract with them with the amount of daily pay (below the minimum) indicated in the contract. All our government licenses and business registrations are updated. But, we are also confused whether the government contributions like SSS, Philhealth and Pagibig must be paid. Currently, we do not do this yet but we want to know what is right to avoid any conflict in the future. Also, our gross sales in a year for our two food carts is about 2million only.

    Thank you and we appreciate your reply thru my e-mail address.