Corporate Securities Info

Populist 14th month pay bill

Ahead of the reopening of Congress on July 22, Senate President Vicente Sotto III has served notice of his intention to push the approval of his proposal to require private employers to give their rank-and-file employees a 14th month pay.

The additional pay would be given to those employees regardless of their employment status or designation and irrespective of the method by which their wages are paid, as long as they have worked for at least one month during the calendar year.


Except for the provision limiting its application to rank-and-file employees, the bill practically replicates the existing law on the 13th month pay.

Recall that the 13th month pay was initially meant for the benefit of rank-and-file employees to help them tide over the expenses of the holiday season. It was later expanded to cover all employees regardless of their pay scale to prevent wage or salary distortions.


When it was first filed in 2016, Sotto’s bill did not go beyond first reading in the Senate. The senators’ attention then was focused on the administration’s legislative agenda.

Considering Sotto’s present standing, expect his colleagues to give his bill, out of courtesy to him, the opportunity to be taken up at the Senate floor.

But whether or not the senators will act on it favorably and the House of Representatives will follow suit remain to be seen.

There is no question this bill, if enacted into law, will redound to the benefit of its intended beneficiaries. Considering the present high cost of living, any upward adjustment in the rank-and-file employees’ take-home pay would be welcome.

The lawmakers should bear in mind, however, that ordering private employers to pay a 14th month pay is one thing and expecting wholehearted compliance from them is another.

After all, the money would be coming from the employers’ pockets and they will fight tooth and nail to prevent that from happening without at least receiving something in return.

Note that more than four decades after the 13th month pay became a requirement for all business establishments, complaints about employers failing or refusing to comply with it still persist despite repeated warnings from the Department of Labor and Employment (DOLE).


The warnings are either ignored or the DOLE does not have the political will to enforce compliance with the regulation.

For less fortunate employees, the 13th month pay is still a work in progress. On paper, it’s mandatory, but in reality, its payment depends on the goodwill of their employer.

With the 13th month pay still to be strictly enforced, now comes the proposal to require employers to give their employees an additional monthly pay.

It’s a populist idea that no doubt would earn brownie points from the labor sector whose yearly demand for increases in the minimum wage has been consistently rebuffed by the government.

For the country’s Top 100 companies, a 14th month pay would not have a substantial adverse effect on their bottom line.

Their stockholders may suffer a decrease in their cash dividends, but the overall profitability of their operations will not be affected. The increase in operating costs can be quietly passed on to customers.

But the same cannot be said for micro, small and medium-scale enterprises (MSMEs) that, according to the DOLE, constitute 90 percent of businesses and majority of the workforce in the country.

Often, due to financial constraints, many of these MSMEs find themselves unable to pay the 13th month pay of their employees in full or on time.

A 14th month pay on top of the 13th month pay may spell financial disaster for many MSMEs and, in the process, the loss of many jobs.

While it is true that labor deserves a fair share in the fruits of the businesses they help grow or prosper, caution must be taken that it is not done at the expense of capital.

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TAGS: 14th month pay, Business, Senate President Vicente Sotto III
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