Wage Order No. 17 & RMC No. 76-2012: Daily Minimum Wage Rates in the National Capital Region

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Wage Order No. 17 was issued on May 17, 2012 to providing a Cost of Living Allowance (COLA) and integrating the existing COLA of P22.00 into the basic wage in the National Capital Region (NCR).  This wage order effectively increased the minimum wage in the NCR.  Effective June 3, 2012, following were changes made to the daily minimum wage rates:

  1. Integration of P22.00 COLA under W.O. No. RB-NCR-16 into the basic wage.
  2. P30.00 COLA per day to be given into two (2) tranches:
    > P20.00/day upon effectivity of this Wage Order
    > P10.00/day effective November 1, 2012

The Minimum Wage

Following are the minimum wage rates effective June 3, 2012 and November 1, 2012 as mandated by the Wage Order No. 17:

Effective 03 June 2012:
Sector/Industry Basic Wage After COLA Integration
COLA
New
Minimum Wage Rates
Non-Agriculture
P 426.00 P 20.00 P 446.00
Agriculture (Plantation and Non Plantation) P 389.00 P 20.00 P 409.00
Private Hospitals with bed capacity of 100 or less P 389.00 P20.00 P 409.00
Retail/Service Establishments employing 15 workers or less P 389.00 P20.00 P 409.00
Manufacturing Establishments regularly employing less than 10 worker P 389.00 P 20.00 P 409.00

It is to be noted that the minimum wage rate of P404.00 is now integrated with the P22.00 COLA in the previous Wage Order No. 16 for non-agriculture sector resulting to a new basic wage of P426.00.  Integration of the COLA to to basic wage is important as COLA is not considered in computing 13th month pay.

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Also, noted that the first tranche of COLA of P20.00 is effective June 23, 2012 bringing the minimum wage to P446.00.  Again, COLA is not considered in the computation of 13th month pay.


Effective 01 November 2012:
Sector/Industry Basic Wage
After
COLA
Integration
COLA Effective 3 June 2012 COLA Effective
1 November 2012
New Minimum Wage Rates
Non-Agriculture P 426.00 P 20.00 P 10.00 P 456.00
Agriculture (Plantation and Non Plantation) P 389.00 P 20.00 P10.00 P 419.00
Private Hospitals with bed capacity of 100 or less
P 389.00 P20.00 P10.00 P 419.00
Retail/Service Establishments employing 15 workers or less
P 389.00 P20.00 P10.00 P 419.00
Manufacturing Establishments regularly employing less than 10 workers
P 389.00 P 20.00 P 10.00 P 419.00

Effective November 1, 2010, the second tranche of COLA will take effect bringing the minimum wage from P446.00 to P456.00 for non-agriculture sector.  It is to be observed however that minimum wage in agriculture, private hospital with 100 or less bed capacity, retail and service establishments with 15 or less workers and manufacturing establishments regularly employing less than 10 workers sectors is lower by P37.00.

Wage Order No. 17 covers the Cities of Caloocan, Las Pinas, Makati, Malabon, Mandaluyong, Manila, Marikina, Muntinlupa, Paranaque, Pasay, Pasig, Quezon, San Juan, Taguig, and Valenzuela and Municipalities of Navotas and Pateros.

To download the full text of NCR Wage Order No. 17, Click Here!

Taxation and Accounting

In 2008, Republic Act No. (RA) 9504 was signed into law exempting Minimum Wage Earners in both the private and public sectors from paying income tax.  Consequently they are also exempt from withholding taxes.  The Bureau of Internal Revenue issued Revenue Regulations (RR) No. 10-2008 to implement the provision of RA 9504.  Along with RR No. 10-2008 are annexes (Annex A, Annex BAnnex CAnnex DAnnex EAnnex F) which will help the taxpayers in the implementation of the RR.  RR No. 10-2008 and Annexes can be downloaded below:

The minimum wage by that time is P382.00.  Upon effectivity of Wage Order No. 17, it also means that the minimum wage not subject to tax and withholding tax increased to the current minimum wage.  That is why Revenue Memorandum Circular (RMC) No. 76-2012 was issued by the BIR which Publishes the Daily Minimum Wage Rates in the National Capital Region pursuant to Wage Order No. 17.  Click Here to download!

Being exempt from income tax sounds and feels really good.  Imagine that you can take home your entire salary (less other statutory deductions) for your self and for your family.  Indeed tax is very burdensome and RA 9504 somehow ease such burden for minimum wage earners.  Included in the provision of RR No. 10-2008 is the increase of additional exemption from P10,000 per qualified dependent to P25,000.  Indeed, the personal exemption is now P50,000 regardless of the tax status of an individual and P25,000 additional exemption for every qualified dependent, but not to exceed four (4).

Another good thing about this exemption is that even the holiday pay, overtime pay, night shift differential pay and hazard pay earned by minimum wage earners are exempt from income tax and consequently, to withholding tax.  Provided, however, that an employee who receives/earns additional compensation such as commissions, honoraria, fringe benefits, benefits in excess of the allowable statutory amount of P30,000.00, taxable allowances and other taxable income other than the statutory minimum wage, holiday pay, overtime pay, hazard pay and night shift differential pay shall not enjoy the privilege of being a minimum wage earner and, therefore, his/her entire earnings are not exempt from income tax and, consequently, from withholding tax.

Okay, if I am a minimum wage earner in a Company I worked for, does it mean I’m automatically exempt from income tax and consequently, to withholding tax?

It’s a big NO! Example, aside from the provision stated in the second preceding paragraph, a minimum wage earner is not exempt from income tax if he/she is receiving other income such as income from the conduct of trade, business or practice of profession except those that are subject to final tax.  Even though subject to income tax, such minimum wage earner is still exempt from withholding tax.

To learn more about the tax matters surrounding minimum wage, please read Revenue Regulations (RR) No. 10-2008, Click Here!  This is an interesting topic!


Disclaimer: Opinions expressed in this article are that of the author and information provided are for general conceptual guidance for public information and are not substitute for expert advice. Contact support@philcpa.org for more information and if you want to avail professional services. Find us on Facebook!



Orlando Calundan is a CPA who has exposures in FS audit of entities in various industries such as real estate, food/restaurants, manufacturing, service organizations and BPOs, automotive, holding/investment companies and more. He also has exposure on internal audit engagements.

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