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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
“In remunerative schemes consisting of a fixed or guaranteed wage plus commission, the fixed or guaranteed wage is patently the “basic salary” for this is what the employee receives for a standard work period. Commissions are given for extra efforts exerted in consummating sales or other related transactions. They are, as such, additional pay, which this Court has made clear do not form part of the “basic salary”. (Thirteenth Month Pay, 2022 Handbook on Statutory Monetary Benefits)
Commission is a direct remuneration received by an agent, salesman, executor, broker, or trustee calculated at a percentage on the amount of his transactions, or on the profit of the principal. (Black’s Law Dictionary, 5th Edition)
In the context of labor, commissions refer to the incentives or forms of encouragement to inspire employees to put a little more industry on the jobs particularly assigned to them; they are the direct remunerations for services rendered.
The law says:
“Wage” paid to an employee shall mean the remuneration of earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor and Employment, of board, lodging, or other facilities customarily furnished by the employer to the employee. (Article 97, par. (f), Labor Code)
The 2022 Handbook on Statutory Monetary Benefits says:
“In remunerative schemes consisting of a fixed or guaranteed wage plus commission, the fixed or guaranteed wage is patently the “basic salary” for this is what the employee receives for a standard work period. Commissions are given for extra efforts exerted in consummating sales or other related transactions. They are, as such, additional pay, which this Court has made clear do not form part of the “basic salary”. (Thirteenth Month Pay, 2022 Handbook on Statutory Monetary Benefits)
Jurisprudence says:
“While commissions are, indeed, incentives or forms of encouragement to inspire employees to put a little more industry on the jobs particularly assigned to them, still these commissions are direct remunerations for services rendered. In fact, commissions have been defined as the recompense, compensation or reward of an agent, salesman, executor, trustee, receiver, factor, broker or bailee, when the same is calculated as a percentage on the amount of his transactions or on the profit to the principal. The nature of the work of a salesman and the reason for such type of remuneration for services rendered demonstrate clearly that commissions are part of a salesman’s wage or salary.” (Marilyn Asentista v. JUPP & Company, Inc., G.R. No. 2294904, January 24, 2018)
What are sales commissions?
Jurisprudence says:
“Sales commissions are intimately related to or directly proportional to the extent or energy of an employee’s endeavors. Commissions are paid upon the specific results achieved by a salesman-employee. It is a percentage of the sales closed by a salesman and operates as an integral part of such salesman’s basic pay.” (Philippine Duplicators, Inc. v. National Labor Relations Commission, G.R. No. 110068, February 15, 1995)
What kinds of commission are not considered part of the basic salary of an employee?
Commissions paid in the nature of “productivity bonuses” are excluded from the term ‘basic salary” in computing the 13th month pay. Such bonuses closely resemble profit-sharing
Jurisprudence says:
“Productivity bonuses are generally tied to the productivity, or capacity for revenue production, of a corporation; such bonuses closely resemble profit-sharing payments and have no clear direct or necessary relation to the amount of work actually done by each individual employee.” (Philippine Duplicators, Inc. v. National Labor Relations Commission, G.R. No. 110068, February 15, 1995)
Further:
“If an employer cannot be compelled to pay a productivity bonus to his employees, it should follow that such productivity bonus, when given, should not be deemed to fall within the “basic salary” of employees when the time comes to compute their 13th month pay.” (Philippine Duplicators, Inc. v. National Labor Relations Commission, G.R. No. 110068, February 15, 1995)
When is commission considered part of 13th month pay?
Jurisprudence says:
“In order to be considered part of 13th month pay, the commission should be part of “basic salary: of the employee.” (Rogelio Reyes v. National Labor Relations Commission, G.R. No. 160233, August 08, 2007)
Related article: Applicability of 13th month pay to commissions
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