The two-tiered wage system is a reform that maintains the mandatory minimum wage setting under R.A. 6727 or the Wage Rationalization Act, as the first tier (Tier 1) and complemented by a voluntary productivity-based pay scheme as the second tier (Tier 2). It was conceptualized in 2010 and implemented in 2012 with the support of social partners.

The RTWPBs issue advisories on productivity incentive pay schemes as reference of workers and enterprises in the implementation of productivity improvement and gainsharing programs. The RTWPBs identify priority or growth industries including their supply chain, as the subject of their advisories. Industry players participate in the crafting and issuance of their advisories, including advocacy campaigns and monitoring of its implementation. The advisories shall form part of the Voluntary Codes of Good Practice in the various Regional Industry Tripartite Councils (RITCs) in line with the envisioned industry self-regulation.

The 2TWS will set a genuine floor or minimum wage for better workers protection. The 2TWS will see to it that the minimum wage is slightly above the poverty threshold to help workers and their families meet their basic needs but should not exceed average wage, taking into account employers’ capacity to pay.

1. Needs of workers and their families
   
   
   • Demand for living wage
   • Wage adjustment vis-à-vis Consumer Price Index (CPI)
   • Cost of living and changes therein
   • Needs of workers and their families
     Improvements in standards of living
     
     
2. Capacity to pay
   
   
   • Fair return on capital invested and capacity to pay of employers
   • Productivity
     
     
3. Comparable wages and incomes
   
   
   • Prevailing wage levels
     
     
4. Requirements of economic and social development

• • Need to induce industries to invest in the countryside
  • Effects on employment generation and family income
  • Equitable distribution of income and wealth along the imperatives of economic social development

Yes, even in the absence of a filed petition for wage increase, Regional Boards can, motu proprio, initiate action or inquiry on whether a wage order should be issued.

The wage-setting function of the Regional Boards is confined to minimum wages.

Under the Labor Code, private sector workers should receive the applicable minimum wages not lower than those prescribed by the Regional Boards under existing wage orders. At present, the prescribed minimum wages are for normal working hours, which shall not exceed eight hours per day.

Pursuant to NWPC Guidelines No. 03, Series of 2020 or the Omnibus Rules on Minimum Wage Determination (Omnibus Rules), the Board has a maximum of 90 days from the publication of notice of public hearing until deliberation to determine whether a new wage order should be issued.

If after determination based on evidence-based information, the conditions in the region warrant an increase in minimum wage, the Board shall issue a new wage order. Otherwise, the Board shall issue a resolution detailing the reasons why an increase is not yet warranted for the time being.

The Commission adopts the policy of moderate, regular and predictable wage order issuance to avoid potential inflationary impacts and provide enterprises with a stable planning horizon. Thus, the Omnibus Rules provides that no new wage order may be issued within a period of twelve (12) months from effectivity of the current wage order. The Boards, however, shall conduct continuous review of socio-economic conditions in the region and hold consultations as necessary. If the Board finds urgent and reasonable grounds to issue a new wage order within the 12-month period, it shall submit a written justification to the Commission for its immediate review and affirmation and if affirmed, the Board may initiate the minimum wage setting process.

A wage order shall take effect after fifteen (15) days from its publication in at least one (1) newspaper of general circulation in the region.

Yes, any aggrieved party may file an appeal with the Commission within 10 days from the date of publication of the wage order on the ground of grave abuse of discretion on the part of the Board for serious error in the application of law and non-compliance with prescribed guidelines and/or procedures.

The filing of appeal does not operate to stay the wage order unless the party appealing files with the Commission an undertaking with a surety or sureties satisfactory to the latter, for the payment to the employees affected by the wage order of the corresponding increase, in the event such wage order is affirmed.

Should disputes arise as a result of wage distortion, RA 6727 provides for correcting the distortions as follows:

1. In organized firms,  the employer and the union shall negotiate to correct the distortion using the grievance procedures in the CBA or, if the dispute remains unresolved, through voluntary arbitration.

2. In  unorganized firms,  the  employers  and  workers  endeavor to correct the distortion.  Any   dispute   is  settled   by   conciliation   through  the  National Conciliation and Mediation Board, or if it remains unresolved, by compulsory arbitration through the  National Labor Relations Commission.

This provision for correcting wage distortions is also stipulated in all Wage Orders being issued by the Regional Boards.

1. Pineda Formula

2. Pineda-Cruz So Formula

 Where : exponent is represented by n

3. Percentile Approach Formula

4. Philippine Construction Supply Formula

 Where : FBR = Actual wage rate (AWR) + Agreed amount of adjustment

5. Jimenez, Ofreneo, Delas Alas Jr. (JODA) Formula

 New Daily wage rate = wage distortion adjustment + Wc

Where: Wa = old daily minimum wage
Wb = daily wage of employee (where Wb > Wa, or Wb is above Wa)
Wc = new daily minimum wage
= Wa + mandated wage increase

6. Wirerope Formula

7. Bagtas Approach

Wage Orders issued by the Boards cover only private sector workers, except for household helpers and persons in the personal employ of another, including family drivers.

Per the Rules on Exemption, the following categories of establishments may be exempted upon application with and as determined by the Board:

• Retail/Service establishment regularly employing not more than ten (10) workers; and
• Establishment adversely affected by natural calamities and/or human-induced disasters.

1. Retail/Service Establishment Regularly Employing Not More Than Ten (10) Workers
   
   
   • engaged in the retail sale of goods and/or services to end users for personal or household use;
   • establishment is employing not more than 10 workers for an aggregate of at least six (6) months in a calendar year.
     
     
2. Establishment Adversely Affected by Natural Calamities and/or Human-Induced Disasters.
   
   
   • Establishment is located in an area under a state of calamity;
   • Calamity occurred within six (6) months prior to the effectivity of the Wage Order. Establishments may still apply if the calamity occurred during the life of the Wage Order but exemption will only be with respect to tranches that are yet to be implemented, if any.

In case an application for exemption is not approved by the Board, the company shall pay the mandated wage increase/allowance to all covered workers retroactive to the date of effectivity of the Wage Order plus simple interest of 1% per month.

The maximum period of exemption that may be granted to qualified applicant establishment is one year only.

An application for exemption together with the supporting documents shall be filed not later than 75 days from the publication of the Wage Order. No extension of filing and submission of required documents will be allowed.

Yes, the decision of the Board on the application for exemption may be appealed to the NWPC within 10 days from date of receipt of the decision.

Grounds for the appeal:

1. Non-conformity with the prescribed guidelines and/or procedure on exemption
2. Prima facie evidence of grave abuse of discretion on the part of the Board
3. Question of law