I Govt edict on 13th month pay will hurt businesses, workers
EARLIER this month, Labor Secretary Silvestre Bello 3rd announced that the Department of Labor and Employment ( DoLE) was considering allowing companies, particularly MSMEs or micro, small and medium enterprises that are in financial distress as a result of the coronavirus pandemic and associated quarantine measures, to defer or forego payment of the annual 13th month bonus to their employees.
Even though the proposal would have to be managed carefully to prevent abuse and include some way in which to ameliorate the unavoidable short- term hardship the suspension of the 13th month pay would cause many workers, we believed it was a worthwhile idea. For businesses that have suffered losses and have not been able to operate, through no fault of their own, during community quarantines, this relief could have made the difference between some being able to remain afloat and closing their doors for good.
Bello’s legal justification for allowing exemptions to the 13th month pay requirement for some employers was that while Presidential Decree 851, the law mandating the 13th month pay, did not include provisions for exemptions, the implementing rules and regulations for PD 851 did. Bello said distressed firms would have to apply for an exemption, which would be considered on a case- by- case basis, and that in any event, employers would be encouraged to negotiate a mutually acceptable arrangement with their workers to delay this year’s 13th month pay rather than eliminate it entirely.
On Friday, however, Bello announced that DoLE had retracted the suggestion, and that all firms, without exception, even if they have permanently closed as a result of the pandemic, would be required to make the 13th month payments to their workers before December 24 as in any other normal year.
The reason for DoLE’s reversal was, apparently, the disagreement of Sen. Franklin Drilon, who insisted that the law was absolute, the provisions of the implementing rules and regulations notwithstanding. Drilon pointed out that during his stint as Labor secretary — more than 30 years ago — he had overruled the exemption in the implementing rules and regulations, and so the current DoLE must follow suit, even though Drilon is in no real position now to make that mandate.
When asked by the media what firms that are unable to pay the 13th month requirement this year should do, Bello said DoLE was working on a proposal to the Department of Finance to help set up a low- cost loan program through banks, from which the firms could borrow to fund their obligations.
To be clear, we are not at all insensitive to the plight of workers who are struggling to make ends meet and support their families. Millions have lost their jobs or have seen their incomes severely reduced as a consequence of many of their workplaces not being permitted to operate or operating under severe and costly restrictions for an extended period of time. They need that 13th month pay; in other years, it is a bonus, but for many this year it is necessary for mere survival.
But the government’s demand that the 13th month pay mandate be followed to the letter even under extraordinary circumstances is extraordinarily shortsighted. Expecting banks to lend to closed or financially distressed businesses, bad credit risks that they would not ordinarily even consider, is simply ludicrous. Some businesses that are managing to hang on in spite of financial difficulties may be forced into closure as a result of the mandate. Much more than short- term relief for workers would be lost in that case; jobs would disappear entirely, and the value chains those businesses fill now would be broken, further spreading losses for businesses and workers alike throughout the economy.
We realize there is no easy answer to this issue, no solution that does not result in somebody bearing a heavy cost. But that should be the government, if it is going to insist that the 13th month requirement be followed without change. After all, most of the pain businesses are experiencing is the direct result of government decisions to try to control the coronavirus pandemic, and putting the responsibility elsewhere is patently unfair.