RMC No. 23-2011: Publishes the full text of Wage Order No. NCR-16, “Providing a Cost of Living Allowance in the National Capital Region” and clarifying its tax implications to Minimum Wage Earners exempt from Income Tax

Key points

1. COLA amount. All private sector minimum wage workers and employees in the NCR receive a COLA of P22.00 per day. The new daily rate is P426.00 for non-agriculture (basic P404.00), and P389.00 (basic P367.00) for agriculture, private hospitals with 100 beds or less, retail/service establishments with 15 workers or less, and manufacturing establishments regularly employing less than 10 workers.
2. Coverage and exclusions. The COLA applies regardless of position, status of employment or manner of payment, including workers paid by result in proportion to hours worked. It does not cover household or domestic helpers, persons in the personal service of another including family drivers, and workers of registered Barangay Micro Business Enterprises under RA No. 9178.
3. Special cases. Principals or clients bear the COLA in construction and service contracts, and contractors are jointly and severally liable if they fail to pay. Private educational institutions may count the tuition increase for School Year 2011-2012 as compliance, with any shortfall covered starting School Year 2012-2013. Apprentices and learners receive not less than 75% of the new rates, and qualified handicapped workers receive the full new rates under RA No. 7277.
4. Exemptions, appeals and creditable increases. On application to the Board, distressed establishments, retail/service establishments with not more than ten workers, establishments with total assets of not more than P3 Million (excluding land), and establishments hit by natural calamities may be exempted. Appeals go to the NWPC through the Board within 10 days from publication. Increases given within 3 months (organized establishments, with agreement or CBA provision) or 5 months (unorganized establishments) before effectivity are credited, excluding anniversary, merit and regularization or promotion increases.
5. Compliance and penalties. Employers file a verified wage structure report with the Board not later than January 31, 2012 and yearly after. Complaints are filed with the NCR Office of the DOLE, and non-compliance is penalized under RA No. 6727, as amended by RA No. 8188.
6. Tax treatment of Minimum Wage Earners. Under RA No. 9504, Minimum Wage Earners are exempt from income tax on taxable income, including holiday pay, overtime pay, night shift differential pay and hazard pay. Since COLA is part of the new statutory minimum wage in the NCR, MWEs receiving not more than the new wage rate, inclusive of COLA, are exempt from income tax.

Who is affected

• Private sector minimum wage workers and employees in the NCR
• Employers in the NCR
• Minimum Wage Earners

Deadlines and effectivity

• Wage report due not later than January 31, 2012 and every year thereafter
• Appeal within 10 days from publication
• Private schools: full compliance starting School Year 2012-2013