Recent adjustments by the Regional Tripartite Wages and Productivity Board across the Philippines have affected millions of workers, increasing their daily earnings. Indeed, as these adjustments take effect, most companies look for a specific number: the new daily rate that they will have to implement.
For employers, especially for Micro, Small, and Medium Enterprises — adjustments aren’t only the case at hand, but rather they will also indicate:
- Higher labor costs
- Payroll recalculations
- Changes in Mandatory Contributions
- Tax and Compliance Difficulties
That’s why the real question is: Are your payroll, tax, and statutory computations still correct after the increase?
Let’s take a deeper look at these matters that you need to consider in adjustments.
What’s happening: Wage Increases Across Regions
The Department of Labour and Employment (DOLE) confirmed that minimum wage increases were approved in 14 regions (NCR, CAR, Regions I, II, III, IV-A, IV-B, VI, VII, VIII, IX, X, XII, and XIII), directly benefiting millions of workers employed in private establishments nationwide. Some of the notable developments are the following:
- Daily wage increases ranged roughly from ₱20 to ₱100, depending on the region.
- The National Capital Region (NCR) continues to have the highest rates, ranging from ₱658 to ₱695 per day.
- RTWPBs in the other 11 regions (CAR, Regions I, II, III, IV-B, VI, VII, VIII, X, XII, and XIII) also ordered wage orders granting monthly minimum wage increases for domestic workers , with increases ranging from ₱300 to ₱2000 per month.
- Approximately 8 million workers earning above the minimum wage may also be indirectly affected by adjustments to the wage structure.
- Wage reviews in the Bicol and Davao Regions will continue through January – February 2026, so further adjustments may still occur.
For employers, this means payroll systems and compensation structures must remain flexible and regularly updated — as non-compliance creates risks and exposes employers to disputes that can be costly to resolve.
Wage Hikes Trigger a Chain-Reaction
While the increase in wages definitely supports workers’ purchasing power and benefits — it also creates some operational and financial pressure on employers, specifically for MSMEs that face tighter margins in their operations.
Furthermore, wage increases affect not only minimum-wage earners but also employees earning above the prescribed minimum wage, primarily due to wage-distortion adjustments and internal payout-structure reviews.
Simply put, this means businesses need to revisit:
- Compensation Structures
- Payroll Processing
- Compliance Schedules
- Budgeting/Budget Forecasting
In practice, a wage order is not just an HR memo—it is a company-wide financial adjustment.
Specific Factors To Be Considered by Employers
Organizations may encounter issues in the following common areas in relation to the wage increase:
1. Changes in Statutory Contributions
When wages increase, both employer and employee contributions may also rise. Sometimes, it may push employees into higher contribution brackets — as it is important to note that SSS, PhilHealth, and PAG-IBIG contributions are salary-based.
Without proper recalculation, payroll recording and remittances may be exposed to inconsistencies.
2. Withholding Tax Recalculations
As noted earlier, employees earning above the minimum wage may be indirectly affected. Hence, an increase in gross compensation of such workers changes their:
- Taxable income levels
- Monthly withholding amounts
- Year-end tax reconciliations
Indeed, even small differences or adjustments in computation can accumulate into substantial discrepancies over time.
3. Wage Distortion Requiring Structural Review
One of the crucial consequences is wage distortion, wherein mandated compensation rates result into a reduction or elimination of the salary gaps between high to low-level employees.
If not resolved properly, it can lead to:
- Internal pay equity concerns
- Reduced employment morale among higher-level staff
- Pressure to adjust multiple salary tiers
Well-known businesses may not encounter a significant issue regarding this, but for the MSMEs — this may result in unplanned costs that increase beyond the wage order itself.
4. Labour Cost Planning Becomes More Complex
Consequently, as the wage increase takes effect, it will also have an impact on:
- Overtime and holiday pay
- 13th-month accruals
- Leave conversions
- Benefits tied to basic salary
Over time, the actual cost of increased labour expenses is often higher than anticipated.
5. Increased Compliance Risks
Since wages will directly have an affect to payroll, it can significantly raise concern towards government agencies such as:
- Department of Labour and Employment for wage compliance
- Bureau of Internal Revenue for withholding taxes and reporting
- SSS, PhilHealth, and PAG-IBIG for mandatory contributions regarding employee benefits
- Securities and Exchange Commission for large entities reporting their Financial Statements and General Information Sheets
When adjustments occur, coordination may be lacking, and updates can lead to reporting inconsistencies, which are also a contributing factor to audit risk.
Exemptions for Businesses in Calamity-Affected Areas
As wage orders are mandatory, the DOLE, through the National Wages and Productivity Commission (NPWC), has reiterated that enterprises significantly affected by calamities such as typhoons and other disasters may avail of an exemption.
Under such current guidelines, enterprises may apply for an exemption, either in partial or full — depending on the applicable wage order through the Regional Tripartite Wages and Productivity Board (RTWPB) that has jurisdiction over their business locale. These exemptions are granted to help businesses:
- Reduce financial distress
- Continue operations
- Preserve employment as they recover from losses
Furthermore, DOLE urged businesses and employees to explore available support programs, such as the Adjustment Measures Program (AMP), which helps businesses lessen the effects of economic problems and operational disruptions.
For more information on eligibility and application procedures for wage-hike exemptions, businesses may refer to official updates on the NWPC website or their verified communication channels.
In Conclusion: Payroll Must Be Reviewed, Not Assumed
Without a doubt, wage increase orders are recurring events — but payroll problems are often reactive. Many businesses tend to conduct investigations only when discrepancies already appear in reports, remittances, or employee concerns/disputes.
Therefore, a proactive payroll review helps organizations validate calculations after wage adjustments, especially since these changes affect statutory contributions, tax compliance, internal issues such as wage distortions, and audit exposure.
If your company has concerns about recent wage increases and needs guidance in navigating payroll technicalities, Babylon2k offers a free consultation demo and a wide variety of services to help you out with compliance — reach out to us today!
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