Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 122827 March 29, 1999
LIDUVINO M. MILLARES, J. CAPISTRANO CORDITA, SHIRLEY P. UY, DIONISIO J. REQUINA, GABRIEL A. DEJERO, NELSON
T. GOMONIT, IMELDA IMPEYNADO SULPICIO B. SUMILE, MA. CONSUELO AVIEL, SILVINO S.GUEVARRA, FIDEL
DUMANHOG, NELFA T.POLOTAN, LEMUEL C. RISMA, JUANITO M. GONZALES, ROGELIO B. CABATUAN, EPIFANCIO E.
GANANCIAL, DOMINADOR D. ATOK, CONRADO U. SERRANO, ISIDRO J. BARNAJA, ROMEO VIRTUDAZO, AVELINO
NABLE, EDGAR TAMPOS, ERNESTO ORIAS, DALMACIO LEGARAY, ROMEO R. BULA ROBERTO G.GARCIA, RUDOLFO
SUZON, JERRY S. DANO, AUGUST G. ESCUDERO, OSCAR B. CATBAGAN, TEOFILO C. SISON, NARCISO BULASA, ALBERTO
CORTEZ, LILIA C. CABRERA, NESTOR A. ACASO, BIENVENIDO MOZO, ISIDORO A. ALMENDAREZ, VICENTE M. PILONGO,
ROBERTO N. LUMPOT, PATRICIO BANDOLA, MANUEL S. ESPINA, ISIDRO K. BALCITA, JR., EMMANUEL O. ABRAHAM,
OLEGARIO A. EPIS, NESTOR D. PEREGRINO, RAMON A.USANAGA, PRESTO BARTOLOME, BRADY EMPEYNADO,
PORFERIO N. CONDADO, AQUILLO V. CORDOVA, LEONARDO ESTOSI, PACIFICO B. DACORINA, PABLITO B. LLUBIT,
ANTONIO DOZA, LEONITO LABADIA, EDGARDO BELLIZA, FEDENCIO P. GEBERTAS, VIRGILIO D. GULBE, MANUEL A.
LERIO, JR., ROGELIO B. OCAMIA, RODOLFO A. CASTILLO, EDMUNDO L. PLAZA, ROBERTO D. YAGONIA, JR., PETRONIO
ESTELA, JR., CRISOLOGO A. LOGRONIO, ERNESTO T. MORIO, ROGELIO M. DAVID, BENJAMIN U. ARLIGUE, APOLONIO
MUNDO, JR., NENE M. ESPINOSA, NILO B. BALAORO, GERONIMO S. CONVI, VICENTE R. TARAGOZA, YOLANDO A.
SALAZAR, MANUEL A. NERI, ELIO C. TICAR, ROBERTO A. MACALAM, MIGUEL MACARIOLA, WALTERIO DAPADAP,
SILVERIO CUAMAG EUPARQUIO PLANOS, GILBERTO M. MIRA, REYNALDO BACSARSA, DIOSDADO B. ABING,
ARISTARCO V. SALON, TOMAS N. CATACTE, RODOLFO MEMORIA, PAPENIANO CURIAS, JOSE S. CANDIA, DESIDERIO C.
NAVARRO, EMMANUEL O. ABRAHAM, JOSELITO D. ARLAN, FRANCISCO S. SANCHEZ, MANSUETO B. LINGGO, ISIDRO
BARNAJA, ROMEO S. CABRERA, LEODEGARIO CAINTIC, NESTOR G. BLANDO, FLORENCIO B. DELIZO, MILAN M. ETES,
GONZALO C. PADILLO, LEONARDO CAGAKIT, JOSEFINO E. DULGUIME, PEPITO G. ARREZA, AMADOR G. CAGALAWAN,
GAUDENCIO C. SARMIENTO, FLORENTINO J. BRACAMONTE, DOMINADOR H. TY, LEOPOLDO T. SUPIL, JOSE A.
DOHINOG, ANIANO T. REYES, CARLITO G. UY, PLACIDO D. PADILLO, TERESITA C. ADRIANO, CANDIDO S. ADRIANO, and
AVELINO G. VENERACION, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, (FIFTH DIVISION) and PAPER INDUSTRIES CORPORATION OF THE
PHILIPPINES (PICOP) respondents.

BELLOSILLO, J.:
Petitioners numbering one hundred sixteen (116)
1
occupied the position of Technical Staff, Unit Manager, Section
Manager, Department Manager, Division Manager and Vice President in the mill site of respondent Paper Industries
Corporation of the Philippines (PICOP) in Bislig, Surigao del Sur. In 1992 PICOP suffered a major financial setback
allegedly brought about by the joint impact of restrictive government regulations on logging and the economic crisis. To
avert further losses, it undertook a retrenchment program and terminated the services of petitioners. Accordingly,
petitioners received separation pay computed at the rate of one (1) month basic pay for every year of service. Believing
however that the allowances they allegedly regularly received on a monthly basis during their employment should have
been included in the computation thereof they lodged a complaint for separation pay differentials.
The allowances in question pertained to the following
1. Staff/Manager's Allowance
Respondent PICOP provides free housing facilities to supervisory and managerial
employees assigned in Bislig. The privilege includes free water and electric consumption.
Owing however to shortage of such facilities, it was constrained to grant Staff allowance
instead to those who live in rented houses outside but near the vicinity of the mill site.
But the allowance ceases whenever a vacancy occurs in the company's housing facilities.
The former grantee is then directed to fill the vacancy. For Unit, Section and
Department Managers, respondent PICOP gives an additional amount to meet the same
kind of expenses called Manager's allowance.
2. Transportation Allowance
To relieve respondent PICOP's motor pool in Bislig from a barrage of requests for
company vehicles and to stabilize company vehicle requirements it grants
transportation allowance to key officers and Managers assigned in the mill site who use
their own vehicles in the performance of their duties. It is a conditional grant such that
when the conditions no longer obtain, the privilege is discontinued. The recipients of
this kind of allowance are required to liquidate it by submitting a report with a detailed
enumeration of expenses incurred.
3. Bislig Allowance
The Bislig Allowance is given to Division Managers and corporate officers assigned in
Bislig on account of the hostile environment prevailing therein. But once the recipient is
transferred elsewhere outside Bislig, the allowance ceases.
Applying Art. 97, par. (f), of the Labor Code which defines "wage," the Executive Labor Arbiter opined that the subject
allowances, being customarily furnished by respondent PICOP and regularly received by petitioners, formed part of the
latter's wages. Resolving the controversy from another angle, on the strength of the ruling in Santos
v.NLRC
2
and Soriano v. NLRC
3
that in the computation of separation pay account should be taken not just of the basic
salary but also of the regular allowances that the employee had been receiving, he concluded that the allowances should
be included in petitioners' base pay. Thus respondent PICOP was ordered on 28 April 1994 to pay petitioners Four
Million Four Hundred Eighty-One Thousand Pesos P(4,481,000.00) representing separation pay differentials plus ten per
cent (10%) thereof as attorney's fees.
4

The National Labor Relations Commission (NLRC) did not the view of the Executive Labor Arbiter. On 7 October 1994 it
set aside the assailed decision by decreeing that the allowances did not form part of the salary base used in computing
separation pay.
5
Its ruling was based on the finding that the cases relied upon by the Executive Labor Arbiter were
inapplicable since they involved illegal dismissal where separation pay was granted in lieu of reinstatement which was
no longer feasible. Instead, what it considered in point was Estate of the late Eugene J. Kneebone v. NLRC
6
where the
Court held that representation and transportation allowances were deemed not part of salary and should therefore be
excluded in the computation of separation benefits. Relating the present case with Art. 97, par. (f), of the Labor Code,
the NLRC likewise found that petitioners' allowances were contingency-based and thus not included in their salaries. On
26 September 1995 reconsideration was denied.
7

In this petition for certiorari, petitioners submit that their allowances are included in the definition of "facilities" in Art.
97, par. (f), of the Labor Code, being necessary and indispensable for their existence and subsistence. Furthermore they
claim that their availment of the monetary equivalent of those "facilities" on a monthly basis was characterized by
permanency, regularity and customariness. And to fortify their arguments they insist on the applicability of
Santos,
8
Soriano,
9
The Insular Life Assurance Company,
10
Planters Products, Inc.
11
and Songco
12
which are all against
the NLRC holding that the salary base in computing separation pay includes not just the basic salary but also the regular
allowances.
There is no showing of grave abuse of discretion on the part of the NLRC. In case of retrenchment to prevent losses, Art.
283 of the Labor Code imposes on the employer an obligation to grant to the affected employees separation pay
equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. Since
the law speaks of "pay," the question arises, "What exactly does the term connote?" We correlate Art. 283 with Art. 97
of the same Code on definition of terms. "Pay" is not defined therein but "wage." In Songco the Court explained that
both words (as well as salary) generally refer to one and the same meaning, i.e., a reward or recompense for services
performed. Specifically, "wage" is defined in letter (f) as the remuneration or 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, of board, lodging, or other facilities customarily furnished by
the employer to the employee.
We invite attention to the above-underlined clause. Stated differently, when an employer customarily furnishes his
employee board, lodging or other facilities, the fair and reasonable value thereof, as determined by the Secretary of
Labor and Employment, is included in "wage." In order to ascertain whether the subject allowances form part of
petitioner's "wages," we divide the discussion on the following "customarily furnished;" "board, lodging or other
facilities;" and, "fair reasonable value as determined by the Secretary of Labor."
"Customary" is founded on long-established and constant practice
13
connoting regularity.
14
The receipt of an allowance
on a monthly basis does not ipso facto characterize it as regular and forming part of salary
15
because the nature of the
grant is a factor worth considering. We agree with the observation of the Office of the Solicitor General that the subject
allowances were temporarily, not regularly, received by petitioners because
In the case of the housing allowance, once a vacancy occurs in the company-provided housing
accommodations, the employee concerned transfers to the company premises and his housing
allowance is discontinued . . . .
On the other hand, the transportation allowance is in the form of advances for actual transportation
expenses subject to liquidation . . . given only to employees who have personal cars.
The Bislig allowance is given to Division Managers and corporate officers assigned in Bislig, Surigao del
Norte. Once the officer is transferred outside Bislig, the allowance stops.
16

We add that in the availment of the transportation allowance, respondent PICOP set another requirement that the
personal cars be used by the employees in the performance of their duties. When the conditions for availment ceased to
exist, the allowance reached the cutoff point. The finding of the NLRC along the same line likewise merits
concurrence, i.e., petitioners' continuous enjoyment of the disputed allowances was based on contingencies the
occurrence of which wrote finis to such enjoyment.
Although it is quite easy to comprehend "board" and "lodging," it is not so with "facilities." Thus Sec. 5, Rule VII, Book III,
of the Rules Implementing the Labor Code gives meaning to the term as including articles or services for the benefit of
the employee or his family but excluding tools of the trade or articles or service primarily for the benefit of the employer
or necessary to the conduct of the employer's business. The Staff/Manager's allowance may fall under "lodging" but the
transportation and Bislig allowances are not embraced in "facilities" on the main consideration that they are granted as
well as the Staff/Manager's allowance for respondent PICOP's benefit and convenience, i.e., to insure that petitioners
render quality performance. In determining whether a privilege is a facility, the criterion is not so much its kind but its
purpose.
17
That the assailed allowances were for the benefit and convenience of respondent company was supported
by the circumstance that they were not subjected to withholding tax. Revenue Audit Memo Order No. 1-87 pertinently
provides
3.2. . . . transportation, representation or entertainment expenses shall not constitute taxable
compensation if:
(a) It is for necessary travelling and representation or entertainment expenses paid or incurred by the
employee in the pursuit of the trade or business of the employer, and
(b) The employee is required to, and does, make an accounting/liquidation for such expense in
accordance with the specific requirements of substantiation for such category or expense.
Board and lodging allowances furnished to an employee not in excess of the latter's needs and given
free of charge, constitute income to the latter except if such allowances or benefits are furnished to the
employee for the convenience of the employer and as necessary incident to proper performance of his
duties in which case such benefits or allowances do not constitute taxable income.
18

The Secretary of Labor and Employment under Sec. 6, Rule VII, Book III, of the Rules Implementing the Labor Code may
from time to time fix in appropriate issuances the "fair and reasonable value of board, lodging and other facilities
customarily furnished by an employer to his employees." Petitioners' allowances do not represent such fair and
reasonable value as determined by the proper authority simply because the Staff/Manager's allowance and
transportation allowance were amounts given by respondent company in lieu of actual provisions for housing and
transportation needs whereas the Bislig allowance was given in consideration of being assigned to the hostile
environment then prevailing in Bislig.
The inevitable conclusion is that, as reached by the NLRC, subject allowances did not form part of petitioners' wages.
In Santos
19
the Court decreed that in the computation of separation pay awarded in lieu of reinstatement, account must
be taken not only of the basic salary but also of transportation and emergency living allowances. Later, the Court in
Soriano, citing Santos, was general in its holding that the salary base properly used in computing separation pay where
reinstatement was no longer feasible should include not just the basic salary but also the regular allowances that the
employee had been receiving. Insular merely reiterated the aforementioned rulings. The rationale is not difficult to
discern. It is the obligation of the employer to pay an illegally dismissed employee the whole amount of his salaries plus
all other benefits, bonuses and general increases to which he would have been normally entitled had he not been
dismissed and had not stopped working.
20
The same holds true in case of retrenched employees. And thus we applied
Insular and Soriano in Planters in the computation of separation pay of retrenched employees. Songco likewise involved
retrenchment and was relied upon in Planters, Soriano and Santos in determining the proper amount of separation pay.
As culled from the foregoing jurisprudence, separation pay when awarded to an illegally dismissed employee in lieu of
reinstatement or to a retrenched employee should be computed based not only on the basic salary but also on
the regular allowances that the employee had been receiving. But in view of the previous discussion that the disputed
allowances were not regularlyreceived by petitioners herein, there was no reason at all for petitioners to resort to the
above cases.
Neither is Kneebone applicable, contrary to the finding of the NLRC, because of the difference in factual circumstances.
In Kneebone, the Court was tasked to resolve the issue whether there presentation and transportation allowances
formed part of salary as to be considered in the computation of retirement benefits. The ruling was in the negative on
the main ground that the retirement plan of the company expressly excluded such allowances from salary.
WHEREFORE, the petition is DISMISSED. The resolution of public respondent National Labor Relations Commission dated
7 October 1994 holding that the Staff/Manager's, transportation and Bislig allowances did not form part of the salary
base used in computing the separation pay of petitioners, as well as its resolution dated 26 September 1995 denying
reconsideration, is AFFIRMED. No costs.
SO ORDERED.
Puno, Mendoza, Quisumbing and Buena, JJ., concur.
Footnotes
1 Liduvino M. Millares, J. Capistrano Cordita, Shirley P. Uy, Dionisio J. Requina, Gabriel A. Dejero, Nelson T.
Gomonit, Imelda Impeynado, Sulpicio B. Sumile, Ma. Consuelo Aviel, Silvino S. Guevarra, Fidel Dumanhog, Nelfa
T. Polotan, Lemuel C. Risma, Juanito M. Gonzales, Rogelio B. Cabatuan, Epifancio E. Ganancial, Dominador D.
Atok, Conrado U. Serrano, Isidro J. Barnaja, Romeo Virtudazo, Avelino Nable, Edgar Tampos, Ernesto Orias,
Dalmacio Legaray, Romeo R. Bula, Roberto G. Garcia, Rudolfo Suzon, Jerry S. Dano, August G. Escudero, Oscar B.
Catbagan, Teofilo C. Sison, Narciso Bulasa, Alberto Cortez, Lilia C. Cabrera, Nestor A. Acaso, Bienvenido Mozo,
Isidoro A. Almendarez, Vicente M. Pilongo, Roberto N. Lumpot, Patricio Bandola, Manuel S. Espina, Isidro K.
Balcita, Jr., Emmanuel O. Abraham, Olegario A. Epis, Nestor D. Peregrino, Ramon A. Usanaga, Presto Bartolome,
Brady Empeynado, Porferio N. Condado, Aquillo V. Cordova, Leonardo Estosi, Pacifico B. Dacorina, Pablito B.
Llubit, Antonio Doza, Leonito Labadia, Edgardo Belliza, Fedencio P. Gebertas, Virgilio D. Gulbe, Manuel A. Lerio,
Jr., Rogelio B. Ocamia, Rodolfo A.Castillo, Edmundo L. Plaza, Roberto D. Yagonia, Jr., Petronio Estela, Jr.,
Crisologo A. Logronio, Ernesto T. Morio, Rogelio M. David, Benjamin U. Arligue, Apolonio Mundo, Jr., Nene M.
Espinosa, Nilo B. Balaoro, Geronimo S. Convi, Vicente R. Taragoza, Yolando A. Salazar, Manuel A. Neri, Rogelio C.
Ticar, Roberto A. Macalam, Miguel Macariola, Walterio Dapadap, Silverio Cuamag, Euparquio Planos, Gilberto M.
Mira, Reynaldo Bacsarsa, Diosdado B. Abing, Aristarco V. Salon, Tomas N. Catacte, Rodolfo Memoria, Papeniano
Curias, Jose S. Candia, Desiderio C. Navarro, Emmanuel O. Abraham, Joselito D. Arlan, Francisco S. Sanchez,
Mansueto B. Linggo, Isidro Barnaja, Romeo S. Cabrera, Leodegario Caintic, Nestor G. Blando, Florencio B. Delizo,
Milan M. Etes, Gonzalo C. Padillo, Leonardo Cagakit, Josefino E. Dulguime, Pepito G. Arreza, Amador G.
Cagalawan, Gaudencio C. Sarmiento, Florentino J. Bracamonte, Dominador H. Ty, Leopoldo T. Supil, Jose A.
Dohinog, Aniano T. Reyes, Carlito G. Uy, Placido D. Padillo, Teresita C. Adriano, Candido S. Adriano, and Avelino
G. Veneracion.
2 G.R. No. 76721, 21 September 1987, 154 SCRA 166.
3 G.R. No. 75510, 27 October 1987, 155 SCRA 124.
4 Decision penned by Executive Labor Arbiter Conchita J. Martinez; Rollo, p. 68.
5 Resolution penned by Commissioner Leon G. Gonzaga Jr. with the concurrence of Acting Presiding
Commissioner Oscar N. Abella; Rollo, p. 48.
6 G.R. No. 77109, 8 November 1988, 167 SCRA 99.
7 Rollo, p. 50.
8 See Note 2.
9 See Note 3.
10 G.R. No. 74191, 21 December 1987, 156 SCRA 740.
11 G.R. No. 78524, 20 January 1989, 169 SCRA 328.
12 G.R. Nos. 50999-51000, 23 March 1990, 183 SCRA 610.
13 Webster's Third New International Dictionary, 1993 Ed., p. 559.
14 Black's Law Dictionary, Sixth Ed., p. 385.
15 See Note 5.
16 Rollo, p. 234.
17 States Marine Corporation v. Cebu Seamen's Association, Inc., No. L-12444, 28 February 1963, 7 SCRA 294.
18 Rollo, pp. 239-240.
19 Citing Pan-Philippine Life Insurance Corporation v. NLRC, G.R. No. 53721, 29 June 1982, 114 SCRA 866 where
transportation allowance was included in the computation of back wages and General Bank and Trust Company
v. Court of Appeals, G.R. No. 42724, 9 April 1985, 135 SCRA 569 where housing allowance was included in the
computation of separation pay that was granted in lieu of reinstatement.
20 East Asiatic Co., Ltd. v. Court of Industrial Relations, No. L-29068, 31 August 1971, 40 SCRA 521.


Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 74156 June 29, 1988
GLOBE MACKAY CABLE AND RADIO CORPORATION, FREDERICK WHITE and JESUS SANTIAGO,petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, FFW-GLOBE MACKAY EMPLOYEES UNION and EDA
CONCEPCION, respondents.
Castillo, Laman, Tan & Pantaleon for petitioners.
Edwin D. Dellaban for private respondents.

MELENCIO-HERRERA, J.:
A special civil action for certiorari with a prayer for a Temporary Restraining Order to enjoin respondents from enforcing
the Decision of 10 March 1986 of the National Labor Relations Commission (NLRC), in NCR Case No. 1-168-85 entitled
"FFW-Globe Mackay Employees Union, et al., vs. Globe Mackay Cable & Radio Corporation, et al.," the dispositive
portion of which reads:
WHEREFORE, premises considered, the appealed Decision is as it is hereby SET ASIDE and another one
issued:
1. Declaring respondents-appellees (petitioners herein) guilty of illegal deductions of cost-of-living
allowance;
2. Ordering respondents-appellees to pay complainants-appellants their back allowances reckoned from
the time of illegal deduction; and
3. Ordering respondents-appellees from further illegally deducting the allowances of complainants-
appellants.
SO ORDERED.
Presiding Commissioner of the NLRC, Diego P. Atienza, concurred in the result, while Commissioner Cleto T. Villaltuya
dissented and voted to affirm in toto the Labor Arbiter's Decision.
On 19 May 1986, we issued the Temporary Restraining Order enjoining respondents from enforcing the assailed
Decision. On 2 September 1987, we gave due course to the petition and required the submittal of memoranda, by the
parties, which has been complied with.
The facts follow:
Wage Order No. 6, which took effect on 30 October 1984, increased the cost-of-living allowance of non-agricultural
workers in the private sector. Petitioner corporation complied with the said Wage Order by paying its monthly-paid
employees the mandated P3.00 per day COLA. However, in computing said COLA, Petitioner Corporation multiplied the
P 3.00 daily COLA by 22 days, which is the number of working days in the company.
Respondent Union disagreed with the computation of the monthly COLA claiming that the daily COLA rate of P3.00
should be multiplied by 30 days to arrive at the monthly COLA rate. The union alleged furthermore that prior to the
effectivity of Wage Order No. 6, Petitioner Corporation had been computing and paying the monthly COLA on the basis
of thirty (30) days per month and that this constituted an employer practice, which should not be unilaterally withdrawn.
After several grievance proceedings proved futile, the Union filed a complaint against Petitioner Corporation, its
President, F. White, and Vice-President, J. Santiago, for illegal deduction, underpayment, unpaid allowances, and
violation of Wage Order No. 6. Petitioners White and Santiago were sought to be held personally liable for the money
claims thus demanded.
Labor Arbiter Adelaido F. Martinez sustained the position of Petitioner Corporation by holding that since the individual
petitioners acted in their corporate capacity they should not have been impleaded; and that the monthly COLA should
be computed on the basis of twenty two (22) days, since the evidence showed that there are only 22 paid days in a
month for monthly-paid employees in the company. His reasoning, inter alia, was as follows:
To compel the respondent company to use 30 days in a month to compute the allowance and retain 22
days for vacation and sick leave, overtime pay and other benefits is inconsistent and palpably unjust. If
30 days is used as divisor, then it must be used for the computation of all benefits, not just the
allowance. But this is not fair to complainants, not to mention that it will contravene the provision of the
parties' CBA.
On appeal, the NLRC reversed the Labor Arbiter, as heretofore stated, and held that Petitioner Corporation was guilty of
illegal deductions, upon the following considerations: (1) that the P3.00 daily COLA under Wage Order No. 6 should be
paid and computed on the basis of thirty (30) days instead of twenty-two (22) days since workers paid on a monthly
basis are entitled to COLA on Saturdays, Sundays and legal holidays "even if unworked;" (2) that the full allowance
enjoyed by Petitioner Corporation's monthly-paid employees before the CBA executed between the parties in 1982
constituted voluntary employer practice, which cannot be unilaterally withdrawn; and (3) that petitioners White and
Santiago were properly impleaded as respondents in the case below.
Hence, this Petition, anchored on the charge of grave abuse of discretion by the NLRC.
We are constrained to reverse the reversal.
Section 5 of the Rules Implementing Wage Orders Nos. 2, 3, 5 and 6 uniformly read as follows:
Section 5. Allowance for Unworked Days.
All covered employees shall be entitled to their daily living allowance during the days that they are paid
their basic wage, even if unworked. (Emphasis supplied)
The primordial consideration, therefore, for entitlement to COLA is that basic wage is being paid. In other words, the
payment of COLA is mandated only for the days that the employees are paid their basic wage, even if said days are
unworked. So that, on the days that employees are not paid their basic wage, the payment of COLA is not mandated. As
held in University of Pangasinan Faculty Union vs. University of Pangasinan, L-63122, February 20, 1984, 127 SCRA 691):
... it is evident that the intention of the law is to grant ECOLA upon the payment of basic wages. Hence,
we have the principle of 'No Pay, No ECOLA.
Applied to monthly-paid employees if their monthly salary covers all the days in a month, they are deemed paid their
basic wages for all those days and they should be entitled to their COLA on those days "even if unworked," as the NLRC
had opined. Peculiar to this case, however, is the circumstance that pursuant to the Collective Bargaining Agreement
(CBA) between Petitioner Corporation and Respondent Union, the monthly basic pay is computed on the basis of five (5)
days a week, or twenty two (22) days a month. Thus, the pertinent provisions of that Agreement read:
Art. XV(a)Eight net working hours shall constitute the regular work day for five days.
Art. XV(b)Forty net hours of work, 5 working days, shall constitute the regular work week.
Art. XVI, Sec. 1(b)All overtime worked in excess of eight net hours daily or in excess of 5 days weekly
shall be computed on hourly basis at the rate of time and one half.
The Labor Arbiter also found that in determining the hourly rate of monthly paid employees for purposes of computing
overtime pay, the monthly wage is divided by the number of actual work days in a month and then, by eight (8) working
hours. If a monthly-paid employee renders overtime work, he is paid his basic salary rate plus one-half thereof. For
example, after examining the specimen payroll of employee Jesus L. Santos, the Labor Arbiter found:
the employee Jesus L. Santos, who worked on Saturday and Sunday was paid base pay plus 50%
premium. This is over and above his monthly basic pay as supported by the fact that base pay was paid.
If the 6th and 7th days of the week are deemed paid even if unworked and included in the monthly
salary, Santos should not have been paid his base pay for Saturday and Sunday but should have received
only the 50% overtime premium.
Similarly, the specimen payrolls of employees, Dennis Dungon and Rene Sanvictores, showed that in computing the
vacation and sick leaves of the employees, Petitioner Corporation consistently used twenty-two (22) days.
Under the peculiar circumstances obtaining, therefore, where the company observes a 5-day work week, it will have to
be held that the COLA should be computed on the basis of twenty two (22) days, which is the period during which the
monthly-paid employees of Petitioner Corporation receive their basic wage. The CBA is the law between the parties and,
if not acceptable, can be the subject of future re-negotiation.
2) Payment in full by Petitioner Corporation of the COLA before the execution of the CBA in 1982 and in compliance with
Wage Orders Nos. 1 (26 March 1981) to 5 (11 June 1984), should not be construed as constitutive of voluntary employer
practice, which cannot now be unilaterally withdrawn by petitioner. To be considered as such, it should have been
practiced over a long period of time, and must be shown to have been consistent and deliberate. Adequate proof is
wanting in this respect. The test of long practice has been enunciated thus:
... Respondent Company agreed to continue giving holiday pay knowing fully well that said employees
are not covered by the law requiring payment of holiday pay.' (Oceanic Pharmacal Employees Union
[FFW] vs. Inciong, L-50568, November 7, 1979, 94 SCRA 270). (Emphasis ours)
Moreover, before Wage Order No. 4, there was lack of administrative guidelines for the implementation of the Wage
Orders. It was only when the Rules Implementing Wage Order No. 4 were issued on 21 May 1984 that a formula for the
conversion of the daily allowance to its monthly equivalent was laid down, thus:
Section 3. Application of Section 2--
xxx xxx xxx
(a) Monthly rates for non-agricultural workers covered Under PDs 1614, 1634, 1678 and 1713:
xxx xxx xxx
(3) For workers who do not work and are not considered paid on Saturdays and Sundays:
P60 + P90 + P60 + (P2.00 x 262) divided by 12 = P 253.70 (Emphasis ours)
As the Labor Arbiter had analyzed said formula:
Under the aforecited formula/guideline, issued for the first time, when applied to a company like
respondent which observes a 5-day work week (or where 2 days in a week, not necessarily Saturday and
Sunday, are not considered paid), the monthly equivalent of a daily allowance is arrived at by
multiplying the daily allowance by 262 divided by 12. This formula results in the equivalent of 21.8 days
in a month.
Absent clear administrative guidelines, Petitioner Corporation cannot be faulted for erroneous application of the law.
Payment may be said to have been made by reason of a mistake in the construction or application of a "doubtful or
difficult question of law." (Article 2155,
1
in relation to Article 2154
2
of the Civil Code). Since it is a past error that is
being corrected, no vested right may be said to have arisen nor any diminution of benefit under Article 100 of the Labor
Code
3
may be said to have resulted by virtue of the correction.
With the conclusions thus reached, there is no further need to discuss the liability of the officers of Petitioner
Corporation.
WHEREFORE, certiorari is granted, the Decision of the National Labor Relations Commission, dated 10 March 1986, is
SET ASIDE, and the Decision of the Labor Arbiter, dated 9 May 1985, is hereby REINSTATED. The Temporary Restraining
Order heretofore issued is hereby made permanent.
SO ORDERED.
Yap, C.J., Paras, and Sarmiento, JJ., concur.
Padilla, J., took no part.

Footnotes
1 ART. 2155. Payment by reason of a mistake in the construction or application of a doubtful or difficult
question of law may come within the scope of the preceding article.
2 ART. 2154. If something is received when there is no right to demand it, and it was unduly delivered
through mistake, the obligation to return it arises.
3 ART. 100. Prohibition against elimination or diminution of benefits.--Nothing in this Book shall be
construed to eliminate or in any way diminish supplements, or other employee benefits being enjoyed
at the time of promulgation of this Code.


Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 88168 August 30, 1990
TRADERS ROYAL BANK, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION & TRADERS ROYAL BANK EMPLOYEES UNION, respondents.
San Juan, Gonzalez, San Agustin & Sinense for petitioner.
E.N.A. Cruz, Enfero & Associates for private respondent.

GRIO-AQUINO, J.:
This petition for certiorari seeks to nullify or set aside the decision dated September 2, 1988 of the National Labor
Relations Commission, which found the petitioner, Traders Royal Bank (or TRB), guilty of diminution of benefits due the
private respondents and ordered it to pay the said employees' claims for differentials in their holiday, mid-year, and
year-end bonuses.
On November 18, 1986, the Union, through its president, filed a letter-complaint against TRB with the Conciliation
Division of the Bureau of Labor Relations claiming that:
First, the management of TRB per memo dated October 10, 1986 paid the employees their HOLIDAY PAY,
but has withheld from the Union the basis of their computation.
Second, the computation in question, has allegedly decreased the daily salary rate of the employees.
This diminution of existing benefits has decreased our overtime rate and has affected the employees'
take home pay.
Third, the diminution of benefits being enjoyed by the employees since time immemorial, e.g. mid-year
bonus, from two (2) months gross pay to two (2) months basic and year-end bonus from three (3)
months gross to only two (2) months.
Fourth, the refusal by management to recall active union members from the branches which were being
transferred without prior notice, solely at the instance of the branch manager. (p. 26, Rollo.)
In its answer to the union's complaint, TRB pointed out that the NLRC, not the Bureau of Labor Relations, had
jurisdiction over the money claims of the employees.
On March 24, 1987, the Secretary of Labor certified the complaint to the NLRC for resolution of the following issues
raised by the complainants:
l) The Management of TRB per memo dated October 10, 1986 paid the employees their holiday pay but
has withheld from the union the basis of their computation.
2) The computation in question has allegedly decreased the daily salary rate of the employees. This
diminution of existing benefits has decreased our overtime rate and has affected the employees' take
home pay.
3) The diminution of benefits being enjoyed by the employees since the (sic) immemorial, e.g. mid-year
bonus, from two (2) months gross pay to two (2) months basic and year-end bonus from three (3)
months gross to only two (2) months.
4) The refusal by management to recall active union members from the branches which were being
transferred without prior notice, solely at the instance of the branch, manager. (p. 28, Rollo.)
In the meantime, the parties who had been negotiating for a collective bargaining agreement, agreed on the terms of
the CBA, to wit:
1. The whole of the bonuses given in previous years is not demandable, i.e., there is no diminution, as to
be liable for a differential, if the bonus given is less than that in previous years.
2. Since only two months bonus is guaranteed, only to that extent are bonuses deemed part of regular
compensation.
3. As regards the third and fourth bonuses, they are entirely dependent on the income of the bank, and
not demandable as part of compensation. (pp. 67-68, Rollo.)
Despite the terms of the CBA, however, the union insisted on pursuing the case, arguing that the CBA would apply
prospectively only to claims arising after its effectivity.
Petitioner, on the other hand, insisted that it had paid the employees holiday pay. The practice of giving them bonuses
at year's end, would depend on how profitable the operation of the bank had been. Generally, the bonus given was two
(2) months basic mid-year and two (2) months gross end-year.
On September 2, 1988, the NLRC rendered a decision in favor of the employees, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the petitioner and ordering respondent bank to
pay petitioner members-employees the following:
1. Holiday differential for the period covering l983-1986 as embodied in Resolution No. 4984-1986 of
respondent's Board of Directors but to start from November 11, 1983 and using the Divisor 251 days in
determining the daily rate of the employees;
2. Mid-year bonus differential representing the difference between two (2) months gross pay and two
(2) months basic pay and end-year bonus differential of one (1) month gross pay for 1986.
The claim for holiday differential for the period earlier than November 11, 1983 is hereby dismissed, the
same having prescribed.
Likewise, the charge of unfair labor practice against the respondent company is hereby dismissed for
lack of merit. (pp. 72-73, Rollo.)
A motion for reconsideration was filed by TRB but it was denied. Hence, this petition for certiorari.
There is merit in the petitioner's contention that the NLRC gravely abused its discretion in ordering it to pay mid-
year/year-end bonus differential for 1986 to its employees.
A bonus is "a gratuity or act of liberality of the giver which the recipient has no right to demand as a matter of right"
(Aragon vs. Cebu Portland Cement Co., 61 O.G. 4597). "It is something given in addition to what is ordinarily received by
or strictly due the recipient." The granting of a bonus is basically a management prerogative which cannot be forced
upon the employer "who may not be obliged to assume the onerous burden of granting bonuses or other benefits aside
from the employee's basic salaries or wages" . . . (Kamaya Point Hotel vs. National Labor Relations Commission,
Federation of Free Workers and Nemia Quiambao, G.R. No. 75289, August 31, 1989).
It is clear from the above-cited rulings that the petitioner may not be obliged to pay bonuses to its employees. The
matter of giving them bonuses over and above their lawful salaries and allowances is entirely dependent on the profits,
if any, realized by the Bank from its operations during the past year.
From 1979-1985, the bonuses were less because the income of the Bank had decreased. In 1986, the income of the Bank
was only 20.2 million pesos, but the Bank still gave out the usual two (2) months basic mid-year and two months gross
year-end bonuses. The petitioner pointed out, however, that the Bank weakened considerably after 1986 on account of
political developments in the country. Suspected to be a Marcos-owned or controlled bank, it was placed under
sequestration by the present administration and is now managed by the Presidential Commission on Good Government
(PCGG).
In the light of these submissions of the petitioner, the contention of the Union that the granting of bonuses to the
employees had ripened into a company practice that may not be adjusted to the prevailing financial condition of the
Bank has no legal and moral bases. Its fiscal condition having declined, the Bank may not be forced to distribute bonuses
which it can no longer afford to pay and, in effect, be penalized for its past generosity to its employees.
Private respondent's contention, that the decrease in the midyear and year-end bonuses constituted a diminution of the
employees' salaries, is not correct, for bonuses are not part of labor standards in the same class as salaries, cost of living
allowances, holiday pay, and leave benefits, which are provided by the Labor Code.
WHEREFORE, the petition for certiorari is granted. The decision of the National Labor Relations Commission is modified
by deleting the award of bonus differentials to the employees for 1986. In other respects, the decision is affirmed. Costs
against the respondent union.
SO ORDERED.
Narvasa (Chairman), Cruz, Gancayco and Medialdea, JJ., concur.