Offsetting Philippine holidays with US holidays

By Leonard Vinz O. Ignacio, 09 July 2009

Labor concerns in the BPO industry Part 2
Read Part 1 | Part 3 | Part 4

"No vacation goes unpunished." ~ Karl Hakkarainen

"A vacation is what you take when you can no longer take what you’ve been taking." ~ Earl Wilson

Last week, this column discussed the night time work prohibition for women employees.

This time, the availment of leave credits and holidays in the call center and the rest of the business process outsourcing (BPO) industry will be discussed.

Call centers and other BPO firms usually cater to the needs of clients operating in various time zones, mostly in the United States (US). The US observes federally mandated holidays that are different from those of the Philippines provided for in Article 94 of the Labor Code.

BPO employees render work during these Philippine holidays, and alternatively, go on leave to have their much-needed rest during said US holidays.

There are 11 regular Philippine holidays in a year under Executive Order (EO) No. 203, as amended by Republic Act (RA) No. 9177, namely: New Year’s Day (January 1), Maundy Thursday (movable date), Good Friday (movable date), Araw ng Kagitingan (April 9), Labor Day (May 1), Independence Day (June 12), National Heroes Day (the last Sunday of August), Eidl Fitr (movable date), Bonifacio Day (November 30), Christmas Day (December 25), and Rizal Day (December 30).

Furthermore, additional special holidays are provided under RA 9256, namely: Ninoy Aquino Day (August 21), All Saints Day (November 1) and the last day of the year (December 31).

During these Philippine regular and special holidays and special days, employees are entitled to receive their daily basic wage and Emergency Cost of Living Allowance (ECOLA) even if they did not report for work, provided that they are present or are on leave of absence with pay on the work day immediately preceding the holiday. The holiday pay is a statutory monetary benefit granted to employees under Article 94 of the Labor Code.

If work is performed on these holidays, the holiday pay shall be equivalent to at least twice (200%) of the basic wage and ECOLA of the employees.

Since call centers and other BPO businesses engage in the provision of services to non-resident foreign entities, e.g., the United States, it is customary within the industry to follow the holidays of the specific country in which the service recipient is domiciled. This means that the holidays mandated in the foreign country dictates when the employees would go on a holiday and not the holidays mandated under Philippine law, which normally do not coincide with the holidays mandated in the foreign country.

For example, in the United States (which is where most BPO customers are located), there are generally 11 Federal holidays observed which, except for January 1 and December 25, do not fall on the same dates as the Philippine regular and special holidays, to wit: New Year’s Day (January 1), Martin Luther King, Jr. Day (third Monday in January), Inauguration Day (January 20), Washington’s Birthday (third Monday in February), Memorial Day (last Monday in May), Independence Day (July 4), Labor Day (first Monday in September), Columbus Day (second Monday in October), Veteran’s Day (November 11), Thanksgiving Day (fourth Thursday in November), Christmas (December 25).

Given the peculiar nature of call centers and BPO businesses, there may be issues on the payment of the holiday pay vis-a-vis the prohibition on diminution of benefits under Article 100 of the Philippine Labor Code. (There is diminution of benefits if something is being taken away from the employees unilaterally by the employer or if there is a decrease in the value of the benefits being enjoyed by the employees.)

Specifically, the question is: can call centers and other BPO firms offset the US holidays (based on our example) against Philippine regular and special holidays, without violating the prohibition on diminution of benefits under Article 100 of the Labor Code? In other words, will payment of the holiday pay for work done on the 11 US holidays plus the three Philippine special holidays be considered in compliance with the holiday pay rule under the Philippine Labor Code notwithstanding that the actual holidays were taken on dates different from the Philippine holidays?

There is no existing jurisprudence clarifying this issue.

However, in my view, there is no diminution of benefits, provided the call centers and BPOs pay their employees the mandated 11 holiday pay, including the three Special Days provided in the Labor Code. There will be no decrease in the value of their benefits and nothing is being taken away from these employees since the 14 mandated holiday/special day wages are still being observed and complied with, although on different dates.

It should be noted though, that, as in all benefit restructuring (i.e. compressed work week, shorter meal periods, etc.), this manner of payment of the holiday pay must be clearly explained to the employees concerned and embodied in their respective employment contracts.

Furthermore, in the absence of rules and regulations or jurisprudence rulings on this issue, it may be prudent for the industry to secure a ruling on this question from the Department of Labor and Employment in order to avoid any confusion or conflict with employees in the future.