Labor Law Advisory: The Pakyaw System and 13th Month Pay Entitlement

Understanding the Exclusion Based on Recent Supreme Court Ruling

The Supreme Court (SC) recently clarified the application of the 13th Month Pay Law to workers hired on a pakyaw (task or output-based) system. While the SC upheld the rights of these workers as regular employees, it reiterated a long-standing exception regarding the mandatory 13th-month benefit.

The Ruling: Amor et al. v. Constant Packaging Corporation

G.R. No. 259988 (May 19, 2025)

In this case, the workers, hired as sorters and packers on a pakyaw basis (paid per output), were found by the SC to have been illegally dismissed. The SC ordered the payment of separation pay, backwages, service incentive leave, and holiday pay.

However, on the claim for 13th-month pay, the Court ruled:

“However, since the workers were hired on a pakyaw basis, they are not entitled to 13th month pay.”

Why the Exclusion?

The Supreme Court’s decision rests on the express exclusion provided under the Implementing Rules and Regulations (IRR) of Presidential Decree (P.D.) No. 851 (The 13th Month Pay Law).

The Law’s Exclusion Clause: Section 3(e) of the IRR of P.D. No. 851 specifically excludes from its coverage:

“Employers of those who are paid on purely commission, boundary or task basis, and those who are paid a fixed amount for performing a specific work, irrespective of the time consumed in the performance thereof.”

The Supreme Court’s Interpretation: The SC affirmed that the rule makes a direct and distinct exclusion for employees paid on a task basis (pakyaw) from receiving 13th-month pay. Unlike the entitlement to Service Incentive Leave (SIL) and Holiday Pay (which the workers were granted because they did not qualify as “field personnel”), the exemption for the 13th Month Pay applies simply based on the method of wage payment (pakyaw or task basis), regardless of whether they are field personnel or not.