Taxi drivers

Taxi drivers are not entitled to the 13th month salary

Dear PAO,

My friend and I are former taxi drivers with a certain taxi company and we were paid based on the “frontier” system. We worked there for over a decade until we became eligible for retirement. During our entire service, we did not receive our 13th month salary or incentive leave. Our former employer claimed that we were not entitled to such benefits under the law. Is it true? Also, is there any way to know if they gave us our good retirement benefits?


Dear Jolan,

The Supreme Court, in Paguio Transport Corp. vs. NLRC (GR 119500, 28 August 1998) and speaking through Chief Justice Artemio Panganiban, said that under the “demarcation system” the driver is hired to drive the owner/operator unit . and pays the latter a fee commonly known as a “bill” for the use of the unit. Anything he has earned beyond that amount is his income.

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Additionally, according to R&E Transport, Inc. and Honorio Enriquez v. Avelina P. Latag, representing her deceased husband, Pedro M. Latag (GR 155214, February 13, 2004) which was also drafted by Panganiban, a paid taxi driver under the border regime is not entitled to a 13th month salary and a service incentive allowance (SIL).

In said case, the Supreme Court explained that Sec. 3(d) of the Executive Order 851 Rules and Regulations excludes “employers of those who are paid only by commission, border, or piecework, and those who receive a fixed amount for the performance of a specific job” of the obligation to pay their employees the 13th month’s salary. On the other hand, Sec. 1(d), Rule V, Book III of the Omnibus Rules provides that those “[f]field staff and other employees whose work is not supervised by the employer” are not entitled to incentive leave.

Thus, a taxi driver paid under the border regime is considered an “unsupervised” employee. On these legal bases, you and your colleague are not entitled to payment of the 13th month’s salary and incentive leave compensation.

With respect to retirement allowances, Section 287 of the Labor Code, as amended by Republic Act 7641 otherwise known as the “New Retirement Allowances Act”, states that:

“Art. 287. Retirement. – Any employee may be retired when he reaches the retirement age set in the collective agreement or any other applicable employment contract.

“In the event of retirement, the employee shall be entitled to receive such retirement benefits as he may have earned under applicable laws and any collective bargaining and other agreements: provided, however, that the retirement benefits of an employee under any collective bargaining and other agreements shall be no less than those provided herein.

“In the absence of a pension plan or an agreement providing for retirement benefits for the employees of the establishment, an employee who has reached the age of sixty (60) years or more, but not above sixty-five (65) years of age who is hereby declared the mandatory retirement age, who has served at least five (5) years in said institution, may retire and be entitled to a pension equivalent to at least one-half (1/2) month’s salary for each year of service, a fraction of at least six (6) months being considered as a full year.

“Unless the parties provide for broader inclusions, the duration of one-half (1/2) month’s salary means fifteen (15) days plus one-twelfth (1/12) of the 13th month’s salary and the equivalent in cash for up to five (5) days of incentive leave. xx”

In this regard, our Supreme Court, in the aforementioned R & E transportation case, held that:

“The implementing rules of the new pension law also provide for the above-mentioned formula for calculating half a month’s salary. Since Pedro was paid under the “limit” system, he is not entitled to the 13th month and service bonus; therefore, his retirement allowance should be calculated solely on the basis of his salary.

“It is accepted that taxi drivers do not receive a fixed salary, but only keep the sums exceeding the “limit” or the fee they pay to the owners or operators of their vehicles. Thus, the basis for calculating their benefits should be the average In this case, the CA found that Pedro earned an average of five hundred pesos (P500) per day, so we calculate his retirement allowance as follows: P500 x 15 days x 14 years of service equals P.105,000 with this amount, the 38,850 pesos he received, which was just over a third of what was legally owed to him, was ineligible.” (Quotes omitted; emphasis added).

The calculation above can be used as a guide to whether your former employer calculated your pension benefits correctly. As a result, the only basis for your retirement allowance will be your salary, more specifically your average daily income. This amount will be multiplied by 15 days to get your half-month salary. Finally, your half-month salary will be multiplied by your actual years of service to arrive at your retirement allowance amount.

We hope we were able to answer your questions. This advice is based solely on the facts you have related and our assessment of them. Our opinion may change when other facts are changed or elaborated.

Editor’s note: Dear PAO is a daily chronicle of the public ministry. Questions for Chef Acosta can be sent to [email protected]