Salceda: Gov’t should provide loans to distressed firms for workers’ 13th month pay

House Ways and Means Committee chair, Albay Rep. Joey Sarte Salceda, has proposed that the government provides loans to Covid-19-hit enterprises, at ‘highly favorable rates and long maturity periods,’ so they could pay their workers’ 13th month salaries

Salceda’s proposal is contained in a three-page aide memoire sent Monday to House Speaker Alan Peter Cayetano and Majority Leader Ferdinand Martin G. Romualdez, following reports that the Department of Labor (DOLE) now considers exempting some businesses from honoring the 13th month obligation.

“We do not believe this is a sound course of action to take in terms of boosting economic activity. While the DOLE argues that this is permitted in the implementing rules and regulations of PD 851, we believe this will be subject to legal and constitutional controversy, as the letter of the law appears not to intend to allow this leeway,” the lawmaker said.

In terms of both economic and legal considerations, the move appears to be unsound, said Salceda, who also co-chairs the Economic Stimulus and Recovery Cluster-Defeat COVID-19 Committee. He said the government can, however, exempt “distressed businesses from providing these benefits to management-level workers and executives.”

Considering that rank-and-file benefits are direct labor costs, Salceda said, their deductibility from taxable income should be on peso-per-peso basis. Should enterprises incur losses due to labor costs, the government has already extended the availment period for net operating loss carryover from three to five years under the Bayanihan to Recover as One Act. This means there is already a direct tax benefit for employers paying the 13th month pay, he added.

Salceda said suspending work benefits to rank-and-file workers sets an undesirable precedent that could erode workers’ rights and hinder broad-based growth and inclusive prosperity. “Not distributing the 13th month pay will also remove what could be the only source of annual savings for most working families. Sixty percent (60%) of Filipino households have savings under just 30 thousand annually, according to the latest Family Income and Expenditure Survey or FIES, he noted.

The lawmaker pointed out that as co-chair of the Defeat COVID-19 Committee, he has made informal manifestations to the Secretaries of Finance (DOF) and Trade and Industry (DTI) to craft loan products under their supervised government financial institutions (GFIs) to allow enterprises to meet the 13th month pay obligation.

“At the same time, this representation has appealed to the Secretary of Labor (DOLE) to consider limiting the exemption of distressed enterprises from giving 13th month pay to “only their management executives,” he said.

“Rank-and-file employees spend the bulk of their income on consumption and any reduction from their income could mean a depression in consumption, which would have negative impacts on aggregate demand. This is a temporary crisis in the present. Measures that amount to private sector austerity will not help solve this crisis of lack of market confidence and depressed demand,” he explained.

Regardless of the economic impact, Salceda stressed, the 13th month pay is a statutory obligation that enterprises must meet, and workers are, by law, entitled to this benefit, and they need it the most in these difficult times.

The long lockdowns have put enterprises under challenging circumstances to meet the mandated 13th month salary payment,  A study commissioned by the World Bank, in partnership with the Department of Finance  and the National Economic Development Authority, said sales revenue has gone down by 64% on average between April and July 2020, with 89% of firms reporting a continued reduction in sales.

This was in addition to the significant 65% losses experienced in March 2020 compared to February 2020, with 75% of firms reporting reduction in sales. 

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