Philippine Labor Law Glossary
Definition: A Commission is remuneration computed as a share or percentage of sales or transactions. It is expressly one of the bases on which a wage may be calculated under the Labor Code, but whether it forms part of “basic salary” for computing statutory benefits depends on its function in the pay structure.
Sa Filipino · Filipino Explanation
Ano ang Commission?
Ang komisyon ay bayad na nakabatay sa porsyento ng nabenta o natapos na transaksyon. Malinaw sa Article 97(f) ng Labor Code na ang komisyon ay isa sa mga paraan ng pagkuwenta ng sahod — kaya bahagi ito ng “wage”.
Pero may mahalagang pagkakaiba: hindi lahat ng komisyon ay kasama sa basic salary na ginagamit sa pagkuwenta ng 13th month pay. Kung ang komisyon ang tunay na bumubuo sa malaking bahagi ng sahod mo at nakadepende sa sarili mong pagsisikap sa pagbenta, malamang kasama ito. Kung ito ay dagdag lamang sa isang buong sahod, o parang profit-sharing o incentive, malamang hindi. Nakadepende sa aktwal na istruktura ng sweldo, hindi sa tawag dito.
Commission Is Part of Wage
Article 97(f) of the Labor Code defines wage as remuneration “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.” Commission is named in the statute itself.
The Supreme Court applied this directly in Songco v. NLRC, holding that “Article 97(f) by itself is explicit that commission is included in the definition of the term ‘wage’,” and that because the commissions there “were earned by actual market transactions attributable to petitioners, these should be included in their separation pay.”
Wage Is Not the Same as Basic Salary
This is where the analysis turns, and where most summaries go wrong. Presidential Decree No. 851 pegs the thirteenth-month pay to basic salary, a narrower concept than wage. A commission can be part of wage and still fall outside basic salary.
There is a well-known line of Supreme Court decisions running in both directions on this, and they were never in conflict — the Court itself said so. The question is always what the commission actually does inside the compensation package.
When Commission Counts as Basic Salary
In Philippine Duplicators, the salesmen’s commissions were a pre-determined percentage of the selling price, and their fixed wages amounted to only roughly fifteen to thirty per cent of total earnings. The Court held the commissions were “an integral portion of the basic salary structure” and properly included in the thirteenth-month pay base.
The test the Court articulated is that sales commissions “are intimately related to or directly proportional to the extent or energy of an employee’s endeavors.” Where the commission is the real substance of the employee’s pay and tracks his own effort, it is basic salary.
When Commission Does Not Count
In Boie-Takeda Chemicals, the Court held that “in remunerative schemes consisting of a fixed or guaranteed wage plus commission, the fixed or guaranteed wage is patently the ‘basic salary’,” and that commissions given “for extra efforts exerted in consummating sales” are “additional pay, which this Court has made clear do not form part of the ‘basic salary’.”
The same decision struck down the second paragraph of Section 5(a) of the Revised Guidelines on the 13th Month Pay Law — which had directed that employees on a fixed wage plus commission be paid based on total earnings — as null and void for exceeding the statute it implemented. The Department of Labor could not expand the base by regulation.
Reyes v. NLRC shows the modern application. A unit manager’s commissions were excluded from both retirement pay and thirteenth-month pay because he “did not enter into actual sale transactions, but merely supervised the salesmen,” and received the commission only when those salesmen collected. That is profit-sharing in character, not wage tracking his own effort.
How the Cases Fit Together
The 1995 resolution in Philippine Duplicators expressly reconciled the two lines: “the doctrines enunciated in these two (2) cases in fact co-exist one with the another. The two (2) cases present quite different factual situations.”
The operative question is therefore never what the payment is called. It is whether the commission is an integral part of the wage structure and directly proportional to that employee’s own productive effort, or an incentive riding on top of a genuinely compensatory fixed wage and partaking of the nature of a productivity bonus or profit-share.
Legal Basis
| Authority | Classification | Rule supported | Official source |
|---|---|---|---|
| Labor Code, Article 97(f) | Statute | Defines wage to include remuneration ascertained on a commission basis. | Department of Labor and Employment |
| Songco v. NLRC, G.R. Nos. 50999 and 51000, March 23, 1990 | Jurisprudence | Holds that commission is included in the statutory definition of wage and that earned commissions form part of separation pay. | Official decision |
| Boie-Takeda Chemicals, Inc. v. De la Serna, G.R. Nos. 92174 and 102552, December 10, 1993 | Jurisprudence | Holds that where a fixed wage is paid plus commission, the fixed wage is the basic salary and the commission is additional pay outside it; voids the contrary paragraph of the Revised Guidelines. | Official decision |
| Philippine Duplicators, Inc. v. NLRC, G.R. No. 110068, Resolution of February 15, 1995 | Jurisprudence | Holds commissions included in basic salary where they are an integral portion of the basic salary structure, and expressly harmonises this with Boie-Takeda. | Official decision |
| Reyes v. NLRC and Universal Robina Corporation, G.R. No. 160233, August 8, 2007 | Jurisprudence | Excludes a supervisory override commission as profit-sharing in character, and applies the analysis to retirement pay as well as thirteenth-month pay. | Supreme Court E-Library |
Practical Examples
Likely included in basic salary: A field salesman receives a small fixed allowance and earns the bulk of his income from a fixed percentage of the goods he personally sells. The commission is directly proportional to his own effort and constitutes the substance of his pay.
Likely excluded: A regional supervisor on a full market-rate salary receives an override equal to a small percentage of his team’s collections. He closes no sales himself and the payment is contingent on collection.
Common Misunderstandings
Misunderstanding: Commissions always count toward thirteenth-month pay.
Correct approach: They count only where the commission is an integral part of the basic salary structure. Incentive commissions on top of a real fixed wage are excluded.
Misunderstanding: The DOLE guidelines settle the question in the employee’s favour.
Correct approach: The paragraph of the Revised Guidelines that would have done so was declared null and void in Boie-Takeda for exceeding the statute.
Common Questions
Are commissions included in separation pay?
Commissions earned through actual transactions attributable to the employee were included in separation pay in Songco. The characterisation of the commission still matters, as Reyes shows in the retirement-pay context.
Can an employer change the commission scheme?
Changes that reduce a benefit already being enjoyed engage Article 100 on non-diminution. See Diminution of Benefits.
Do commission earners get the minimum wage?
Commission is a recognised basis for computing wage, and wage-related standards continue to apply to the employment relationship. Coverage and exemptions depend on the employee’s classification and the applicable wage order.
Sources and Legal Citations
- Labor Code of the Philippines, Article 97(f), official DOLE text. Classification: statute.
- Songco v. NLRC, G.R. Nos. 50999 and 51000, March 23, 1990, official decision. Classification: jurisprudence.
- Boie-Takeda Chemicals, Inc. v. De la Serna, G.R. Nos. 92174 and 102552, December 10, 1993, official decision. Classification: jurisprudence.
- Philippine Duplicators, Inc. v. NLRC, G.R. No. 110068, Resolution of February 15, 1995, official decision. Classification: jurisprudence.
- Reyes v. NLRC and Universal Robina Corporation, G.R. No. 160233, August 8, 2007, official decision. Classification: jurisprudence.
Sources rechecked as of: August 23, 2026
Disclaimer
This glossary entry is for general educational and legal-information purposes and is not legal advice. Whether a particular commission forms part of basic salary depends on the compensation structure, the nature of the employee’s work and the surrounding facts.