The boundary system is a scheme by an owner/operator engaged in transporting

passengers as a common carrier to primarily govern the compensation of the driver,

that is, the latters daily earnings are remitted to the owner/operator less the excess
of the boundary which represents the drivers compensation. Under this system, the
owner/operator exercises control and supervision over the driver.In a boundary
system, the directives given to the drivers were such a means of control.The
Supreme Court (SC) affirmed the CA ruling that an employer-employee relationship
existed and explained the mechanisms behind a boundary system.

What are some principles on retirement benefits? 1/12 of 13 th month pay and 5
days of service incentive leave (SIL) should not be included if the employee was not
entitled to 13 th month pay and SIL during his employment. Example: R & E
Transport, Inc. v. Latag, where it was held that employees who are not entitled to 13
th month pay and SIL pay while still working should not be paid the entire 22.5
days but only the fifteen (15) days salary. In other words, the additional 2.5 days
representing one-twelfth [1/12] of the 13 th month pay and the five (5) days of SIL
should not be included as part of the retirement benefits. The employee in this case
was a taxi driver who was being paid on the boundary system basis. It was
undisputed that he was entitled to retirement benefits after working for fourteen
(14) years with R & E Transport, Inc. However, he was not entitled to the 13 th
month pay since Section 3 of the Rules and Regulations Implementing P.D. No. 851
exempts from its coverage employers of those who are paid on purely boundary
basis. He was also not entitled to the 5-day service incentive leave pay pursuant to
the Rules to Implement the Labor Code which expressly excepts field personnel and
other employees whose performance is unsupervised by the employer.

But in the 2010 case of Serrano v. Severino Santos Transit, which involves a bus
conductor (petitioner) who worked for 14 years for respondent bus company which
did not adopt any retirement scheme. It was held herein that even if petitioner as
bus conductor was paid on commission basis, he falls within the coverage of R.A.
7641 (Retirement Pay Law, now Article 287 of Labor Code). This means that his
retirement pay should include the cash equivalent of the 5-day SIL and 1 / 12 of the
13 th month pay for a total of 22.5 days.

The affirmance by the Court of Appeals of the reliance by the NLRC on R & E
Transport case was held erroneous. For purposes of applying the law on SIL as well
as on retirement, there is a difference between drivers paid under the boundary
system and conductors paid on commission basis. This is so because in practice,
taxi drivers do not receive fixed wages. They retain only those sums in excess of the
boundary or fee they pay to the owners or operators of the vehicles. Conductors,
on the other hand, are paid a certain percentage of the bus earnings for the day. It
bears emphasis that under P.D. No. 851 and the SIL Law, the exclusion from its
coverage of workers who are paid on a purely commission basis is only with respect
to field personnel

bus conductor was paid on commission basis then, he falls within the coverage of
R.A. 7641 and its implementing rules. As thus correctly ruled by the Labor Arbiter,
petitioners retirement pay should include the cash equivalent of the 5-day SIL and
1
/12 of the 13th month pay.

Retirement Benefits of Workers who are Paid by Results

For covered workers who are paid by results and do not have a
fixed monthly salary rate, the basis for the determination of the
salary for fifteen (15) days shall be their average daily salary (ADS).
The ADS is derived by dividing the total salary or earnings for the
last twelve months reckoned from the date of retirement by the
number of actual working days in that particular period, provided
that the determination of rates of payment by results are in
accordance with the established regulations.

Gratuity Pay CA No. 186 , RA No. 6601, RA No. 1616

act of liberality of the giver which the recipient has no right to demand as a matter
of right.2[12] The grant of a bonus is basically a management prerogative which
cannot be forced upon the employer who may not be obliged to assume the
onerous burden of granting bonuses or other benefits aside from the employees
basic salaries or wages.3[13]

Gratuity pay is paid to the employee purely out of the generosity of the employer. It is not legally
demandable (unless it has already ripened into company practice).

That being said, the computation of gratuity pay depends solely on the employer, or on existing
CBA.

Retirement pay

is the amount to be paid to the employee who has reached the compulsory
retirement age or who availed of voluntary retirement.