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Erica S.


Contract Law
All businesses inherently deal with contracts, even if they are unwritten, as with many transactions involving goods or
services. Since a contract is a legally binding agreement, and even an honest contractual mistake can cause serious
problems, it is crucial that small business owners have at least a basic understanding of contract law. This section
covers the basics of contract law and how it relates to the many facets of running a business, including articles on
when a verbal agreement carries the weight of a contract, the meaning of "breach of contract," which contracts must
be in writing, and related topics.
The Philippine government has taken steps to ensure that contractual employees are as protected by law as
permanent employees. In 2011, the Department of Labor and Employment issued Department Order 18-A, Series of
2011, which lists the employees’ rights (Section 8) that contractual employees are entitled to, as well as the
guidelines for the employment contract.
What are the rights of a contractual worker?
So what are the rights of a contractual employee? Here goes:
1. Safe and healthful working conditions
Whether your position is a desk job or it entails a lot of physical labor, your employer should ensure that your health
isn’t compromised at work. Your employer should take steps to safeguard your health and well-being while on the
2. Service incentive leave, rest days, overtime pay, holiday pay, 13th month pay, and separation pay
Aside from your wage or salary, you should also be given paid time off, as well as additional pay for any work done
beyond your contract’s work hours, 13th month pay and a separation pay if your employment is terminated early.
3. Retirement benefits under the SSS or retirement plans of the contractor, if there is any
If your employer has a retirement plan for their permanent employees, you should also be granted the same benefit.
4. Social security and welfare benefits
Your employer must also grant you SSS, PhilHealth, and Pag-Ibig benefits, just like any other permanent employee.
5. Self-organization, collective bargaining and peaceful concerted action
Contractual employees may also join or form employee unions, collective bargaining agreements, and join peaceful
demonstrations or protests. Your employment shouldn’t be in jeopardy should you decide to join a union, which might
result to your termination of employment.
6. Security of tenure
These were lifted from the Department of Labor and Employment’s website, under Department Order No. 18-A on the
Rules Implementing Articles 106 to 109 of the Labor Code.
What You Should Look For In Your Contract
Your job contract is an official legal agreement between you and your employer, ensuring that both parties will do
their best to adhere to the terms. Performing well at work is how you make sure you stick to the contract, while your
company’s job is to grant you your rightful compensation and humane treatment.
If you’re a contractual employee, you should also ensure that your employment contract includes the following terms
and conditions:
1. The specific description of the job, work or service to be performed by the employee
Ensure that your actual work done matches the description in your employment contract.
2. The place of work and terms and conditions of employment, including a statement of the wage rate of the
individual employee
Your contract should specify where you should work and the specific terms and conditions of your employment (e.g.
Is your contract renewable? Is there a confidentiality agreement or a non-competition clause?)
3. The term or duration of employment, which shall be coextensive with the contract of the principal and
subcontractor, or with the specific phase which the contractual employee is engaged
The length of your employment should coincide with the time span of the project or contract that you were hired for
and should be specified in your job contract.
4. The contractor or subcontractor shall inform the contractual employee of the foregoing terms and conditions on or
before the first day of his employment.
Before you even begin working for your employer, they should go through the terms and conditions of your
employment. Make sure you know what you’re getting yourself into before you start working.
A contractual position can sound like a risky job to accept. And it’s true; it can be a bit of a gamble, but don’t let that
be the only deciding factor in accepting or rejecting the position. If you do decide to accept the job offer, guarantee
that your future employer will take the required steps to ensure the protection of your rights as a contractual
employee. Knowing what you’re getting yourself into and being aware of your legal rights will give you the
preparation you didn’t know you needed on your first day at work.
Computation of 13 th Month Pay
According to rules and regulation of Presidential Decree 851 otherwise known as 13th Month Pay Law, the 13th
month pay shall be paid not later than December 24.
However, an employer may give his or her employees half of the 13th month pay before the opening of the regular
school year and the remaining half on or before December 24 every year.
There are around 920,000 establishments in the country employing 39 million workers in various major industry
enterprises including agriculture, manufacturing and services sectors.
All ranked and file employees regardless of their designation or employment status who have worked at least one
month during the calendar year are entitled to a 13th month pay.
The 13th month pay shall be in the amount not less than 1/12 of the total basic salary earned by the employee within
the Calendar day.
Example: Let say an employee basic salary is Php15,000 per month and had worked for 10 months, the 13th month
computation is:
(Php15,000 X 10 months) / 12= Php12,500.00
So PayrollHero keeps a record for every employee on how much has been accumulated for 13th Month benefits.
Every pay check will take 12th of the employee pay (Either Base pay or Gross pay, depending on how the payment
has been set up) and add this number to the accumulating account.