Employers in the Philippines wary of wage hike’s cost impact

Employer groups argue that attracting investments and creating jobs instead of raising wages is a better strategy.
By: | October 10, 2023
Topics: Compensation and Benefits | Employment Law | News | Philippines

The Employers Confederation of the Philippines (ECOP) has warned that a proposed P150 (US$2.65) legislated wage hike could lead to a 30% increase in costs for employers, with micro, small, and medium enterprises (MSMEs) bearing the heaviest burden.

Edgardo Lacson, Chairman of the ECOP, emphasised that any wage adjustment automatically results in a 30% rise in employer expense, covering heightened payroll costs for contributions to the Social Security System (SSS), the PhilHealth insurance scheme, overtime pay, and retirement benefits for employees.

Lacson also pointed out that wage hikes tend to trigger inflation as producers pass on increased labour costs to consumers through higher prices. Informal employees not covered by minimum wage increases will adversely affected, he added.

Lacson cautioned that a legislated P150 wage increase, proposed in Senate Bill 2002, could harm the Philippine economy and called for more sustainable alternatives to help employees cope with the rising cost of living.

Ma. Flordeliza Leong, Vice-President of the Philippine Exporters Confederation, echoed Lacson’s concerns, emphasising that wage hikes tend to exacerbate inflationary pressures.

Leong and Lacson proposed focusing on bills that promote jobs creation and attract investments, such as allocating a larger budget to the Department of Trade and Industry to support MSMEs and providing struggling enterprises with more opportunities for financial support.

READ MORE: Business groups in the Philippines warn of job losses amid wage hike

Other business groups like the Philippine Chamber of Commerce and Industry (PCCI) and the Federation of Filipino Chinese Chamber of Commerce and Industry (FFCCCII) also shared concerns that higher labour costs may deter foreign investments.

George Barcelon, President of PCCI, noted that with the proposed wage increase, the Philippines could become less competitive in the global market. Cecilio Pedro, President of FFCCCII, emphasised that labour costs are currently a competitive advantage for the country, and efforts should be directed towards preserving this advantage, reported Philstar.