BIR Ruling No. 013-09

July 16, 2009 BIR RULING NO. 013-09 Golden Arches Development Corporation (GADC) 17th Floor Citibank Centre Building Paseo de Roxas Ave., Makati City Attention: Romeo B. Bachoco Executive Vice-President Gentlemen : This refers to your letter dated November 11, 2008 requesting for clarification regarding the application of Republic Act (RA) No. 9504 and Revenue Regulations (RR) No. 10-08 to part-time employees. IcSADC It is represented that Golden Arches Development Corporation (GADC) is the exclusive Philippine franchisee of McDonald's USA with more than 170 company-operated McDonald's stores nationwide; that it employs a large number of part-time, hourly-paid employees for its stores and that most of these part-time employees are students, working on a six-day work week, performing about two (2) to four (4) hours of work in a day. You seek clarification on how to determine if a part-time hourly paid employee is a minimum wage earner entitled to tax exemption. In reply, please be informed as follows: RA No. 9504 which exempts Minimum Wage Earners (MWE) from income tax provides the definition of statutory minimum wage and minimum wage earner, to wit: "(GG) the term 'statutory minimum wage' shall refer to rate fixed by the Regional Tripartite Wage and Productivity Board, as defined by the Bureau of Labor and Employment Statistics (BLES) of the Department of Labor and Employment (DOLE) "(HH) the term 'minimum wage earner' shall refer to a worker in the private sector paid the statutory minimum wage, or to an employee in the public sector with compensation income of not more than the statutory minimum wage in the non-agricultural sector where he/she is assigned." Moreover, RR No. 10-08 states the basis for computation of minimum wage rates as follows: "Sec. 2.78.5 Computation of Wages. The basis of the computation of the minimum wage rates prescribed by law shall be the normal working time of eight (8) hours a day. By practice, the statutory minimum wages fixed by the Regional Tripartite Wage Boards (RTWB) are daily rates based on an eight-hour workday. Applying the aforementioned law and regulation, it can be determined with ease whether an employee who renders at least eight (8) hours of work in a day would qualify as a minimum wage earner one only has to compare if the employee's daily rate is equal to the minimum wage rate as determined by the RTWB. ESTAIH This simple process of comparing rates, however, will not apply if the employee renders work for less than eight hours per day as in the case of part-time employees who are paid by the hour. The difficulty arises because the RTWB does not prescribe minimum wage rates for hourly paid workers. Hence, to determine whether a part-time employee qualifies as a MWE, his hourly rate should first be multiplied by eight (8) hours to arrive at his daily rate. If the product is equal to the minimum wage rate fixed by the RTWB, then the part-time employee is a MWE entitled to the tax incentives under RA 9504. Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Commissioner of Internal Revenue