Wage Theft: An Ethical Challenge in BPO Companies in the Philippines

 JENNYVIEVE ABUCAY

Divine Word College of Laoag

Abstract

Business Process Outsourcing (BPO) is one of the major contributors to the economy and is considered the largest employer in the Philippines. In this industry, the issue of ethical challenges is still current and is linked to the topic of wage theft. As employees, it is expected that they receive their due compensation for their work; not only that, they should receive it on top form—and unfortunately, not all receive these on time. The ethical issues involving unpaid overtime, wage discrimination, misclassification, and unpaid wages continue to be faced, even with the expansion of the industry. This article will provide a discussion and the Impact of wage theft and labor law violations, an overview of the Philippine laws and policies with regard to the matter, and a discussion for the solutions for each issue. This is to ensure fair compensation for employees and for their well-being, and ethical business practices.

Keywords: wage theft, BPO industry, ethical challenge, labor ethics, labor law, Philippines laws and policies

Introduction

In the Philippines, BPO is considered the key factor for economic development as it provides job opportunities for customer service agents, IT professionals, financial staff, and back-office personnel to various clients around the world. However, despite these opportunities, BPO still experiences issues associated with labor standards, particularly with respect to wage thefts. This is a form of non-compliance with laws, apart from moral dilemmas arising from employee financial security, welfare, and employee trust and confidence in the management.

 “Wage theft” is a general term that encompasses a variety of illegal activities by employers aimed at denying employees their fair wages or earnings. It encompasses payment of less than the set minimum wage rates, failure to pay employees for their services, fringe benefit deductions not authorized or mandated by the laws of the land or country for services such as the provision of uniforms, tools, or equipment. Additionally, failure to pay employees for working over the usual eight hours a day or on rest days/holidays, and treating usual employees as contractual or “independent contractors” (Respicio, 2025).

Ethical Challenges of Wage Theft in BPO Companies

 

Unpaid or Underpaid Overtime and Night Differential. BPO workers usually go beyond their eight-hour work schedule due to international clients’ time constraints. Based on the PH Labor Law, an additional 25% rate is applicable for OT, while night differentials require a 10% premium (LaborLaw.ph, 2023; RespiCio, 2023a). Against this legal provision, many claim unpaid OT, off-clock work, or improper documentation (Delapena, 2021).

Misclassification and Contractual Exploitation. Some workers are also misclassified as contractual or non-standard employees to bypass legal protections. Misclassification covers benefits such as SSS, PhilHealth, and Pag-IBIG contributions, putting workers at risk (RespiCio, 2023b).

Low Base Pay and Heavy Reliance on Incentives. Entry-level jobs usually have a low base pay, and thus, many employees must rely on incentives to provide for their needs. However, if an incentive is cut or delayed, workers face instability in paying their bills on time and are treated as receiving unfair pay. (Philstar, 2023).

Lack of Worker Awareness or understanding of working rights. There is a likelihood that the worker does not understand the concept of overtime pay or night differential pay. This creates a challenge for the worker because they cannot claim the benefits accordingly (Delapena, 2021).

Job Insecurity and Weak Unionization. There is a lack of job security, contract ambiguity, and possibilities of unionization among BPO employees. The lack of union representation among BPO employees affects their ability to resist unfair practices (Philstar, 2023).

Psychological and Social Impacts. Poor compensation and wage theft result in stress, anxiety, burnout, and low worker morale. This makes employees feel taken advantage of or underappreciated at work (RespiCio, 2023c).

Impacts of Wage Theft

Wage theft may have implications for the mental state of the workforce. It may lead to stress and anxiety among the workforce. Secondly, the financial condition may result in instability in finances. Lack of finances may lead to expenditure on debts. Furthermore, the sector in which it will hit may experience a lack of trust and a lack of loyalty.

Addressing Wage Theft in BPO Companies

Wage theft remedy and inequalities in the BPO industry will need a different strategy that can end with the enforcement of the law, companies taking responsibility, employee empowerment, and a holistic approach for the industry.

Strengthening Legal Enforcement

More regular and surprise checks should be carried out by the Department of Labor and Employment (DOLE) to ensure that BPO companies are conforming with Labor Laws, specifically those related to overtime, night differential premium, and minimum wage requirements (RespiCio, 2023c). Furthermore, what can strengthen the preventive measures against Wage Theft is if Congress passes and implements its Wage Theft Prevention Act (Senate Bill No. 81), that will hold violators criminally liable (Senate of the Philippines, 2023). Aside from that, it should simplify its complaint process in which it should set up complaint mechanisms where employees can file their complaints anonymously.

Transparent and Fair Compensation Structures

BPO firms must apply clear salary scales in must develop transparent compensation structures. These structures shall define the base salary, bonus, allowance, and overtime compensation. The compensation statement shall break down all compensation components. Moreover, it is necessary to keep an accurate timekeeping system, and there is a need to invest in good timekeeping technology to track their time, including night shifts, to avoid off-the-clock work.

Employee Education and Empowerment

BPO firms must implement awareness programs. Organized workshops and orientations should be done to promote awareness among employees about their rights to work, calculation of pay, overtime hours, night differentials, and legal entitlements (Delapena, 2021). Likewise, unionization and collective bargaining must be emphasized to support the establishment of employee unions or employee councils to represent them collectively to compensate for the lack of equal representation between employees and firm administrators (Philstar, 2023). Lastly, legal support should be made available to work with organizations championing employee rights to assist employees during the filing of complaints or claims.

Corporate Social Responsibility and Ethical Practices

Organizations should embrace humane values and include fairness in compensation packages, timely payment of salaries, and respect for the rights of employees. Finally, feedback mechanisms for employees are also valuable, where regular forums or surveys enable management to discern any possible injustices that exist within the compensation packages. This should be complemented by well-structured reward packages that do not financially exploit employees.

Industry-wide Reforms

BPO organizations and the government can set minimum pay rates or be required to adhere to minimum pay guidelines. Additionally, organizations will be required to make annual reports showing their commitment to labor laws. This will be feasible by ensuring the technology is implemented in organizations, which involves software that monitors payroll management systems to reduce wage theft. This will ensure organizations do not engage in wage theft. The solution will be technology-based.

Employee Support and Wellbeing Programs

Conducting Financial Literacy Workshops is also highly necessary since educating employees on budgeting and managing their benefits not only helps them become aware of pay gaps but also ensures that they plan for their financial stability. Furthermore, mental health services also need to be required to tackle mental concerns with counseling sessions for dealing with work-related stress of pay gaps and wage theft.

Relevant Policies and Republic Acts for Wage Protection

·         Labor Code of the Philippines (Presidential Decree No. 442) – Governs minimum wage, overtime, night differential, and prohibits unauthorized deductions (International Labour Organization, 2022).

·         Republic Act 6727 – Wage Rationalization Act – Establishes regional minimum wages (LawPhil, 1989).

·         Republic Act No. 8188 – Imposes fines and double indemnity for non-compliance with wage laws (LawPhil, 1996).

·         Senate Bill No. 81 – Wage Theft Prevention Act – Proposed legislation criminalizing wage theft (Senate of the Philippines, 2023).

·         DOLE Enforcement – Conducts inspections and imposes penalties for non-compliance with wage laws (RespiCio, 2023c).

Conclusion:

Wage theft and salary inequality are issues that raise both ethical and practical concerns for the BPO industry in the Philippines. These issues affect the issues of financial and psychological stability and trust in the work setting. These issues can be dealt with by implementing policies and procedures for payments and following proper business practices while also implementing policies and procedures for employee rights and well-being.

In addition to that, having a positive attitude and mindset with a willingness to learn and adapt will enable an individual to be a part of a comfortable and healthy work setting and also a part of an ethical and sustainable business setting.

References:

Delapena, E. (2021). The invisible overtime: Investigating workplace abuse in Davao call centers. Medium. https://medium.com/@esldelapena/the-invisible-overtime-investigating-workplace-abuse-in-davao-call-centers-3b63acb75335

International Labour Organization. (2022). Labor Code of the Philippines (P.D. No. 442). https://natlex.ilo.org/dyn/natlex2/natlex2/files/download/15242/PHL15242%202022.pdf

LaborLaw.ph. (2023). Night shift differential pay. https://laborlaw.ph/night-shift-differential-pay/ LaborLaw.ph. (2023). Overtime pay. https://laborlaw.ph/overtime-pay/

LawPhil. (1989). Republic Act No. 6727 – Wage Rationalization Act. https://lawphil.net/statutes/repacts/ra1989/ra_6727_1989.html

LawPhil. (1996). Republic Act No. 8188 – Double indemnity & penalties for wage violations. https://lawphil.net/statutes/repacts/ra1996/ra_8188_1996.html

Philstar. (2023, May 21). A bill seeking fair labor practices, job security for BPO workers was filed. https://www.philstar.com/headlines/2023/05/21/2267487/bill-seeking-fair-labor-practices-job-security-bpo-workers-filed/amp/

RespiCio. (2023a). Legality of mandatory overtime and sanctions in BPO companies in the Philippines.

https://www.respicio.ph/commentaries/legality-of-mandatory-overtime-and-sanctions-in-bpo-companies-in-the-philippines

RespiCio. (2023b). Addressing non-payment of statutory benefits and employee misclassification in the BPO industry. https://www.respicio.ph/commentaries/addressing-non-payment-of-statutory-benefits-and-employee-misclassification-in-the-bpo-industry

RespiCio. (2023c). Penalties for employers' failure to pay wages. https://www.respicio.ph/commentaries/penalties-for-employers-failure-to-pay-wages

Senate of the Philippines. (2023). Senate Bill No. 81 – Wage Theft Prevention Act. https://web.senate.gov.ph/lisdata/4655542559%21.pdf

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