Reyes vs.

NLRC
[G.R. No. 160233. August 8, 2007]
Facts:
Reyes was a salesman at Universal Robinas Grocery Division in Davao City. He
became unit manager of Sales Department-South Mindanao and remained such
until his retirement.
Reyes disagreed with the manner the company computed his separation pay.
Insisting that his retirement benefits and 13th month pay must be based on the
average monthly salary, which consists of basic salary and average monthly
commission, he refused to accept payment. Instead he filed a case for recovery
of these monetary claims.
Issu
e:
Should the overriding commission be included in the computation of the
retirement benefits and 13th month pay?
Held:
Any seeming inconsistencies between Philippine Duplicators and Boie-Takeda
had been clarified by the Court in the Resolution dated February 15, 1995 in
the Philippine Duplicators case.
The Court thus clarified that in Philippine Duplicators, the salesmens
commissions, comprising a pre- determined percentage of the selling price of
the goods sold by each salesman, were properly included in the term basic
salary for purposes of computing the 13th month pay. The salesmens
commission are not overtime payments, nor profit-sharing payments nor any
other fringe benefit, but a portion of the salary structure which represents an
automatic increment to the monetary value initially assigned to each unit of
work rendered by a salesman.
Contrarily, in Boie-Takeda, the so-called commissions paid to or received by
medical representatives of Boie-Takeda Chemicals or by the rank and file
employees of Philippine Fuji Xerox Co., were excluded from the term basic
salary because these were paid to the medical representatives and rank-andfile employees as productivity bonuses, which are generally tied to the
productivity, or capacity for revenue production, of a corporation and such
bonuses closely resemble profit-sharing payments and have no clear direct or
necessary relation to the amount of work actually done by each individual
employee. Further, commissions paid by the Boie-Takeda Company to its
medical representatives could not have been sales commissions in the same
sense that Philippine Duplicators paid the salesmen their sales commissions.

Medical representatives are not salesmen; they do not effect any sale of any
article at all.
In this case, SC ruled that commissions should
be excluded.

Section 5 of Rule II of the Rules Implementing the New Retirement Law, provides:
The term [salary] does not include cost of living allowance, profitsharing payments and other monetary benefits which are not
considered as part of or integrated into the regular salary of the
employees.
Article 287, as amended by RA 7641, provides for two types of retirement:
(a) compulsory upon reaching 65 years old
(b) optional primarily determined by CBA or other employment contract
or employers retirement plan. In the absence of any provision on
optional retirement in a collective bargaining
agreement,
other
employment contract, or employers retirement plan, an
employee may optionally retire upon reaching the age of 60 years or
more, but not beyond
65 years, provided he has served at least five years in the establishment
concerned.
For the purpose of computing retirement pay, one-half month salary shall
include all of the following:
1) 15 days salary based on the latest salary rate;
2) cash equivalent of 5 days of service incentive leave (or vacation leave);
3) 1/12 of the 13th month pay;
4) other benefits as may be agreed upon by employer and employee for
inclusion.
But, it shall not include the
following:
1) cost of living allowance;
2) profit-sharing payments; and
3) other monetary benefits which are not considered as part of or
integrated into the regular salary of the employees
Petitioner filed for optional retirement upon reaching the age of 60. However,
the basis in computing his retirement benefits is his latest salary rate of
P10,919.22 as the commissions he received are in the form of profit-sharing
payments specifically excluded by the foregoing rules.
Aside from the fact that as unit manager petitioner did not enter into actual
sale transactions, but merely supervised the salesmen under his control, the
disputed commissions were not regularly received by him. Only when the
salesmen were able to collect from the sale transactions can petitioner
receive the commissions. Conversely, if no collections were made by the
salesmen, then petitioner would receive no commissions at all. In fine, the
commissions which petitioner received were not part of his salary structure but
were profit-sharing payments and had no clear, direct or necessary relation to
the amount of work he actually performed. The collection made by the
salesmen from the sale transactions was the profit of private respondent from

which petitioner had a share in the form of a commission.

It may be argued that petitioner may have exerted efforts in pushing the
salesmen to close more sale transactions; however, it is not the criterion which
would entitle him to a commission, but the actual sale transactions brought
about by the individual efforts of the salesmen.