Revised Rules of the Telecommuting Act (Philippines)

Highlights of the Revised Rules

1. Application of labor standards

The Revised Rules apply to employers and employees in the private sector that implement a telecommuting program. The Revised Rules provide that terms and conditions of telecommuting shall not be less than minimum labor standards, and not diminish or impair the terms and conditions of employment in employment contracts, company policies or practices, or collective bargaining agreements.

Work performed in the alternative workplace is still considered as work performed in the regular workplace of the employer, and the time the employer is required to be on duty and rendering work in the alternative workplace shall still be counted as hours worked.

2. Telecommuting Program

The telecommuting program may be in the form of a separate policy or incorporated into existing policies or employment contracts. The employer or the employee may propose the telecommuting program, which will be adopted on such terms as may be mutually agreed upon.

The Revised Rules provide for clearer guidelines on the provisions that must be included in a telecommuting program, which include:

a) Eligibility criteria to participate in the telecommuting program (e.g., job qualification, nature or functional areas of work, roles and positions, personal circumstances, past performance, etc.)

b) Acceptable alternative workplaces including minimum requirements for computer hardware and software (e.g., internet connectivity, security and terminals)

c) Occupational safety and health standards, such as ergonomics, good housekeeping, mental health programs as reasonably necessary

d) Performance evaluation standards for telecommuting employees, including means of communicating feedback or addressing performance issues

e) Code of Conduct such as attendance, appearance and demeanor during virtual meetings, and other measures to ensure compliance with work standards

f) Data protection, confidentiality and security

g) Emergency protocols or contingency plans to address device breakdown, power interruption, weather disturbances and other events

h) Duration of the telecommuting, such as termination or change of work arrangement due to business necessity

i) Dispute resolution to resolve employee grievances from the implementation and enforcement of the program, which shall include an agreement for referral to voluntary arbitration

3. Principle of fair treatment

Telecommuting employees shall be covered by the same set of applicable rules, company policies or existing collective bargaining agreements. Employers shall also ensure that telecommuting employees are given same treatment as employees working at the employer’s premises, such as with respect to (a) the rate of pay, including overtime pay and other benefits, (b) the right to rest days and regular holidays, (c) workload and performance standards, provided that parties may mutually agree to different performance standards that may be more appropriate, and (d) access to training and career development opportunities without additional costs.

4. Employer responsibilities, reporting and record keeping

Employers are also required to ensure that measures are taken to prevent the telecommuting employee from being isolated from the rest of the employees in the company, by giving the telecommuting employee opportunities to meet (physically or through telecommunication) with colleagues and allow access to the employer’s premises and company information.

The Revised Rules also clarify that facilities, equipment and supplies to implement the telecommunicating program, including expenses for the acquisition, proper handling, usage, maintenance, repair and return of such facilities, equipment and supplies are considered the ordinary and necessary costs of the business of the employer.

Employers are required to notify the DOLE of the implementation of the telecommuting arrangement through the DOLE’s establishment report system. Further, employers should keep and maintain for at least three (3) years the documents and records proving that parties voluntary adopted telecommuting.

Additional considerations for PEZA-registered IT-BPM businesses

PEZA-registered IT-BPM businesses will have to note the requirements of the Fiscal Incentives Review Board (“FIRB”) in considering whether to adopt, or continue current telecommuting arrangements, as it may have an impact on their fiscal incentives.

Section 309 of the National Internal Revenue Code, as amended by the Corporate Recovery and Tax Incentives for Enterprises Act (the “CREATE Act”), requires that registered projects or activities should be exclusively conducted within the geographical boundaries of the economic or freeport zone being administered by the relevant investment promotion agency (“IPA”) (e.g., PEZA) and that any project or activity conducted or performed outside the economic or freeport zone shall not be entitled to incentives, unless such project or activity is conducted or operated under another IPA.

The FIRB, which has power to exercise policy making and oversight functions in the administration and grant of incentives by IPAs, has issued Resolution No. 026-22 dated 14 September 2022, allowing PEZA-registered IT-BPM businesses an extension of until 31 December 2022 to temporarily adopt work from home arrangements not exceeding 30% of their total workforce without adversely affecting their income tax incentives under the CREATE Act. Registered business enterprises exceeding the 30% threshold shall not be entitled to avail of the fiscal and non-fiscal incentives for the months their enterprises were non-compliant.

However, subject to the procedures outlined in FIRB Resolution No. 026-22, affected registered enterprises in the IT-BPM sector may be allowed to transfer their registration to the Board of Investment until 31 December 2022 and adopt up to 100% work from home arrangements. In the meantime, a Senate bill has been filed proposing to amend Section 309 of the National Internal Revenue Code in order to allow such entities to adopt work from home arrangements while still retaining their fiscal incentives.

Conclusion

While the suitability of telecommuting varies across occupations and business sectors, the updates to the implementing rules of the Telecommuting Act signal that remote or hybrid work arrangements have indeed become part of the “new normal”, and companies should keep in mind the Revised Rules when navigating through the opportunities and challenges of implementing such work arrangements.