DOLE tells small firms to resort to loans for 13th month pay of workers

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Metro Manila (CNN Philippines, October 20) — Small businesses may resort to soft loans to cover the 13th month pay of their employees, the Labor Department said, insisting that the benefit cannot be deferred or cancelled.

Labor Secretary Silvestre Bello III said micro- and small-scale enterprises can tap into a ₱4-billion credit facility of the Small Business Corporation, a unit of the Department of Trade and Industry, to secure cash in time for the benefit payouts.

Bello said Trade Secretary Ramon Lopez informed him about the loan portal, which he said comes with minimal interest and no collateral for easy repayment. Separately, he said the Rural Bankers Association of the Philippines is also willing to provide soft loans to small firms.

"'Yung 13th month, talagang babayaran iyan. There is no exception and no deferment... Iyan ang batas, hindi natin pwedeng iwasan 'yan, hindi pwedeng tawaran," Bello said during a Tuesday Malacañang briefing.

Under the law, the mandatory cash benefit should be released to workers on or before December 24 each year.

The government has been encouraging the private sector to secure bank loans to add to their working capital as they sustain or revamp business operations under the "new normal," especially after a two-month lockdown in Luzon, the country's main economic hub.

The Philippines has slipped into a recession, sending an additional 23.7 million people into hunger and 4.5 million more into poverty, based on estimates of the National Economic and Development Authority.

Earlier this month, Bello said DOLE was looking into exempting some companies –– especially small businesses –– gravely hit by the pandemic from the annual doleouts.

However, Bello explained that the DOLE unearthed a subsequent Presidential decree from 1978 that explicitly prohibits the agency from accepting any proposals to defer or cancel the annual payout.

The Labor chief said they have sought help from President Rodrigo Duterte to provide between ₱5 billion to ₱13.7 billion so the government can subsidize the 13th month pay of employees of micro and small enterprises.

The proposal is still being studied by the Department of Finance, Presidential Spokesperson Harry Roque said on Monday.

Employees who did not work for weeks or months during the lockdown periods will receive lower 13th month benefits, Bello said, as computation will be done pro rata regardless if the absences were voluntary or not.