WAGE DISTORTION

• Wage distortion


  Presupposes a classification of positions and ranking of these positions at various levels, with a hierarchy of positions and corresponding ranks in terms of wages and other emoluments
• Where a significant change occurs at the lowest level of positions in terms of basic wage without a corresponding change in the other level in the hierarchy of positions, negating as a result thereof the distinction between one level of position from the next higher level, and resulting in a parity between the lowest level and the next higher level or rank, between new entrants and old hires, there exists a wage distortion
• Concept of wage distortion

  Assumes an existing grouping or classification of employees which establishes distinctions among such employees on some relevant or legitimate basis, reflected in a differing wage rate for each of the existing classes of employees
• Elements of wage distortion

  • An existing hierarchy of positions with corresponding salary rates
  • A significant change in the salary rate of a lower pay class without a concomitant increase in the salary rate of a higher one
  • The elimination of the distinction between the two levels
  • The existence of the distortion in the same region of the country
• Normally, a company has a wage structure or method of determining the wages of its employees
• In a problem dealing with wage distortion, the basic assumption is that there exist a grouping or classification of employees that establish distinctions among them on some relevant or legitimate bases
• Factors involved in the classification of employees

  Degrees of responsibility, the skills and knowledge required, the complexity of the job, or other logical basis of differentiation
• The differing wage rate for each of the existing classes of employees reflects this classification
• Wage distortion occurs when the variations in wage structures or rates among employee groups within an enterprise are significantly eliminated or substantially diminished due to mandated wage increases. Restoring the substantial distinction or gap is permissible under Article 124 of the Labor Code.