The fight over P85 is exposing a problem much bigger than P85.
When the Pasig Regional Trial Court halted Metro Manila’s latest wage increase, politicians joined protests against the TRO last August 4. Did the wage board sufficiently consider employers’ capacity to pay? The court’s intervention raised a concern: what happens to workers and employers while the wage increase remains in limbo?
Those questions matter. But from an HR compensation perspective, another deserves equal attention: Why do we keep debating how high the wage floor should rise without asking whether workers still have a meaningful pay ladder above it?
NCR Wage Order No. 27 was intended to raise the non-agricultural daily minimum wage from P695 to P780 in two tranches. The first P60 increase took effect on July 25 before implementation was subsequently suspended by court order. For workers, every additional peso matters. Employers, meanwhile, must absorb the payroll cost of every mandated increase. Inside a salary structure, however, the consequences extend beyond those earning the minimum.
Consider a workplace. An entry-level employee earns P695 a day. A skilled worker earns P760. A senior skilled worker receives P820. If the floor rises to P780, the entry-level employee gains, as intended. But the skilled worker’s pay advantage disappears. The senior worker, despite greater experience and responsibility, is suddenly only P40 above the minimum. That is wage compression.
Our labor laws recognize its more serious form as wage distortion, when intentional pay differences based on skills, length of service or other reasonable distinctions are severely narrowed or eliminated. The raison d’être of a sound compensation system is not merely to meet the lowest legal rate. Pay should also recognize skill, job difficulty, responsibility and experience. That is why compensation professionals use job evaluation, salary grades and wage bands. They help answer a question: How much more should greater job value be worth? If these distinctions collapse after wage adjustments, a worker who spent years mastering a trade may ask: What was the point of moving up?
Encouragingly, the National Wages and Productivity Commission has begun moving in this direction. Its voluntary Progressive Wage Model for selected lower-wage occupations in the construction industry, introduced in June 2026, links wage progression to skills upgrading, work experience and productivity while retaining the regional minimum wage as the floor. The next question is whether the same principle can help shape a broader compensation framework for private employment.
We have spent decades debating the height of the wage floor. We have paid far less attention to whether workers can still see a ladder above it. The answer is not one government salary table for the entire private sector. A restaurant in Iloilo, a construction firm in Metro Manila, a semiconductor company in Laguna and a multinational in BGC cannot operate under identical salary rates.
What the country needs instead is a three-layer wage architecture.
The first layer is the statutory minimum wage. Regional economic differences should remain part of the equation because living costs, productivity and business conditions vary. What should become more consistent and transparent is the methodology used to determine regional rates. Workers and employers should understand how inflation, living costs, prevailing wages, productivity, employment conditions and capacity to pay produced the final figure.
The second layer should provide national reference guidelines for job leveling in the private sector, without imposing uniform salaries across industries or regions. A common framework can distinguish jobs according to skill, complexity, accountability and responsibility, giving employers a basis for preserving meaningful pay progression when the minimum rises.
The third layer belongs to the enterprise. Companies should retain flexibility to establish salary grades and wage bands using job evaluation, market benchmarking, affordability, performance, productivity, and scarcity of skills.
Existing productivity-based incentives under the Two-Tiered Wage System need not disappear under this approach. They can remain part of the enterprise layer, alongside performance pay, benefits, career development and other elements of total rewards. In that sense, this proposal does not have to compete with the Two-Tiered Wage System. It can be viewed as its next logical step: keep the legal wage floor, preserve productivity-based rewards, but add a clearer structure connecting job value and skills to wage progression. Such a framework could reduce the familiar déjà vu after every wage order. Instead of waiting for wage compression to become a distortion problem that must later be corrected, employers would have a clearer basis for preserving pay relationships as the minimum wage moves upward.
The P85 controversy should therefore become more than another argument over whether one wage increase is too high or too low. Instead, it offers an opportunity to rethink how the minimum wage fits into the wider architecture of compensation. A minimum wage tells us the least a worker may legally receive. What it cannot capture is the value of greater skill, experience, responsibility and productivity.
The Two-Tiered Wage System gives us a floor and a mechanism for productivity rewards. The Progressive Wage Model has begun adding rungs based on skills and experience. What remains missing is a broader framework that connects the wage floor with job value, wage progression and enterprise salary structures. Before we fight over the next wage increase, perhaps it is time we finally build the pay ladder above the floor.
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For questions, please e-mail nicasio.pimentel@antiquespride.edu.ph./PN
