The principal issue posed in the present controversy is: what is the appropriate mode of computation of the 13th month pay of employees who receive a fixed or guaranteed salary plus sales commissions?

Petitioner Philippine Duplicators, Inc. is a domestic corporation engaged in the distribution of foreign-made copying machines and related consumables. In petitioner's employ are salesmen who are paid a fixed or guaranteed salary plus commissions, which commissions are computed on the selling price of the duplicating machines sold by the respective salesmen.

P.D. No. 851, promulgated on 16 December 1975, prescribed payment of 13th month pay in the following terms:

"Sec. 1. All employers are hereby required to pay all their employees receiving a basic salary of not more than P1,000.00 a month, regardless of the nature of the employment, a 13th month pay not later than December 24 of every year." (Underscoring supplied)

The Rules and Regulations Implementing P.D. No. 851, issued by the Secretary of Labor and Employment on 22 December 1975, defined the following basic terms:

"(a) '13th month pay' shall mean one-twelfth (1/12) of the basic salary of a employee within a calendar year;

(b) 'basic salary' shall include all remunerations or earnings paid by an employer to an employee for services rendered, but may not include cost of living allowances granted pursuant to President Decree No. 525 or Letter of Instructions No. 174, profit-sharing payments, and all allowances and monetary benefits which are not considered or integrated as part of the regular or basic salary of the employee at the time of the promulgation of the Decree on December 16, 1975." (Underscoring supplied)

On 13 August 1986, President Corazon C. Aquino, then exercising both executive and legislative authority, issued Memorandum Order No. 28 which provided as follows:

"Sec. 1 of Presidential Decree No. 851 is hereby modified to the extent that all employers are hereby required to pay all their rank-and-file employees a 13th month pay not later than December 24 of every year." (Underscoring supplied)

In connection with and in implementation of Memorandum Order No. 28, Minister Augusto S. Sanchez of the then Ministry of Labor and Employment issued MOLE Explanatory Bulletin No. 86-12 on 24 November 1986. Item No. 5 (a) of this issuance read:

"Employees who are paid a fixed or guaranteed wage plus commission are also entitled to the mandated 13th month pay, based on their total earning[s] during the calendar year, i.e., on both their fixed and guaranteed wage and commission."^[1] (Underscoring supplied)

Private respondent union, for and on behalf of its member-salesmen, asked petitioner corporation for payment of 13th month pay computed on the basis of the salesmen's fixed or guaranteed wages plus commissions.

Petitioner corporation refused the union's request, but stated it would respect an opinion from the MOLE. On 17 November 1987, acting upon a request for opinion submitted by respondent union, Director Augusto G. Sanchez of the Bureau of Working Conditions, MOLE, rendered an opinion to respondent union declaring applicable the provisions of Explanatory Bulletin No. 86-12, Item No. 5 (a):

"x x x [S]ince the salesmen of Philippine Duplicators are receiving a fixed basic wage plus commission on sales and not purely on commission basis, they are entitled to receive 13th month pay provided that they worked at least one (1) month during the calendar year. May we add at this point that in computing such 13th month pay, the total commissions of said salesmen for the calendar year shall he divided by twelve (12)." (Underscoring supplied)

Notwithstanding Director Sanchez' opinion or ruling, petitioner refused to pay the claims of its salesmen for 13th month pay computed on the basis of both fixed wage plus sales commissions.

Respondent union thereupon instituted a complaint against petitioner corporation for payment of the demand of its salesmen-members for 13th month pay. The union averred that the salesmen received 13th month pay computed only on the basis of their fixed or guaranteed wage. Its basic contention was that pursuant to Memorandum Order No. 28, above quoted, in relation to the Explanatory Bulletin No. 86-12, also quoted above, the 13th month pay of salesmen receiving a fixed salary and commissions should be computed on the basis of their total earnings for the calendar year, i.e., on both the fixed salary and sales commissions.

After submission of the parties' respective position papers, the Labor Arbiter rendered a decision dated 24 October 1989 directing petitioner corporation to pay 13th month pay to its salesmen computed in accordance with the requirements of Explanatory Bulletin No. 86-12.

Petitioner appealed to the National Labor Relations Commission ("NLRC"), formulating the basic issue in terms of "whether or not an employer is liable to give his employee a separate 13th month pay on commissions independently of, aside from and in addition to, 13th month pay on basic wage." Petitioner maintained that the commissions earned by its salesmen fell outside the scope of the term "basic salary" for purposes of computing the 13th month pay of employees. Expansion of the scope of the term "basic salary", for purposes of computing 13th month pay, is beyond the authority and prerogatives of the DOLE Secretary, petitioner argued, since such expansion required legislative authority.

On 17 November 1992, the NLRC affirmed the award of the Labor Arbiter, declaring that it (the NLRC) was not vested with authority to pass upon the validity of Explanatory Bulletin No. 86-12, which issuance by Secretary Augusto S. Sanchez remain operative as a source of rights until declared invalid by the proper authorities, i.e., the Supreme Court. Petitioner moved for reconsideration of the decision, without success.

Hence, this recourse.

Petitioner reiterates its contention that Explanatory Bulletin No. 86-12 issued by Secretary Augusto S. Sanchez, as well as the opinion dated 17 November 1987 of Director Augusto G. Sanchez rendered upon request of respondent union, are void and without force and effect. Petitioner contends that Explanatory Bulletin No. 86-12 runs counter to Section 2 (b) of the Implementing Rules and Regulations Relating to P.D. No. 851, quoted earlier. Petitioner insists also that Explanatory Bulletin No. 86-12 was in any case rendered ineffective by Item No. 4 (a) of the "Revised Guidelines on the Implementation of the 13th Month Pay" issued by Secretary Franklin M. Drilon on 16 November 1987, which Item provides in part as follows:

"4. Amount and payment of 13th Month Pay

(a) MINIMUM AMOUNT - The minimum 13th month pay required by law shall not be less than 1/12 of the total basic salary earned by an employee within a calendar year. For the year 1987, the computation of the 13th month pay shall include the cost of living allowance (COLA) integrated into the basic salary of a covered employee pursuant to Executive Order 178.

x         x           x           x           x           x           x

The "basic salary" of an employee for the purpose of computing the 13th month pay shall include all remunerations or earning paid by this employer for services rendered but does not include allowances and monetary benefits which are not considered or integrated as part of the regular or basic salary, such as the cash equivalent of unused vacation and sick leave credits, overtime, premium, night differential and holiday pay, and cost of living allowances. However, these salary-related benefits should be included as part of the basic salary in the computation of the 13th month pay if by individual or collective agreement, company practice or policy, the same are treated as part of the basic salary of the employees." (Underscoring supplied)

Petitioner thus reads the above provisions as expressly excluding sales or incentive commissions from the coverage of "basic salary" for purposes of computing 13th month pay. Petitioner also denies that it had any company policy treating said commissions as part of its salemen's fixed or basic salary. Petitioner asserts that neither P.D. No. 851 nor the amendatory Memorandum Order No. 28 expressly or impliedly considered "commissions" as part of "basic salary" for purposes of computing the 13th month pay due to its salesmen. Accordingly, petitioner insists that Explanatory Bulletin No. 86-12 constituted an invalid expansion of the scope of P.D. No. 851, as well as Memorandum Order No. 28.

The petition must fail.

In the first place, Article 97 (f) of the Labor Code defines the term "wage" (which is equivalent to "salary," as used in P.D. No. 851 and Memorandum Order No. 28) in the following terms:

"(f) 'Wage' paid to any employee shall mean the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is, payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered, and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee. 'Fair and reasonable value' shall not include any profit to the employer or to any person affiliated with the employer." (Underscoring supplied)

In the instant case, there is no question that the sales commissions earned by salesmen who make or close a sale of duplicating machines distributed by petitioner corporation, constitute part of the compensation or remuneration paid to salesmen for serving as salesmen, and hence as part of the "wage" or "salary" of petitioner's salesmen. Indeed, it appears that petitioner pays its salesmen a small fixed or guaranteed wage; the greater part of the salemen's wages or salaries being composed of the sales or incentive commissions earned on actual sale closed by them. No doubt this particular salary structure was intended for the benefit of petitioner corporation, on the apparent assumption that thereby its salesmen would be moved to greater enterprise and diligence and close more sales in the expectation of increasing their sales commissions. This, however, does not detract from the character of such commissions as part of the salary or wage paid to each of its salesmen for rendering services to petitioner corporation.

The term "basic salary" used in P.D. No. 851 and Memorandum Order No. 28 is not to be confused with the term "fixed or guaranteed wage." The term "basic salary" is used to distinguish wage or salary from "fringe benefits" which are not integrated into "basic salary" for certain specific purposes. In San Miguel Corporation v. Inciong,^[2] the catch-all phrase "allowances" and "monetary benefits" which are deemed not considered or integrated as part of "basic salary" was construed to refer to "any and all additions which may be in the form of allowances or 'fringe' benefits." These fringe benefits include payments for sick leave, vacation leave or maternity leave; premium pay for work performed on rest day and special holidays; premium pay for regular holidays and night differential pay; and cost of living allowances.^[3] Sales commissions form part of the "wage" or "salary" of salesmen and are not in the nature of an "allowance" or "additional fringe" benefit. Once more, we note that in the instant case, sales commissions form the bulk of the salaries or wages of petitioner's salesmen.

This Court has had prior occasion to consider the nature of commissions earned by salesmen. In Songco v. National Labor Relations Commission,^[4] the Court was called upon to determine whether earned sales commissions should be included in the monthly or fixed salaries of petitioners for purposes of computing their separation pay. The Court, in declaring that sales commissions must be included in the salary base of salesmen for purposes of computing separation pay, stressed that:

" 'Salary,' the etymology of which is the Latin word 'salarium,' is often used interchangeably with 'wage,' the etymology of which is the Middle English word 'wagen.' Both words generally refer to one and the same meaning, that is, a reward or recompense for services performed. Likewise, 'pay' is the synonym of 'wages' and 'salary' (Black's Law Dictionary, 5th Ed.). Inasmuch as the words 'wages,' 'pay' and 'salary' have the same meaning, and commission is included in the definition of 'wage,' the logical conclusion, therefore, is, in the computation of the separation pay of petitioners, their salary base should include also their earned sales commissions.

x x x                x x x                  x x x

We agree with the Solicitor General that granting, in gratia argumenti, that the commissions were in the form of incentives or encouragement, so that the petitioners would be inspired to put a little more industry on the jobs particularly assigned to them, still these commissions are direct remunerations for services rendered which contributed to the increase of income of Zuellig. Commission is the recompense, compensation or reward of an agent, salesman, executor, trustees, receiver, factor, broker or bailee, when the same is calculated as a percentage on the amount of his transactions or on the profit to the principal (Black's Law Dictionary, 5th Ed., citing Weiner v. Swales, 217 Md. 123, 141 A. 2d 749, 750). The nature of the work of a salesman and the reason for such type of remuneration for services rendered demonstrate clearly that commissions are part of petitioners' wage or salary. x x x."^[5] (Underscoring supplied)

In the second place, contrary to petitioner's contention, P.D. No. 851 in defining the term "basic salary" did not exclude from the ambit thereof sales commissions which are paid along with fixed or guaranteed wages. As pointed out above, what Section 2(b) of the Implementing Rules and Regulations Implementing P.D. No. 851 excluded from the scope of "basic salary" were "profit-sharing payments and all allowances and monetary benefits which are not considered or integrated as part of the regular or basic salary of the employees x x x," which properly refer to "fringe benefits."

In the third place, both the opinion rendered by Director Augusto G. Sanchez and the Explanatory Bulletin No. 86-12 issued by Secretary August S. Sanchez, constitute contemporaneous administrative construction of the meaning of the term "basic salary," and the two (2) issuances construed the term "basic salary" as embracing both fixed or guaranteed wage and sales commissions. As long ago as 1903, this Court stressed that

"the principle that the contemporaneous construction of a statute by the executive officers of the government, whose duty it is to execute it, is entitled to great respect, and should ordinarily control and construction of the statute by the courts, is so firmly embedded in our jurisprudence that no authorities need be cited to support it."^[6]

Finally, it must be noted that the construction given by Director Sanchez and Secretary Sanchez was adopted and reiterated by Secretary Franklin M. Drilon in promulgating, on 16 November 1987, the "Revised Guidelines on the Implementation of the 13th Month Pay Law." Item No. 5 (a) of these Revised Guidelines, which petitioner corporation has curiously chosen to ignore, while citing Item No. 4 (a) of the same Guidelines, reads as follows:

"5. 13th Month Pay for Certain Types of Employees.

(a) Employees Paid by Results. -- Employees who are paid on piece work basis are by law entitled to the 13th month pay.

Employees who are paid a fixed or guaranteed wage plus commission are also entitled to the mandated 13th month pay, based on their total earnings during the calendar year, i.e., on both their fixed or guaranteed wage and commission.

x x x                                  x x x                               x x x"

(Emphases supplied)

To recapitulate, the 13th month pay of employees paid a fixed or guaranteed wage plus sales commissions must be equivalent to one-twelfth (1/12) of the total earnings (fixed or guaranteed wage-cum-sales commissions) during the calendar year. Considering that petitioner has excluded from the computation of the 13th month pay the sales commissions earned by its individual salesmen, we believe and so hold that petitioner must be held liable to pay for the deficiency.

WHEREFORE, petitioner having failed to show any grave abuse of discretion on the part of the National Labor Relations Commission in rendering its Decision dated 17 November 1992, the Petition for Certiorari is hereby DISMISSED for lack of merit. Cost against petitioner.

SO ORDERED.

Bidin, Romero, Melo, and Vitug, JJ., concur.

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^[1] See Decision of the NLRC dated 17 November 1992; Rollo, p. 24.

^[2] 103 SCRA 139 (1981).

^[3] See Item No. 4 (a), Revised Guidelines on the Implementation of the 13th Month Pay Law.

^[4] 183 SCRA 610 (1990).

^[5] 183 SCRA at 617-618.

^[6] In Re Allen, 2 Phil. 630, 640 (1903).