Business groups urge government to help firms absorb wage hike

By Beatriz Marie D. Cruz, Senior Reporter

BUSINESS GROUPS are urging the government to prioritize measures that boost productivity and strengthen investor confidence to help firms absorb the higher labor costs from the increase in the daily minimum wage in Metro Manila.

The Financial Executives Institute of the Philippines (FINEX) said it recognizes the need to hike wages as the rising costs of food, transportation, and other basic needs weigh on household budgets.

However, the group said wage hikes are more effective when supported by a competitive business environment and policies meant to lower the business costs.

“While higher wages provide immediate relief to workers, FINEX believes that the magnitude and timing of the increase underscore the need for government to carefully assess its absorptive impact, particularly on micro, small, and medium enterprises (MSMEs) and employment-intensive industries,” it said in a statement on Wednesday.

In particular, FINEX called for measures to reduce red tape, streamline permitting processes, improve regulatory predictability, and accelerate digitalization.

The group also sought policies to lower key input costs, particularly electricity, logistics, and transportation, noting its impact on consumers and businesses.

“The challenge now is to ensure that the gains from higher wages are not diminished by higher prices, reduced hiring, lower investment, or slower economic activity,” it said.

FINEX is also seeking reforms to strengthen investor confidence and attract domestic and foreign capital.

“Greater investment expands productive capacity, creates quality jobs, introduces new technologies, and raises productivity — the most sustainable foundation for higher wages and improved living standards,” it said.

The effect of the wage hike on inflation, employment, business viability, and wage distortion should also be monitored closely, FINEX added.

The wage board last month approved a dual tranche P85 increase in the minimum wage in the National Capital Region (NCR). The NCR minimum wage will increase by P60 on July 25, while the second tranche or the P25 hike will take effect on Jan. 20, 2027.

On Tuesday, Palace Press Officer Clarissa A. Castro said the NCR wage increase will proceed as scheduled, adding the private sector has not formally sought a halt on its implementation.

Labor Secretary Francis N. Tolentino has also said there is no legal basis to suspend the wage hike for Metro Manila workers.

The Foundation for Economic Freedom (FEF) earlier called on the government to suspend the NCR wage hike, noting that it would harm MSMEs, deter investments, and threaten macroeconomic stability.

FEF President Calixto V. Chikiamco told BusinessWorld that the group is open to support a company that will formally request the government to reconsider the wage hike.

“We have no legal standing to file the appeal, because we aren’t a company,” he said in a Viber message. “However, it’s possible for us to assist any company with minimum wage workers that will file the appeal.”

Management Association of the Philippines President Donald Patrick L. Lim said its members have “no choice” but to absorb the effect of the wage hike on its operations and sales.

“We have no choice for now. For now, it eats up on our margins amidst declining sales,” he said in a Viber message.

Mr. Lim noted that a wage hike must be coupled with investments to upskill workers and boost technologies.

Jose Sonny G. Matula, labor lawyer and president of the Federation of Free Workers noted that qualified MSMEs are protected under the law in the event of a wage hike.

He noted that barangay micro business enterprises (BMBEs) are exempted from the Minimum Wage Law under Section 8 of Republic Act No. 9178 or the BMBE Act.

The law defines BMBEs as enterprises with total assets equivalent of not more than P3 million.

Mr. Matula added that retail and service establishments with up to 10 employees may apply for an exemption with the wage board.

“Our wage-fixing system has built-in safety valves for enterprises that cannot absorb a wage increase,” he said in a statement.