Reader Lyn sent me this question:

Dear Ed,

Hello, my company has recently established a corporation in Philippines.

I would like to know if it is usual to provide meal allowance for the employees in many Philippine companies.

I would also like to know how much meal allowance, which major companies (such as San Miguel) or mid-small companies provide, is? (For example, 10,000 peso/month)

Here's my answer.

If you want a more detailed information regarding local practices on meal allowances, I suggest that you buy Watson Wyatt's Total Rewards Survey. The meal allowance provision vary largely among companies and I do not have those data available What I can share with you today are practices I've seen and as usual my opinion on them.

I don't think there is any law that require payment of meal allowances. It is however, a practice in the Philippines to give meal allowance for various reasons and purposes.

1. To compensate employees who are required to work in the field or for extra hours in consideration of the possibility of them spending more because of the tasks.
2. To give additional benefits for employee retention purposes
3. give additional compensation that is not taxable ( within limits of what is called de minimis benefits)

Reason/Purpose # 1
When employees are frequently tasked to go out in the field or work extra hours, management may decide to give meal allowance as additional compensation to cover for additional personal expense due to the unusual work. Often, the employees are required to surrender receipts so the company can pass the cost as expense. Normally the amount should be able to cover for the meal expense for that day as the title of the allowance implies. If you intend to cover the person's meal on a monthly basis, then you should compute for the number of meals you will cover.

Reason/Purpose # 2.
In the Philippines, employees tend to look at the number of benefits offered as a factor for accepting employment offers and staying in the company. If your company competes for available talent you need to at least be at par with other companies in this area or else you could be a target for poaching headhunters. Meal allowance while not that significant in terms of amount serves as an added attraction in your benefits list.

Reason/Purpose # 3
Many local employees hate seeing their hard-earned money go to taxes that practically go to the pockets of corrupt government officials. The meal allowance is one way to give employees tax free benefits because it is considered a de minimis benefit (so small they're not taxed). There are plenty of other de minimis benefits and combined with this meal allowance you can actually give your employees considerable additional compensation that fall within the bounds of non-taxable benefits. For more information on de minimis benefits, download this report by Alfredo Q. Merto, a Tax Manager from Punongbayan & Araullo.

Bottom line, I suggest that you seriously consider giving meal allowances if any of the factors I mentioned here are of interest to you.