Salaries and Wages
Definition of Terms
• Wage – Basic pay in an employee’s compensation package wherein
the amount of money the employee receives may vary from one pay
period to the next, as the amount paid is directly dependent on the
amounts of hours worked. Usually refer to the earnings received by a
worker on a piece rate, hourly rate, or daily rate.
• Salary – Basic pay in an employee’s compensation package wherein
there is a fixed annual amount of money the employee receives
regardless of the hours worked.
• Income – A broader term than wages or salary. It is the general term
for money received as payment for work rendered or earnings of a
business firm.
Definition of Terms (Cont’d)
• Piece Rate – It occurs when workers are paid by the unit performed
(e.g. the number of tee shirts or bricks produced) instead of being paid
on the basis of time spent on the job.
• Hourly Rate – Occurs when workers are paid based on the number of
working hours rendered.
• Overtime – Work that is rendered outside of prescribed regular
working schedule.
Example Problems
• Rolando earns P30.00 per hour. For the week, he worked a total of 35
hours. How much did he earn?
• Pearl works as a dressmaker. She is paid P150.00 for every dress that
she finishes. For the week Pearl finished 5 dresses. How much did
she earn?
Working Hours
Working Hours (Cont’d)
Working Hours (Cont’d)
Summary
• Normal working hours in 1 day should not exceed 8 hours.
• Meal periods should not be less than 60 minutes (not counted as
normal working hour).
• Night shift differential is given to employees rendering work from 10PM
to 6AM. Equivalent to at least 10% of regular rate.
Night Shift Differential Pay = 10% x Hourly Rate x No. of Hours
Total Night Shift Pay = 110% x Hourly Rate x No. of Hours
• Undertime work shall not be offset by overtime on a different day.
• A minimum rest day of not less than 24 consecutive hours (1 day) shall
be given for every 6 consecutive normal work days.
Compensation for Rest Day, Sunday or Holiday Work (Cont’d)
• For Rest Day/s, Sundays and Special Holidays:
At least 130% of the regular rate for the first 8 hours
• For Special Holidays during Rest Day/s:
At least 150% of the regular rate for first 8 hours
• For Regular Holidays:
Twice or 200% of the regular rate for first 8 hours
• For Regular Holidays during Rest Day/s:
At least 260% of the regular rate for first 8 hours
Compensation for Rest Day, Sunday or Holiday Work
Compensation for Rest Day, Sunday or Holiday Work
Overtime based on Labor Code
• For Regular Days:
At least 125% of regular rate
• For Holidays or Rest day
At least 130% of the rate of first 8 hours
Overtime Pay Computations
Regular Overtime:
Overtime Rate = 125% x Hourly Rate
Overtime Pay = 125% x Hourly Rate x No. of overtime hours
Rest Day / Special Holiday Overtime:
Rest Day Rate = 130% x Hourly Rate
Overtime Rate = 130% x Rest Day Rate
Overtime Pay = 130% x Rest Day Rate x No. of overtime hours
Overtime Pay Computations (Cont’d)
Special Holiday Overtime during Rest Day:
Special Holiday Rate = 150% x Hourly Rate
Overtime Rate = 130% x Special Holiday Rate
Overtime Pay = 130% x Special Holiday Rate x No. of overtime
hours
Regular Holiday Overtime:
Regular Holiday Rate = 200% x Hourly Rate
Overtime Rate = 130% x Regular Holiday Rate
Overtime Pay = 130% x Regular Holiday Rate x No. of overtime
hrs.
Overtime Pay Computations (Cont’d)
Regular Holiday Overtime during Rest Day:
Regular Holiday Rate = 260% x Hourly Rate
Overtime Rate = 130% x Regular Holiday Rate
Overtime Pay = 130% x Regular Holiday Rate x No. of overtime
hrs.
Example Problems
• Myrna earns the regular daily rate of P340.00 giving her an hourly rate
of P42,50. If she works 10 hours on a regular day, how much would
her pay be?
Example Problems
• Linda eams the regular daily rate of P340.00 giving her an hourly rate
of P42.50. She was requested by her boss to work on a Saturday, her
rest day. How much would her pay be if she rendered 2 hours of
overtime?
Sample Problems
• Jessica earns a monthly salary of P27,000.00, wherein her hourly rate
is P168.75. Her immediate superior asked her to render work on her
rest day that was declared as special non working holiday by the
government. If she rendered 12 hours of work for that day, how much
will be her additional pay for the month? How much will be her gross
earnings for that month?
De Minimis Benefits
The following shall be considered as “de minimis” benefits, which are not
subject to Fringe Benefit Tax and Income Tax as well as Withholding Tax on
compensation income of both managerial and rank and file employees:
1. Monetized unused vacation leave credits of private employees not
exceeding 10 days;
2. Monetized value of vacation and sick leave credits paid to government
employees;
3. Medical cash allowance to dependents of employees, not exceeding
P750.00 per employee per semester of P125.00 per month;
4. Rice Subsidy of P1,500.00 or one (1) sack of 50 kg of rice per month
amounting to not more than P1,500.00;
5. Uniform and clothing allowance not exceeding P5,000.00 per annum;
(amended on RR 8-2012 from original amount of P4,000.00)
De Minimis Benefits (Cont’d)
6. Actual medical expenses not exceeding P10,000.00 per annum;
7. Laundry allowance not exceeding P300.00 per month;
8. Annual achievement awards with an annual monetary value not
exceeding 10,000.00;
9. Gifts during Christmas and major anniversaries not exceeding
P5,000.00 per annum; and
10. Daily meal allowance for overtime work and night shift not exceeding
25% of the basic minimum wage.
All other benefits given by employers, which are not included in the
above enumeration shall not be considered as “de minimis” benefits, and
hence, shall be subject to Income Tax as well as to withholding tax on
compensation income.
Sample Problems
• Arvin is a manager who earns a monthly salary of P50,000.00. He
instructed 2 of his subordinates to render work on a regular holiday
due to emergency repairs that is needed in one of the machine that is
crucial in their company's operations. If the daily rate of his
subordinates is P750.00 and P1,350.00, How much pay would each
employee receive for that day if they rendered 11 hours of work?
Sample Problems
