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04 Handout 1
*Property of STI
Page 1 of 14
SH1606
I.
Wage Compensation
Employee compensation refers to the benefits (cash, vacation, etc.) that an employee
receives in exchange for the service they provide to their employer. There are many
different types of compensation paid to employees.
Of all the different types of compensation, wages () are the most common and the
reason why most people work. Wages are often called the total cash compensation paid to
an employee. Employees are paid on a piece rate, hourly rate, or monthly and daily rate.
II.
Piece Rate
A worker paid in piece rate is paid in proportion to the quantity of work s/he finishes.
The rate () can be fixed irrespective of the quantity () produced, in which case it is
called fixed piece-rate plan. In a fixed piece-rate plan, the base-rate-percentage
relationship is applied where the base is the quantity produced, and percentage is the
wages or total earnings.
=
(Eq. 2.1)
On the other hand, the rate can be increasing as the quantity produced increases, in which
case it is called differential piece-rate plan.
III.
Hourly Rate
Many employees are paid on an hourly basis. With a specified regular hourly rate, the
wage is the percentage and the base is the number of hours ().
=
(Eq. 3.1)
04 Handout 1
*Property of STI
Page 2 of 14
SH1606
b. The employer shall determine and schedule the weekly rest day of his
employees subject to collective bargaining agreement and to such rules and
regulations as the Secretary of Labor and Employment may provide. However,
the employer shall respect the preference of employees as to their weekly rest
day when such preference is based on religious grounds.
Art. 93. Compensation for rest day, Sunday or holiday work.
a. Where an employee is made or permitted to work on his scheduled rest day,
he shall be paid an additional compensation of at least thirty percent (30%) of
his regular wage. An employee shall be entitled to such additional
compensation for work performed on Sunday only when it is his established
rest day.
b. When the nature of the work of the employee is such that he has no regular
workdays and no regular rest days can be scheduled, he shall be paid an
additional compensation of at least thirty percent (30%) of his regular wage
for work performed on Sundays and holidays.
c. Work performed on any special holiday shall be paid an additional
compensation of at least thirty percent (30%) of the regular wage of the
employee. Where such holiday work falls on the employees scheduled rest
day, he shall be entitled to an additional compensation of at least fifty per cent
(50%) of his regular wage.
d. Where the collective bargaining agreement or other applicable employment
contract stipulates the payment of a higher premium pay than that prescribed
under this Article, the employer shall pay such higher rate.
Art. 94. Right to holiday pay.
a. Every worker shall be paid his regular daily wage during regular holidays,
except in retail and service establishments regularly employing less than ten
(10) workers.
b. The employer may require an employee to work on any holiday but such
employee shall be paid a compensation equivalent to twice his regular rate;
and
c. As used in this Article, "holiday" includes: New Years Day, Maundy
Thursday, Good Friday, the ninth of April, the first of May, the twelfth of
June, the fourth of July, the thirtieth of November, the twenty-fifth and
thirtieth of December and the day designated by law for holding a general
election.
Computation of Regular Hourly Rate
According to Article 83, regular working hours shall not exceed eight (8) hours and
article 84 states that this does not include a time-off, which should be greater than or
equal to an hour (60 minutes), spent usually for meals. Hence, if 8, it is subject to
the regular hourly rate () of the employee and Eq. 3.1 is applied.
04 Handout 1
*Property of STI
Page 3 of 14
SH1606
The Labor Code sets the rules on the computation of on different working days
On Ordinary Day
On ordinary days, the rate () is constant and is set by the employer. But when an
employee is asked to work during rest days, or special holidays, or regular holidays,
then the rate varies.
http://www.dole.gov.ph/files/Labor%20Advisory%20No_%2011-15.pdf
Since both cases assume the same value of regular hourly rate, the rates for both cases
shall be denoted by r . Hence,
= 1.3
(Eq. 3.2)
(Eq. 3.3)
On a Regular Holiday
If an employee works on a regular holiday, the hourly rate, which will be denoted by
r shall be equivalent to twice r, as stated in Article 94 section b). That is,
r = 2
(Eq. 3.4)
04 Handout 1
*Property of STI
Page 4 of 14
SH1606
ordinary day, rest day or special holiday, rest day falling on a special holiday, or regular
day.
On Ordinary Day
On Ordinary Day, overtime rate shall be denoted as . Article 87 suggests that
is equivalent to and an additional compensation equal to 25% of . Therefore,
= 1.25
(Eq. 3.5)
(Eq. 3.6)
(Eq. 3.7)
On a Regular Holiday
When an employee works overtime at a regular holiday, rate of overtime, which will
be denoted as rOT , shall be equivalent to r plus 30% of r. That is,
= 1.3
= 2.6
(Eq. 3.8)
Table 3.1 gives a summary of the hourly rates for different cases.
Cases
On a Regular Day
On a Rest Day or Special Holiday
On a Rest Day Falling on a Special Holiday
On a Regular Holiday
Table 3.1
Hourly Rates
Regular
Overtime
( )
( > )
= 1.25
= 1.3
= 1.69
= 1.5
= 1.95
= 2
= 2.6
Note that the standard percent values stated by the law are preceded by the phrase at
least, which implies " conditions. But for class discussion purposes, we will assume
that the rates given by the employers are equal to the standard percent values. In real life
04 Handout 1
*Property of STI
Page 5 of 14
SH1606
practice, company may give higher rates, but never lower than the lower bounds set by
the law.
Computation of the Total Pay () for the day.
Given a regular hourly rate and number of hours an employee worked for the day
(), is computed depending on the and the day. If 8, then is subject
to regular hourly rate. Otherwise, the first eight (8) hours is subject to regular hourly rate
and is subject to overtime rate.
Table 3.2 shows the computation for total pay ().
Regular
( )
On a Regular Day
=
On a Rest Day or Special Holiday
=
On a Rest Day Falling on a Special Holiday
=
On a Regular Holiday
=
Table 3.2
Cases
IV.
Overtime
( > )
= 8 + ( )
= 8 + ( )
= 8 + ( )
= 8 + ( )
1
12
(Eq. 4.1)
=
=
1
52
1
24
(Eq. 4.2)
(Eq. 4.3)
1
26
(Eq. 4.4)
To convert monthly salary into hourly rate, it is first converted into weekly salary.
Afterwards, the regular hours in a week is computed. Suppose
= , then
=
V.
(Eq. 4.5)
Income
Income is a broader term than wages or salary. Wages and salaries are cash inflows
received any individual in exchange for the provision of service to a firm. It is the
04 Handout 1
*Property of STI
Page 6 of 14
SH1606
payment to the employee paid by the employer. An income is any form of inflow of
funds that an individual receives, which allows an individual the opportunity to consume
the required goods and services and to save for future needs.
For people who are not employees, their income may not be in the form of wages or
salaries. They can have commission income if they are paid for the commission on sales
they make, rental income if they have properties they rent out, dividend income if they
are authors, and other income for whatever endeavor they engage in including profitmaking businesses. A business firms income is in the form of profits that the business
earns as discussed in previous handouts.
VI.
Vacation pay: 13 vacation days, with additional one (1) vacation day every year
starting on 2nd year of service and convertible to cash at the end of each year.
Maximum total vacation leave is 18 days.
Sick Leave: 12 days per year for the first two (2) years of service. With additional
one (1) sick leave every year starting on 2nd year of service. Maximum total sick
leave is 15 days. All unused leave days are convertible to cash in December of each
year.
Holiday Pay: In lieu of vacation pay, Article 95 of the Labor Code provides for
service incentive leave for every employee who has rendered at least one year of
service of five (5) days with pay.
Some benefits are taxable, just like wages, salaries, commission, royalties, etc.
However, some benefits are non-taxable. Revenue Regulations (RR) No. 5-2011 dated
March 16, 2011 cites the non-taxable benefits as follows:
REVENUE REGULATIONS NO. 5-2011 issued on March 16, 2011 further amends
Revenue Regulations (RR) Nos. 2-98 and 3-98, as last amended by RR No. 5-2008, with
respect to De Minimis Benefits, which are exempt from Income Tax on compensation
as well as from Fringe Benefit Tax.
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:
04 Handout 1
*Property of STI
Page 7 of 14
SH1606
VII.
Payroll Deductions
04 Handout 1
*Property of STI
Page 8 of 14
SH1606
Schedule of Contributions
EMPLOYER-EMPLOYEE
MONTHLY
SALARY
SOCIAL SECURITY
EC
TOTAL CONTRIBUTION
CREDIT*
ER
EE
TOTAL
ER
ER
EE
TOTAL
1,000 - 1,249.99
1,000
73.70
36.30
110.00
10.00
83.70
36.30
120.00
1,250 - 1,749.99
1,500
110.50
54.50
165.00
10.00
120.50
54.50
175.00
1,750 - 2,249.99
2,000
147.30
72.70
220.00
10.00
157.30
72.70
230.00
2,250 - 2,749.99
2,500
184.20
90.80
275.00
10.00
194.20
90.80
285.00
2,750 - 3,249.99
3,000
221.00
109.00
330.00
10.00
231.00
109.00
340.00
3,250 - 3,749.99
3,500
257.80
127.20
385.00
10.00
267.80
127.20
395.00
3,750 - 4,249.99
4,000
294.70
145.30
440.00
10.00
304.70
145.30
450.00
4,250 - 4,749.99
4,500
331.50
163.50
495.00
10.00
341.50
163.50
505.00
4,750 - 5,249.99
5,000
368.30
181.70
550.00
10.00
378.30
181.70
560.00
5,250 - 5,749.99
5,500
405.20
199.80
605.00
10.00
415.20
199.80
615.00
5,750 - 6,249.99
6,000
442.00
218.00
660.00
10.00
452.00
218.00
670.00
6,250 - 6,749.99
6,500
478.80
236.20
715.00
10.00
488.80
236.20
725.00
6,750 - 7,249.99
7,000
515.70
254.30
770.00
10.00
525.70
254.30
780.00
7,250 - 7,749.99
7,500
552.50
272.50
825.00
10.00
562.50
272.50
835.00
7,750 - 8,249.99
8,000
589.30
290.70
880.00
10.00
599.30
290.70
890.00
8,250 - 8,749.99
8,500
626.20
308.80
935.00
10.00
636.20
308.80
945.00
8,750 - 9,249.99
9,000
663.00
327.00
990.00
10.00
673.00
327.00
1,000.00
9,250 - 9,749.99
9,500
699.80
345.20
1,045.00
10.00
709.80
345.20
1,055.00
9,750 - 10,249.99
10,000
736.70
363.30
1,100.00
10.00
746.70
363.30
1,110.00
10,250 - 10,749.99
10,500
773.50
381.50
1,155.00
10.00
783.50
381.50
1,165.00
10,750 - 11,249.99
11,000
810.30
399.70
1,210.00
10.00
820.30
399.70
1,220.00
11,250 - 11,749.99
11,500
847.20
417.80
1,265.00
10.00
857.20
417.80
1,275.00
11,750 - 12,249.99
12,000
884.00
436.00
1,320.00
10.00
894.00
436.00
1,330.00
12,250 - 12,749.99
12,500
920.80
454.20
1,375.00
10.00
930.80
454.20
1,385.00
12,750 - 13,249.99
13,000
957.70
472.30
1,430.00
10.00
967.70
472.30
1,440.00
13,250 - 13,749.99
13,500
994.50
490.50
1,485.00
10.00
1,004.50
490.50
1,495.00
13,750 - 14,249.99
14,000
1,031.30
508.70
1,540.00
10.00
1,041.30
508.70
1,550.00
14,250 - 14,749.99
14,500
1,068.20
526.80
1,595.00
10.00
1,078.20
526.80
1,605.00
14,750 - 15,249.99
15,000
1,105.00
545.00
1,650.00
30.00
1,135.00
545.00
1,680.00
15,250 - 15,749.99
15,500
1,141.80
563.20
1,705.00
30.00
1,171.80
563.20
1,735.00
15,750 - over,
16,000
1,178.70
581.30
1,760.00
30.00
1,208.70
581.30
1,790.00
Source: https://www.sss.gov.ph/sss/appmanager/pages.jsp?page=scheduleofcontribution retrieved April 25, 2016
RANGE OF
COMPENSATION
SE/VM/OFW
TOTAL
CONTRIBUTION
110.00
165.00
220.00
275.00
330.00
385.00
440.00
495.00
550.00
605.00
660.00
715.00
770.00
825.00
880.00
935.00
990.00
1,045.00
1,100.00
1,155.00
1,210.00
1,265.00
1,320.00
1,375.00
1,430.00
1,485.00
1,540.00
1,595.00
1,650.00
1,705.00
1,760.00
04 Handout 1
Salary
Bracket
Salary Range
Salary Base
Total Monthly
Premium
Employee
Share*
Employer
Share
8,000.00
200
100
100
9,000.00 - 9,999.99
9,000.00
225
112.5
112.5
10,000.00 - 10,999.99
10,000.00
250
125
125
11,000.00 - 11,999.99
11,000.00
275
137.5
137.5
12,000.00 - 12,999.99
12,000.00
300
150
150
13,000.00 - 13,999.99
13,000.00
325
162.5
162.5
14,000.00 - 14,999.99
14,000.00
350
175
175
15,000.00 - 15,999.99
15,000.00
375
187.5
187.5
16,000.00 - 16,999.99
16,000.00
400
200
200
10
17,000.00 - 17,999.99
17,000.00
425
212.5
212.5
*Property of STI
Page 9 of 14
SH1606
11
18,000.00 - 18,999.99
18,000.00
450
225
225
12
19,000.00 - 19,999.99
19,000.00
475
237.5
237.5
13
20,000.00 - 20,999.99
20,000.00
500
250
250
14
21,000.00 - 21,999.99
21,000.00
525
262.5
262.5
15
22,000.00 - 22,999.99
22,000.00
550
275
275
16
23,000.00 - 23,999.99
23,000.00
575
287.5
287.5
17
24,000.00 - 24,999.99
24,000.00
600
300
300
18
25,000.00 - 25,999.99
25,000.00
625
312.5
312.5
19
26,000.00 - 26,999.99
26,000.00
650
325
325
20
27,000.00 - 27,999.99
27,000.00
675
337.5
337.5
21
28,000.00 - 28,999.99
28,000.00
700
350
350
22
29,000.00 - 29,999.99
29,000.00
725
362.5
362.5
23
30,000.00 - 30,999.99
30,000.00
750
375
375
24
31,000.00 - 31,999.99
31,000.00
775
387.5
387.5
25
32,000.00 - 32,999.99
32,000.00
800
400
400
26
33,000.00 - 33,999.99
33,000.00
825
412.5
412.5
27
34,000.00 - 34,999.99
34,000.00
850
425
425
28
35,000.00 and up
35,000.00
875
437.5
437.5
04 Handout 1
Personal Share
Government Share
Life
Retirement
Life
Retirement
Regular
2%
7%
2%
10%
Employees
Compensation Fund
none
0%
none
1% not to
exceed P100
*Property of STI
Page 10 of 14
SH1606
Withholding Taxes
Withholding Tax on Compensation is the tax withheld from income payments to
individuals arising from an employer-employee relationship.
REVISED WITHHOLDING TAX TABLES
Effective January 1, 2009
DAILY
Exemption
1.65
8.25
28.05
74.26
165.02
412.54
+0%
over
+5%
over
+10%
over
+15%
over
+20%
over
+25%
over
+30%
over
+32% over
Status
(000P
)
33
99
231
462
825
1,650
2. S/ME
50
165
198
264
396
627
990
1,815
75
248
281
347
479
710
1,073
1,898
2. ME2 / S2
100
330
363
429
561
792
1,155
1,980
3. ME3 / S3
125
413
446
512
644
875
1,238
2,063
4. ME4 / S4
150
495
528
594
726
957
1,320
2,145
WEEKLY
Exemption
9.62
48.08
163.46
432.69
961.54
2,403.85
+0%
over
+5%
over
+10%
over
+15%
over
+20%
over
+25%
over
+30%
over
+32% over
Status
192
577
1,346
2,692
4,808
9,615
2. S/ME
50
962
1,154
1,538
2,308
3,654
5,769
10,577
75
1,442
1,635
2,019
2,788
4,135
6,250
11,058
2. ME2 / S2
100
1,923
2,115
2,500
3,269
4,615
6,731
11,538
3. ME3 / S3
125
2,404
2,596
2,981
3,750
5,096
7,212
12,019
4. ME4 / S4
150
2,885
3,077
3,462
4,231
5,577
7,692
12,500
SEMIMONTHLY
Exemption
20.83
104.17
354.17
937.5
2,083.33
5,208.33
+0%
over
+5%
over
+10%
over
+15%
over
+20%
over
+25%
over
+30%
over
+32% over
Status
417
1,250
2,917
5,833
10,417
20,833
2. S/ME
50
2,083
2,500
3,333
5,000
7,917
12,500
22,917
04 Handout 1
1. ME1 / S1
75
3,125
3,542
4,375
6,042
8,958
13,542
23,958
2. ME2 / S2
100
4,167
4,583
5,417
7,083
10,000
14,583
25,000
3. ME3 / S3
125
5,208
5,625
6,458
8,125
11,042
15,625
26,042
*Property of STI
Page 11 of 14
SH1606
4. ME4 / S4
150
6,250
6,667
7,500
9,167
12,083
16,667
27,083
MONTHLY
Exemption
41.67
208.33
708.33
1,875.00
4,166.67
10,416.67
+0%
over
+5%
over
+10%
over
+15%
over
+20%
over
+25%
over
+30%
over
+32% over
Status
833
2,500
5,833
11,667
20,833
41,667
2. S/ME
50
4,167
5,000
6,667
10,000
15,833
25,000
45,833
75
6,250
7,083
8,750
12,083
17,917
27,083
47,917
2. ME2 / S2
100
8,333
9,167
10,833
14,167
20,000
29,167
50,000
3. ME3 / S3
125
10,417
11,250
12,917
16,250
22,083
31,250
52,083
4. ME4 / S4
150
12,500
13,333
15,000
18,333
24,167
33,333
54,167
Legend: Z-Zero exemption; S-Single; ME-Married Employee; 1;2;3;4-Number of qualified dependent children
S/ME = 50,000 EACH WORKING EMPLOYEE Qualified Dependent Child = 25,000 each but not exceeding four (4)
children
04 Handout 1
*Property of STI
Page 12 of 14
SH1606
04 Handout 1
Monthly Compensation
Employee Share
Employer Share
1%
2%
Over 1,500
2%
2%
*Property of STI
Page 13 of 14
SH1606
VIII.
(Eq. 7.1)
References:
Lopez-Mariano, Norma D. (2016). Business Mathematics. Manila, Philippines. Rex Bookstore.
Lopez, Lundag, Dagal (2016). Business Mathematics. Quezon City, Philippines. Vibal Group
Inc.
Altares, P.S., Arao, R.R., Arce, M.T.B., Bugtong, D.E., Calayag, M.E., CoPo, A.R.I., Laddaran,
A.T., , Yao, A.M.S.D. (2012). Business Mathematics. Manila, Philippines. Rex
Bookstore.
Rags
to
Riches:
Mariano
QueMercury
Drugstore.
Retrieved
from:
https://ragstoriches101.wordpress.com/2014/02/20/mariano-que-mercury-drugstore/ on
April 19, 2016.
Mckinney, Paul. What Is Employee Compensation? - Definition & Concept Study.com.
Retrieved
from:
http://study.com/academy/lesson/what-is-employee-compensationdefinition-lesson-quiz.html on April 19, 2016
Billikopf, Gregorio. Labor Management in Agriculture: Cultivating Personnel Productivity
Chapter
10:
Piece
Rate
Pay
Design
Retrieved
from:
https://nature.berkeley.edu/ucce50/ag-labor/7labor/10.pdf on April 22, 2015.
Labor Code of the Philippines: PRESIDENTIAL DECREE NO. 442, AS AMENDED.
Retrieved from: http://www1.umn.edu/humanrts/research/Philippines/PD%20442%20%20Labor%20Code%20of%20the%20Philippines.pdf on April 22, 2016.
DOLE.gov.ph. (n.d.). List of Holidays. Retrieved from: http://www.dole.gov.ph/pages/view/9 on
April 22, 2016
DOLE.gov.ph.
(n.d.).
Labor
Advisory
No.
11-15.
Retrieved
from:
http://www.dole.gov.ph/files/Labor%20Advisory%20No_%2011-15.pdf on April 21,
2016.
DOLE.gov.ph. (n.d.). Working Conditions and Rest Periods. Retrieved from:
http://www.dole.gov.ph/labor_codes/view/12 on April 22, 2016.
DOLE.gov.ph. (n.d.). Handbook on Workers Statutory Monetary Benefits 2010 Edition.
Retrieved from: http://ro2.dole.gov.ph/fndr/mis/files/handbook.pdf on April 24, 2016.
BIR.gov.ph.
(n.d.).
Revenue
Regulations
No.
5-2011.
Retrieved
from:
ftp://ftp.bir.gov.ph/webadmin1/pdf/56846rr11_05.pdf on April 24, 2016.
SSS.gov.ph.
(n.d.).
Rate
of
Contributions
to
SSS.
Retrieved
from:
https://www.sss.gov.ph/sss/appmanager/pages.jsp?page=scheduleofcontribution on April
25, 2016.
Philhealth.gov.ph.
(n.d.).
Premium
Contribution
Table.
Retrieved
from:
http://www.philhealth.gov.ph/partners/employers/contri_tbl.html on April 25, 2016.
gsis.gov.ph.
(n.d.).
Premium
Payments.
Retrieved
from:
http://www.gsis.gov.ph/default.php?id=86 on April 25, 2016.
pagibig.gov.ph.
(n.d.)
Mandatory
Membership.
Retrieved
from:
http://www.pagibigfund.gov.ph/benpromembership.aspx on April 25, 2016.
04 Handout 1
*Property of STI
Page 14 of 14