1. Gross pay Overtime premium Income taxes Net Pay
Salaries and Wages
Gross pay
Overtime premium
Income taxes
Net Pay

2. Objectives: Define salary, wage, income, and benefits
Compute gross and net earnings
Differentiate gross from net earnings
Enumerate and define the benefits of a wage earner
Distinguish taxable from nontaxable benefits
Enumerate the standard deductions and show the corresponding computations
Identify the variables needed in the computation of overtime pay and calculate overtime pay

3. Compensation
Compensation – remuneration in cash and in kind paid to employees at regular intervals for time of work or work done.
Kinds of Compensation
Salaries – fixed rate that is quoted on a weekly, monthly, bi-monthly, or annual basis.
Wages – quoted on an hourly basis.

4. Benefits of an Employee
Salary or wages
Overtime pay
Rest day (24 hours)
Incentive leaves (5 days)
Paternity and maternity leave
Provision of medical or health insurance
SSS, GSIS

5. Gross Earnings For Salaried Workers Smonthly Sannual / 12
Description
Notation
Computation
Monthly Salary
Smonthly
Sannual / 12
Semi-Monthly Salary
Ssemi-monthly
Sannual/12
Weekly Salary
Sweekly
Sannual / 52
Bi-weekly Salary
Sbi-weekly
Sannualy / 26

6. Example 1
A nationwide survey has determined that the average monthly salary of a high school teacher is Php 25, On average, how much does a high school teacher earn in one year? In one week? Every two weeks? Per hour?

7. Example 1: Solution Annual Salary = Monthly salary x 12 months
Weekly salary = Annual Salary / 52 weeks
5, = 307,200 / 52
Bi-weekly salary = Weekly salary x 2
11, = 5, x 2
Per day = Monthly Salary / 20 working day
1,280 = 25,600 / 20
Per hour = Per day / 8 hours
160 = 1,280 / 8

8. Gross Earnings for Wage-Earners
Total Daily wage = Hours x Rate
Provided: Hours < 8 hours

9. Example 2
Patrick is paid Php per hour. His regular days of work are from Tuesday to Sunday. Assuming that he worked eight hours per day last week, determine his daily gross pay. Determine the amount he received in wages for the entire week.

10. Example 2: Solution Daily gross pay: W = hours x rate
Weekly wages: W = Daily gross pay x Working days per week
21,600 = 3, x 6

11. Holiday Pay
Holiday Pay – refers to compensation received by an employee for an unworked holiday. It may also refer to income received for working during a regular holiday.
Types of Holiday
Regular Holiday -
Special Holiday - additional holiday

12. Regular Holidays Date Holiday January 1 New Year’s Day Movable Date
Maundy Thursday
Good Friday
April 9
Araw ng Kagitingan
May 1
Labor Day
June 12
Independence Day
Last Sunday of August
National Heroes Day
November 30
Bonifacio Day
December 25
Christmas Day
December 30
Rizal Day

13. Example 3
July reported for work from June 8 to June 13. On each day she worked eight hours during her shift, for which she is paid P125 per hour. Determine the amount received at the end of the week.

14. Example 3: Solution Rendered 8 hours June 12 is regular holiday
Daily gross rate = per hour x 8 hours
1,000 = 125 x 8
Weekly = daily rate x ordinary work days
5,000 = 1,000 x 5
Daily gross for holiday = 200% x daily rate
2,000 = 200% x 1,000
Gross income:
7,000 = 5, ,000

15. Premium Pay
is compensation received by an employee for performing work on special holidays on or rest days.
Special Day
Date
Ninoy Aquino Day
August 21
All Saints Day
November 1
Last Day of the Year
December 31

16. Current premium pay rates
Work
Premium Rate (of daily rate)
Total rate
Work on rest days or special days
30%
130%
Work on rest day which is also a special day
50%
150%
Work on regular holiday which also a rest day
30% of 200%
260%

17. Example 4
Anna worked eight hours a day from August 17 (Monday) to 22 (Saturday). Her rest days are scheduled on Tuesdays and she is compensated at a rate of P240 per hour for her services. Determine the amount she receives in compensation at the end of her week.

18. Example 4: Solution Daily rate: 1,920 = 240 x 8 Gross income:
12,672 = 4 x 1,920 + (2 x (130% x 1,920))

19. Example 5
Mary’s has five regular work days in a week. Last week, she was called in to work on a special holiday, which coincide with her rest day. If she receives an hourly rate of P120, determine her gross pay for that week assuming she worked eight hours each day she reported for work.

20. Example 5: Solution Daily rate: 960 = 120 x 8
Special Holiday (also rest day)
1,440 = 960 x 150%
Gross income:
6,240 = (960 x 5) + 1,440

21. Example 6
Jennifer has six regular work days in a week. Last week, she reported for work on a regular holiday, which coincide with her rest day. If she receives an hourly rate of P175, determine her gross pay for that week assuming she worked eight hours each day she reported for work.

22. Example 6: Solution Daily rate: 1,400 = 175 x 8
Regular holiday (also rest day)
3,640 = 1,400 x 260%
Gross income:
12,040 = (1,400 x 6) + 3,640

23. Overtime Pay
Is compensation received for additional work done beyond eight hours. The rate used in computing overtime pay is called the overtime rate.

24. Overtime Pay Rate Work Overtime Rate
Work > 8 hours on ordinary working days
25%
Work > 8 hours on rest day or special or regular holiday
30%

25. Who are covered by the OT pay?
All Employees in all establishments and undertakings whether for profit or not are entitled to overtime pay for work rendered beyond eight (8) hours.
Except:
Managerial employees
Field personnel
Members of the family of employers
Domestic helpers
Persons in the personal services of another
Workers who are paid by results

26. Example 7
Nick’s regular working days are from Tuesday to Sunday. Last week, he rendered 56 hours of work. If he is paid P315 per hour, determine his gross pay for the week.

27. Example 7: Solution
Regular total hours: 48 hour per week Overtime rate: = 315 x 125% Overtime pay: 3,150 = x 8 Gross income: 18,270 = (315 x 48) + 3,150

28. Example 8
Darlene’s regular work schedule is from Monday to Saturday. Last week she reported for work on Sunday, which is her rest day. For that week she rendered 70 hours of work, 10 of which were rendered on Sunday. If her hourly rate is P280, determine her gross pay for the week.

29. Example 8: Solution
Daily rate: 2,240 = 280 x 8 Overtime rate (per hour): 350 = 280 x 125% Rest day rate(per hour): 364 = 280 x 130% Rest day overtime rate (per hour): = 280 x 130% x 130% Gross income: 21, = (48 x 280) + (12 x 350) + (8 x 364) + (2 x )

30. Example 9
Darlene’s regular work schedule is from Monday to Saturday. Last week she reported for work on Sunday, which is her rest day. For that week she rendered 70 hours of work, 10 of which were rendered on Sunday. If her hourly rate is P280. Suppose Sunday was also declared a special holiday. How much would Darlene then receive for the week?

31. Example 9: Solution
Overtime rate (per hour): 350 = 280 x 125% Rest day and Special Holiday (per hour): 420 = 280 x 150% Overtime rate on rest and special holiday: 546 = 280 x 150% x 130% Gross income: 22,092 = (48 x 280) + (12 x 350) + (8 x 420) + (2 x 546)

32. Example 10
Miguel’s normal working days are from Monday to Saturday. Last week, he worked 10 days for each of the six days. Suppose Thursday of last week was a regular holiday. If he is paid P225 per hour, determine Miguel’s gross pay.

33. Example 10: Solution Overtime rate (per hour): 281.25 = 225 x 125%
Regular Holiday (per hour):
450 = 225 x 200%
Overtime rate on Regular holiday:
585 = 225 x 200% x 130%
Gross income:
16, = (40 x 225) + (10 x ) + (8 x 450) + (2 x 585)

34. Example 11
Sam’s rest days falls on a Friday. Last week, his rest day was also declared a regular holiday, but he still reported for work. He worked for 9.5 hours each day the past week. If he is paid P195 per hour, determine his gross pay for the week.

35. Example 11: Solution Overtime rate (per hour): 243.75 = 195 x 125%
Rest day and Regular Holiday (per hour):
507 = 195 x 260%
Overtime rate on rest and Regular holiday:
= 195 x 260% x 130%
Gross income:
16, = (48 x 195) + (9 x ) + (8 x 507) + (1.5 x )

36. Income Taxes and the Computation of Net Income
Income taxes are taxes levied on a person’s income or profits, coming from the practice of profession or conduct of trade or business
Taxable income refers to all gross income items stated in the Tax Code less personal and/or additional exemptions.
Withholding tax is income tax taken directly from an employee’s compensation by the employer and is paid directly to the government.

37. Exemption per Fiscal Year
Personal Exemptions
Criteria
Exemption per Fiscal Year
Single individuals or married individuals who are judicially decreed as legally separated with no qualified dependents
P 50,000
Head of the Family
For each married individual

38. Additional Exemption Additional exemption: P 25,000
Maximum: 4 dependents
Maximum age: 21 years old

39. Computation of Income Tax Payable
Annual Gross Income XX
Less: SSS, PhilHealth, Other contribution, Penalties for late and absences
(XX)
Less: Personal and additional exemptions
Taxable Income
Income tax due
Less: Total Withholding Tax
Total Income tax Payable

40. Example 20
Angge’s gross monthly salary amounts to P 25,600 per month subject to the following deductions: SSS contribution – P581.30, Philhealth contribution – P312.50, HDMF contribution – P100. Her withholding tax is P2, per month. Furthermore, she is married with three dependents under her name. Determine her income tax due at the end of the fiscal year.

41. Example 20: Solution Item Amount Monthly salary 25,600 Less: SSS
(581.30)
Less: PhilHealth
(312.50)
Less: HDMF
(100)
Monthly salary less deductions
24,606.20
Annual basis:
24, x 12 = 295,274.40
Taxable Income:
170, = 295, – (50, x 25,000)
Income tax:
=22, % (taxable income – 140,000)
30, = 22, % (170, – 140,000)
Income tax payable:
1,199 = 30, – (2, x 12)

42. Annual Taxable Income (in Peso)
Income Tax Table
Annual Taxable Income (in Peso)
Applicable Tax rate
below
10,000
5% of Taxable income
Up to
30,000
P % of excess over P10,000
70,000
2, % of excess over P30,000
140,000
8, % of excess over P70,000
250,000
22, % of excess over P140,000
500,000
50, % of excess over 250,000
And above
125, % of excess over P500,000