Salaries and Wages Gross pay Overtime premium Income

Salaries and Wages Gross pay Overtime premium Income taxes Net Pay

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 • •

Compensation • Compensation – remuneration in cash and in kind paid to employees at regular intervals for time of work or work done. • Kinds of Compensation 1. Salaries – fixed rate that is quoted on a weekly, monthly, bi-monthly, or annual basis. 2. Wages – quoted on an hourly basis.

Benefits of an Employee 1. 2. 3. 4. 5. 6. 7. 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

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

Example 1 • A nationwide survey has determined that the average monthly salary of a high school teacher is Php 25, 600. On average, how much does a high school teacher earn in one year? In one week? Every two weeks? Per hour?

Example 1: Solution • Annual Salary = Monthly salary x 12 months 307, 200 = 25, 600 x 12 • Weekly salary = Annual Salary / 52 weeks 5, 907. 69= 307, 200 / 52 • Bi-weekly salary = Weekly salary x 2 11, 815. 38 = 5, 907. 69 x • Per day 1, 280 = Monthly Salary / 20 working day = 25, 600 / 20 • Per hour 160 = Per day / 8 hours = 1, 280 / 2 8

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

Example 2 • Patrick is paid Php 450. 00 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.

Example 2: Solution • Daily gross pay: W = hours x rate 3, 600 = 450. 00 x 8 • Weekly wages: W = Daily gross pay x Working days per week 21, 600 = 3, 600. 00 x 6

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 1. Regular Holiday 2. Special Holiday - additional holiday

Regular Holidays Date Holiday January 1 New Year’s Day Movable Date Maundy Thursday Movable Date 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

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 P 125 per hour. Determine the amount received at the end of the week.

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 + 2, 000

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

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%

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 P 240 per hour for her services. Determine the amount she receives in compensation at the end of her week.

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

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 P 120, determine her gross pay for that week assuming she worked eight hours each day she reported for work.

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

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 P 175, determine her gross pay for that week assuming she worked eight hours each day she reported for work.

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

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

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%

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

Example 7 Nick’s regular working days are from Tuesday to Sunday. Last week, he rendered 56 hours of work. If he is paid P 315 per hour, determine his gross pay for the week.

Example 7: Solution Regular total hours: 48 hour per week Overtime rate: 393. 75 = 315 x 125% Overtime pay: 3, 150 = 393. 75 x 8 Gross income: 18, 270 = (315 x 48) + 3, 150

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 P 280, determine her gross pay for the week.

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): 473. 20 = 280 x 130% Gross income: 21, 498. 40 = (48 x 280) + (12 x 350) + (8 x 364) + (2 x 473. 20)

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 P 280. Suppose Sunday was also declared a special holiday. How much would Darlene then receive for the week?

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)

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 P 225 per hour, determine Miguel’s gross pay.

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, 582. 50 = (40 x 225) + (10 x 281. 25) + (8 x 450) + (2 x 585)

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 P 195 per hour, determine his gross pay for the week.

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: 659. 10 = 195 x 260% x 130% Gross income: 16, 598. 40 = (48 x 195) + (9 x 243. 75) + (8 x 507) + (1. 5 x 659. 10)

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.

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 P 50, 000 For each married individual P 50, 000

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

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

Example 20 Angge’s gross monthly salary amounts to P 25, 600 per month subject to the following deductions: SSS contribution – P 581. 30, Philhealth contribution – P 312. 50, HDMF contribution – P 100. Her withholding tax is P 2, 405. 80 per month. Furthermore, she is married with three dependents under her name. Determine her income tax due at the end of the fiscal year.

Example 20: Solution Item Monthly salary Amount 25, 600 Less: SSS (581. 30) Less: Phil. Health (312. 50) Less: HDMF Monthly salary less deductions (100) 24, 606. 20 Annual basis: 24, 606. 20 x 12 = 295, 274. 40 Taxable Income: 170, 274. 40 = 295, 274. 40 – (50, 000 + 3 x 25, 000) Income tax: =22, 500 + 25% (taxable income – 140, 000) 30, 068. 60 = 22, 500 + 25% (170, 274. 40 – 140, 000) Income tax payable: 1, 199 = 30, 068. 60 – (2, 405. 80 x 12)

Income Tax Table Annual Taxable Income (in Peso) below Applicable Tax rate 10, 000 5% of Taxable income 10, 000 Up to 30, 000 P 500 + 10% of excess over P 10, 000 30, 000 Up to 70, 000 2, 500 + 15% of excess over P 30, 000 70, 000 Up to 140, 000 8, 500 + 20% of excess over P 70, 000 140, 000 Up to 250, 000 22, 500 + 25% of excess over P 140, 000 250, 000 Up to 500, 000 50, 000 + 30% of excess over 250, 000 500, 000 And above 125, 000 + 35% of excess over P 500, 000