SALARY, WAGE, INCOME, GROSS EARNINGS & NET EARNINGS

1. COMPUTING THE SALARIES AND WAGES

A. Dr. Hojilla is earning a monthly salary of ₱ 138,000. How much does she earn in a year?

Solution:
S= ₱ 138,000 × 12
S= ₱ 1,656,000

B. Dr. Villanueva is earning an annual salary of ₱ 1,800,000. How much is his monthly salary?

Solution:
S= ₱ 1,800,00 ÷ 12
S= ₱ 1,500,000

C. Manang Mel is earning a total monthly wage of ₱ 12,000. How much is her daily wage if she works
20 days in a month?

Solution:
W= ₱ 12,000 ÷ 20
W= ₱ 12,000 ÷ 20
W= ₱ 600

2. COMPUTING THE INCOME

A. Manong Mark earns a monthly salary of ₱ 15,000. He also runs a small business in which he gain a
profit of ₱ 10,000 a mnth. How much is his total income?

Solution:
I= ₱ 15,000 + ₱ 10,000
I= ₱ 25,000

B. As a teacher, Michael earns a monthly salary of ₱ 15,000. He also works as a tutor for 2 hours a day
on weekdays. If he paid ₱ 200 an hour for his tutoring services, how much is his total income in a
month, assuming that there are 20 working days in a month?

Solution:
W= nR
W= ₱ 200 × 2
W= ₱ 400

W= ₱ 400 × 20
W= 8,000

Total Income = ₱ 15,000 + 8,000

Total Income = ₱ 23,000

3. GROSS EARNINGS AND NET EARNINGS

A. CALCULATING THE NET EARNINGS

1. The employees of Avielex Merchandise only have the following deductions on their basic pay:
SSS and PhilHealth contributions. Victoria Sofia, who works as a sales executive in the company,
earns a monthly salary of ₱ 28,000. If her SSS and PhilHealth contributions are ₱ 791.50 and ₱ 200,
respectively, how much is the amount of her net earnings?

Formula:
N=G-d

where: N= Net Earnings

G= Gross Earnings
d= deductions

Solution:
d= ₱ 791.50 + ₱ 200
d= ₱ 991.5

N=G-d
N = ₱ 28,000 + ₱ 991.5
N = ₱ 28,991.5

B. CALCULATING THE MONTHLY GROSS EARNINGS

2. Kuya RF receives a monthly basic salary of ₱ 14,000 and a commission of 15% of his total sales
every month. In June 2015, he had a total sale of ₱ 25,000. How much was his gross earnings that
month?

Solution:
₱ 25,000 × 15%
₱ 3,750

G= ₱ 14,000 + ₱ 3,750
G= 15,750

3. Ryana received a monthly net earnings of ₱ 12,000. If the total amount of her monthly deductions
is ₱ 1,000.50, how much is her monthly gross earnings?

Solution:
N=G-d

G=N+d
G = ₱ 12,000 + 1,000.50
G= 13,000.50
TAXABLE AND NONTAXABLE COMPENSATION AND BENEFITS

1. Minimum Wage

 Every Filipino wage earner should at least earn the minimum wage in his or her region.

 Republic Act 6727 or Wage Rationalization Act states the required minimum wage per
region, province, and industry.

2. Overtime Pay During Regular Working Days

 Every Filipino wage earner should be paid an overtime pay for the extra working hours
that he or she renders.

Number of hours in excess of 8 hours = 125% × rate per hour

3. Premium Pay During Rest Days and Special Holidays

 Every Filipino wage earner is entitled to a premium pay for performing work during
nonworking days such as rest days and special day.

 A premium pay refers to the additional compensation required by law for work
performed within 8 hours on nonworking days such as
scheduled rest days and special holidays.

3 IDENTIFIED SPECIAL HOLIDAYS

1. Ninoy Aquino Day
2. All Saints Day
3. Last day of the year

A special day or scheduled rest day = 130% × basic pay

A special day, which is also a scheduled rest day = 150% × basic pay

4. Premium Pay During Regular Holidays

 Every Filipino wage earner is entitled to a holiday pay for performing work on
nonworking regular holidays.

 A holiday pay refers to the additional compensation required by law of work performed
within 8 hours on nonworking regular holidays.

A regular holiday = 200% × basic pay

A regular holiday which is also a scheduled rest day = 260% × basic pay

5. Night Shift Differential

 Every Filipino wage earner is entitled a night shift differential for performing work
between 10 PM to 6 AM.

 A night shift differential is the additional compensation given to an employees who

works during the abovementioned condition.

On Ordinary day = 110% × rate per hour

On a rest day, special day, regular holiday = 110% × rate per hour

Overtime Pay on Night Shift

On Ordinary day = 110% × overtime rate per hour

On rest day, special day or regular holiday = 110% overtime rate per hour

6. Service Charge

 A wage earner in a company that collects service fees from its clients is entitled to
service charge.

 Service charge is the amount that hotels, restaurants, and similar establishements
received from their clients as payment
for performing certain services.

 The Labor Code states that such service charges shall be distributed at a rate of 85% for
all covered employees and 5% for the management.

7. Service Incentive Leave

 Every Filipino wage earner who has rendered at least one year of service is entitled to a
service incentive leave of 5 days with pay.

A service incentive leave may be either a sick leave or a vacation leave.

8. Maternity, Paternity and Parental Leaves

 Eligible wage earners can avail of maternity, paternity, and parental leaves with pay.

 A female wage earner is entitled to a maternity leave benefit equivalent to 100% of her
current wage 60 days in case of normal delivery, or for 78 days in case of Caesarean
delivery, for up to four pregnancies.

 A male wage earner is entitled to a paternity leave benefit of 7 days for each of the first
four deliveries of his legitimate spouse. Unlike a maternity leave, a paternity leave is by
the employer and is not reimbursed by the SSS.

 A parental leave benefit of 7 days is also granted to solo-parent wage earners to enable
them to perform parental duties and responsibilities where physical presence is
required.

9. 13th Month Pay

 Every Filipino wage earner is entitled to a 13th month pay, provided that he or she
worked for at least one month during a calendar year.

 The 13th month pay is a form of monetary benefit equivalent to the monthly basic
salary of an employee or at least one-twelfth of his annual salary.

10. Separation Pay

 Filipino wage earners who are validly dismissed from a company for causes other than
serious misconduct are entitled to a separation pay.

11. Retirement Pay

 Upon reaching the retirement age, every eligible Filipino wage earner is entitled to a
retirement pay.

 The retirement pay is equivalent to at least half-month salary for every of service. A
fraction of at least 6 months is considered as one whole year.

STANDARD DEDUCTIONS

 Are mandatorily applied on the gross earnings of an employee. The standard

deductions include the following:
  Social Security System contribution for employees in the private sector;
 Employees Compensation contribution for employees in private and public
sector
 Government Service Insurance System contribution for employees in public
sector;
 PhilHealth contribution for all employees;
 Home Development Mutual Fund or Pag-IBIG contribution for all
employees; and
 Withholding tax for all employees.

Social Security System (SSS) and Employees Compensation (EC) Contribution

Take note of the following meanings of the codes used in the table:

EE- employee’s share

EC- employee’s compensation program
VM- voluntary members
ER- employer’s share
SE- self-employed members
OFW- members who are overseas Filipino workers

Philippine Health Insurance Corporation (PhilHealth) Contribution

Home Development Mutual Fund (HDMF) or Pagtutulungan ng Kinabukasan: Ikaw,

Bangko, Industriya at Gobyerno (Pag-IBIG) Contribution
Formula for Calculating the Monthly Pag-IBIG Contribution

C = rS

Where: C = amount of contribution

r = Pag-IBIG contribution rate
S = sum of monthly basic salary and cost of living allowance (COLA)

Cost of Living Allowance (COLA) is an incentive given to an employee to help him or

her cope with the living standards of the city or province where he or she works.

Withholding Tax