CHAPTER 10: Compensation Income actions if the exercise of such authority

is not merely routinary or clerical in

EMPLOYER-EMPLOYEE RELATIONSHIP
Employer
- Refers to any person for whom an
individual performs any service of
whatever nature as employee of such
Types of employees as to Taxability
person
Employee
- Refers to any individual who is a
recipient of wages and includes officer,
employee or elected official of the
Government of the Philippines or any
political subdivisions, agency or
instrumentality thereof
nature but requires the use of
independent judgment
3. Rank and file employees
1. Minimum wage earners- employees
who are recipients of minimum wage.
They are exempt from income tax on
their compensation (exempt from
income tax)
2. Regular employees- employees who are
subject to regular progressive income
tax

Minimum Wage Earner

Elements of employer and employee - Refers to worker in a private sector who

relationship under case law: is paid the minimum wage or to an
employee in the public sector with
1. Selection and engagement of compensation income of not more than
employees the statutory minimum wage in the
- Screening process for employees to hire non-agricultural sector where he or she
2. Payment of wages is assigned.
3. Power of dismissal- employer has the
power to retrench (change) or Statutory minimum wage
terminate employees when incurring
- rate fixed by the Regional Tripartite
heavy losses or another reasonable
Wage and Productivity Board of the
basis
Department of Labor and Employment
4. Power of control- the employer has
or 5,000/ month or 60,000/ year
power to control
whichever is higher

The Tax Model on Compensation Income

Types of employees as to function:
Gross compensation income xxx
1. Managerial employees- those whose
Less: non-taxable compensation xxx
given powers or prerogatives to lay
down and execute managerial policies Taxable compensation income xxx
and/or hire, transfer, suspend, lay-off,
recall, discharge, assign or discipline
employees
2. Supervisory employees- those whose
effectively recommend such managerial
Gross Compensation Income

- generally, includes all remunerations

received under an employer-employee
relationship

Non-Taxable Compensation

a. Mandatory Deductions
- These includes employees’ mandatory
contribution to GSIS, SSS, PhilHealth,
HDMF, and Union Dues
b. Exempt Benefits
1.