SIMPLE INTEREST R = rate of interest

T = time in years
Interest
The amount earned on deposited To compute for final amount of an
money or the amount paid for using investment or total amount to be paid in
loaned money. a loan,
Formula:
It is computed as percentage of a F=P+I
principal amount.

Two types of interest: To directly solve for the final amount

● Simple without solving for I,
● Compound
Formula:
In simple interest, the interest is F = P (1 + rt)
computed based on the original
principal.

In compound interest, the interest is

computed on the principal plus the
accumulated interest per period. The
principal increases periodically.

SIMPLE INTEREST
➢ The principal for which the simple
interest is computed does not
change.

Formula:
I = Prt
I = interest
P = principal
 COMPOUND INTEREST

Unlike the simple interest, the basis for

calculating the compound interest
increases periodically. Most
investments, insurance plans, and loans
are based on this type of interest.
Compounding involves the computation
of interest periodically over the duration
of a loan or investment. Future
calculations are on the adjusted
principal, that is the old principal plus
the interest.

Formula:
FV = PV ¿

Where,
FV = final amount of investment or loan
after years.

PV = present value (or principal) of an

investment or loan

j = nominal rate
m = number of conversion periods in a
year.
t = number of years in the term of loan
investment
Types of compounding according to
the frequency of conversion in a year.

Compounded annually - the interest is

calculated once a year, then it adds the
compounded interest to form the
adjusted principal, m = 1

Compounded semiannually - the If the present value is to be solved,

interest is calculated every 6 months or divide both sides of the equation by ¿
every half a year, m = 2
Formula:
Compounded quarterly - the interest is
FV = PV ¿
calculated every 3 months, m = 4

Compounded monthly - the interest is

PV = FV
calculated every month, m = 12 ¿¿

Example:

WAGES, SALARIES, AND

BENEFITS

In a company or business firm, the

computation of compensation income
is a very important task.
Compensation income includes:
● Salaries
● Wages
● Bonuses
 ● Allowances
Salary
- is a fixed regular payment normally
paid monthly or every 2 weeks by
an employer to an employee for
services rendered. Examples of
employees receiving salaries are
professionals or white-collar workers.
Wage
- is a fixed regular payment usually
on a daily or weekly basis made by
an employer to an employee for
manual or unskilled laborers. Some
wage earners are paid according to
contract on an hourly, daily,
piecework basis.
Practice:
Income
- income from work is the amount of
money received by an employee as
an exchange of work or services
rendered to the company. Income
can be in the form of salary or wage
including benefits.
Benefits
- Benefits, on the other hand, are
additional privileges given to the
employees. Some benefits are
mandatory while others are not.
The following are the wage and
wage related benefits:
1. Minimum Wage
Minimum daily wage is the lowest
allowable rate of compensation that
is applicable per region, province and
industry sector. The minimum wage
of non-agricultural workers in Metro
Manila is P533 - P570. Outside
metro Manila the minimum wage
varies from P329 to P470 for non-
agricultural workers. This rate
depends on the region. The minimum
wage is based on a 40 hour work
week or 8 hours per day. The daily
1 hour lunch break is mandatory. It
is not included in the 8 hour work
day, it is not compensated.
 The following premium pay rates
apply:

a. Rest day or special holiday -

an employee is entitled to an
additional 30% of his basic
rate.

b. Rest day and special holiday -

an employee is entitled to an
additional 50% of his daily
basic rate.

c. Regular holiday and rest day -

an employee is entitled to an
additional 30% of the regular
2. Overtime Pay holiday rate of 200%. (this is
applicable to employees
Overtime pay is given when an covered by the holiday-pay
employee works for more than the rule.)
required number of hours of work per
day. The computation of the overtime
pay depends if the overtime work
happens on a regular work day,
holiday, rest day or at night (between
10 pm to 6 am). If an overtime took
place on a regular work day - plus
25% of the hourly pay rate while if
the overtime took place in a rest
day, regular or special holiday -
plus 30% of the hourly rate.

3. Premium Pay

Premium pay is given on non-

working days (rest day and special
holidays).

4. Holiday Pay
In cases of non-working regular
holidays, the Labor Code dictates the
payment of an employee’s daily
basic wage. If the work day falls on a
regular holiday, the worker is entitled
to at least twice of his basic pay. In a
situation when the work day is a
regular and is the employees rest
day, he is entitled to at least 260% of
his basic pay. The following are the
12 regular holidays in the Philippines
based on RA No.9849.
- New Year’s Day
- Maundy Thursday
- Good friday
- Araw ng kagitingan
- Labor day
- Independence day
- National heroes day
- Eid ul-fitr
- Eid -I Adha
- Bonifacio day
- Christmas day
- Rizal day
5. Night Shift Differential
A night shift differential is an
additional pay given to an employee
if work is done between 10pm to
6am. The rate is an additional 10% to
the regular wage per hour of work
rendered.
There are exceptions to the coverage
of benefits related to overtime pay,
premium pay and night shift
differential pay. The benefits
mentioned apply to all except:
a. Government employees
b. Workers of retail and service
establishment regularly
employing less than 10
workers
c. Managerial employees and
officers or members of a
managerial staff.
d. House helpers and persons in
the personal service of another
e. Workers who are paid by
results or outputs
f. Field personnel if they
regularly perform their duties
away from the office or place
of business.
 6. Service incentive leave Rico ‘s pay = daily rate x number of
days = 537 x 20
If an employee has rendered at least
one year of service, he is entitled to a =Php 10,740
service incentive leave (SIL) of 5
days with compensation. SIL may be
used for sick leave (SL) or vacation 2. Anna is a factory worker paid
leave (VL). P65 per hour. She worked for
a total of 39 hours in a certain
GROSS PAY AND OVERTIME PAY week. How much will her gross
pay be after a week?
Any member of the working class is
normally paid in exchange of the Anna ‘s gross pay = Hourly rate x
work rendered or service done to his number of hours work
or her employer.
= 65 x 39
Any amount derived from this is =Php 2,535
referred to as the gross income.
Normally the gross pay is the regular
3. Julie earns Php 600 a day.
or basic pay added to overtime pay.
She worked overtime for a total
When the income is reduced by
of 12 hours on a particular pay
taxes, standard deductions like SSS,
period. Assuming the overtime
Philhealth and Pag-ibig contributions
took place on ordinary days,
and some other deduction like loan
how much is her overtime pay?
payment, the reduced amount is
called net pay. The income prior to
tax deduction is called taxable
income. Regular Hourly rate = Daily
wage / 8
Examples: = 600 / 8
= P75
1. Rico is a minimum wage
earner who receives P53 a day
for an 8-hour a day job. How
much is his gross income if he
worked for 20 days? Overtime rate = regular hourly rate
 + 25% of regular hourly rate
= 75 + 75 x 0.25
= Php 93.75
Overtime pay = overtime rate x
number of overtime hours
= Php 93.75 x 12
= Php 1,125
4. Cecil worked on a rest day. If
her daily rate is Php 600, how
much will she receive for that
day?
Daily rate on a rest day = Daily
rate + 30% of the daily rate
= Php 600 + 0.30 x Php 600
= Php 780
5. Cecil worked on a rest day. If
her daily rate is Php 600, how
much is her overtime pay if she
worked overtime for 2 hours?
Hourly rate = 130% of regular
hourly rate
=(1.30)(600/8)
= Php 97.50
Overtime rate = hourly rate on a
rest day + 30% of hourly rate on a
rest day
= Php 97.50 + (0.30)(Php 97.50)
= Php 126.75
Overtime Pay = Overtime rate on a
rest day x Number of overtime
hours
= Php 126.75 (2)
= Php 253.5
6. Ely worked on New Year’s Day
(regular holiday). If his daily
rate is P750, how much will he
receive on that day?
Rate for regular holiday = 200%
of regular daily rate
= 2 (Php 750)
= Php 1,500
If he worked 3 hours extra on that
day, how much overtime pay will he
earn on that day?
Hourly rate on regular holiday =
200% of regular hourly rate
= (2)(750/8)
= Php 187.50
Overtime rate on regular holiday
= Hourly rate on RH + 30% of
Hourly rate on RH
= Php 187.50 + (0.30)(187.50)
= Php 243.75
Overtime pay = overtime rate x
number of overtime hours

=Php 243.75 (3)

=Php 731.25