Business Math Module 7 Salaries and Wages

Business Mathematics
Governor Pack Road, Baguio City, Philippines 2600

Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: Grade 11- ABM
Email: email@uc-bcf.edu.ph; Website: www.uc-bcf.edu.ph
MODULE 7 – BUS MATH Subject Teacher: JOAN A. MALA
Commission and Introduction to salaries and wages
Learning Objectives:
At the end of this module, student must be able to:
a. Compute commissions on cash basis and commission on instalment basis
b. Solve problems involving commissions
c. Define salary, wage, income, and benefits
d. Differentiate gross earnings from net earnings
e. Enumerate the benefits of a wage earner
“It’s not your salary that makes you rich, it’s

your spending habits” – Charles A. Jaffe.
This particular quote above makes us
rethink about how we spend about money.
However, in this module, you will not learn how to
spend money or manage money but what is
salary, and how is it related to terms like wages,
earnings, and other terms with almost the same
meaning.
Salary and wages are important aspects in

the life of a working individual. Through the salary
or wages that an individual receives, he or she is
able to provide for his or her needs and those of
his or her family. It is important that employees get
paid fairly and accurately to keep them
motivated to do their work. Your knowledge of
salary and wages will be vital for you in the future
when you start to work and get paid, or when you
put up your own business and pay salaries and
wages to your employees. Remember that
treating your employees right is a must for a good
business owner.
COMMISION
When salespersons close a business deal that involves selling a product or a service – for
example, real estate, appliances, internet service, and insurance policies – to their customers, the
agents are often paid a certain amount based on a percentage of their sales. Such amount is called
a commission. The amount that they receive is based on the commission rate that their employer
sets. A higher commission rate on the same sales amount would mean a higher commission. In other
words, commission is the amount of money a salesperson receives based on the level of his or her
sales.
Since a commission is a percentage of the sales, then the commission is equal to the product
of the commission rate and the sales amount. The formula in calculating commission is stated below.
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Formula in Calculating the Commission

If a commission rate r is applied on a sales amount S, then the commission C is
C=rxS
From this formula, we can derive two more formulas that may be used when either the commission
rate or the sales amount is the missing information. The following techniques can also help us in
deciding which formula to use:
When we need to get the When we need to get the When we need to get the sales
commission, cover C. commission rate, cover r. amount, cover S.
𝐶= 𝑟𝑥𝑆 𝐶 𝐶
𝑟= 𝑆=
𝑆 𝑟
There are three commonly known type of commission; namely,
1. Straight Commission
2. Salary-plus-commission
3. Graduated Commission
Let us discuss the definition and a corresponding example for each type of commission one by
one.
When employees are paid only on commission – that is, their commission is already their entire
pay – they are said to be working on a straight commission. For example, when a real estate owner
hires sales agents to sell a property, there are cases when the agents only get paid based on a
percentage of the property’s market value after they close a deal with a client. The amount that
they receive is a straight commission. They will only get paid for every property that they successfully
sell. If they are not able to sell anything, they will not receive any payment for their services. To
compensate for such downside, the straight commission rate is usually higher than the rates for other
types of commissions.
To calculate the straight commission, we simply use the previously presented formula in finding
the commission. Study how this is done in the two succeeding examples.
EXAMPLE 1. Determining the Straight Commission.
Ghan Dhakagurl is a real estate sales agent who receives a straight commission of 5% for
every property that she sells. If she successfully sells a house for ₱5,000,000, how much will she get
paid?
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SOLUTIONS AND ANSWERS
To determines Ghan Dhakagurl’s commission, use the formula C = r x S; that is,

C=rxS
C = (0.05)(5,000,000)
C = ₱250,000
Therefore, Ghan Dhakagurl will get ₱250,000 as straight commission
EXAMPLE 2. Determining the Straight Commission.
For every appliance he sells, Pou Gikaboy receives 6% straight commission. One day, he sold a
television set for ₱12,000, a refrigerator for ₱17,000, and a washing machine for ₱8,000. How much is
his straight commission?
First, we need to add the selling prices of the appliances to get the total amount of Pou
Gikaboy’s sales (S). So we have:
S = 12,000 + 17,000 + 8,000

S = ₱37,000
Next, use this value of S and a rate (r) of 6% or 0.06 to compute for his commission (C); that is,
C=rxS
C = 0.06(37,000)
C = ₱2,220
If you will get the individual commission from each product and add them all, you will get
the same answer. That is,
C = (0.06 x 12,000) + (0.06 x 17,000) + (0.06 x 8,000)
C = ₱2,220
Therefore, Pou Gikaboy received a straight commission of ₱2,220
Many salespersons do not prefer to work on straight commission because there are times
when closing a deal with their clients does not come easy. To address such concern, many
employers offer their salespersons a fixed monthly salary in addition to their commission. This type of
commission is called a salary-plus-commission.
Although salespersons can expect to receive a fixed amount of salary in a salary-plus-

commission arrangement, there are cases when the commission is only given after they reach a
certain sales amount. Moreover, the commission rate in this arrangement is usually lower than that of
a straight commission. The commission is just like a form of an incentive given by an employer to
encourage their personnel to achieve higher sales.
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The salary-plus-commission, which we denote as SC, is the sum of the monthly pay P and the
commission C; that is,
SC = P + C
Since C = r x S, we can also write the formula for salary-plus-commission as follows:
SC = P + (r x S) or just SC = P + rS
Study how this formula is used in the next example.
EXAMPLE 3. Determining the Salary-Plus-Commission
Agh Lee Yu works as a salesperson for FANG IT Cosmetics. Her employer pays her a salary of
₱4,000 per week, plus a 3% commission whenever her sales exceed ₱3,000. If she sold items worth
₱5,000 in a certain week, how much did she receive on that week?
First, determine the given in the problem. Salary (P) is ₱4,000; Commission Rate (r) is 3%; and
Sales (S) is ₱5,000.
First, determine the commission that he received,
C = rS
C = 0.03(5,000)
C = ₱150
Next, compute the total amount (SC) that he received by adding his weekly pay (P =P4,000)
and his commission (C = P150); that is,
SC = P + C
SC = 4,000 + 150
SC = ₱4,150
Thus, he received P4,150 that week. But remember that had he not been able to sell above
P3,000, he would not have received a commission of 3%. Hence, it is important to pay
attention to the details of every problem, otherwise you will be computing erroneously.
The third type of commission is called graduated commission, which means that the percent
of sales earned (that is, the commission rate) increases incrementally as the sales amount increases.
A company usually implements a graduated commission scale to motivate salespersons to increase
their sales. For instance, salespersons may get n% commission if they achieve a certain sales amount,
a higher m% commission (that is m% > n%) if they achieve a higher sales amount, and so on. The next
example demonstrates how this commission is computed.
EXAMPLE 4. Determining the Graduated Commission
Mina Hal works in an insurance company that pays him a graduated commission based on
the following scale:
 5% commission on the first ₱5,000 worth of sales
 10% commission on the next ₱15,000 worth of sales
 15% commission on sales in excess of ₱20,000
What is her total commission if she closed a deal worth ₱25,000?
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To compute, we must follow the conditions:

 Commission on the 1st P5,000 ₱250 ~> 0.05 x ₱5,000
 Commission on the next P15,000 ₱1,500 ~> 0.10 x ₱15,000
 Commission on the excess (25,000 – 20,000) ₱750 ~> 0.15 x ₱5,000
TOTAL COMMISSION ₱2,500 ~> ₱250 + ₱1,500 + ₱750
Notice that the underlined numbers must equal ₱25,000 or lower. Remember also that after
the first commission was satisfied, we got ₱20,000 left (25,000 – 5,000). On the second
condition, we are still able to satisfy it since we still have ₱20,000 and the second condition is
only on ₱15,000, hence we can do the second computation of commission. After the
second condition, we still have ₱5,000 remaining (20,000 – 15,000), thus, we will consider it as
the excess, so we compute also for the third commission.
If for example, the second condition was, 10% commission on the next ₱20,000, this would
mean, we got no more computation for the third commission since we will have P0 after the
second commission was computed.
Always remember to follow the conditions set in a graduated commission.
Under the salary-plus-commission, it may be also that the computation of commission is a

graduated commission approach.
There are cases when salespersons receive their commission on installment basis, which means
that the commission is divided into certain number of payments depending on the number of periods
that has been agreed upon. Typically, installment commissions are applicable when the prices of the
products or services being sold are relatively high and the client has an option to pay on installment
basis. In such case, the salespersons may not get fully paid at the point of sale; they just receive a
portion of their commission based on the client’s paid amount. To study how this is done, consider the next
example.
EXAMPLE 5. Calculating Commission on Installment Basis
Bong Gacaday has a house and lot worth ₱6,000,000. His agent will receive a 10% commission
if the sales agent is able to sell the property. A client offered to give Bong a 50% down payment and
to pay the remaining amount on a monthly installment basis for 1 year. Bong accepted the offer, and
his sales agent agreed to receive his commission based on such arrangement as well.
Determine how much the sales agent would receive as commission:
1. At the point of sale; and

2. On each succeeding month.
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1. It was given that the property is worth ₱6,000,000 and that the client will give a 50% down
payment. Hence, the down payment (which we denote as DP) is:
DP = 0.5(6,000,000)
DP = ₱3,000,000
The sales agent will receive his or her first commission (which we denote as C1) based
on the down payment. Since the commission rate (r) is 10%, we have:
C1 = r x DP
C1 = 0.10 x
3,000,000 C1 =
₱300,000
Thus, at the point of sale, the agent will receive a commission of ₱300,000.
2. The remaining amount or the balance that the client needs to pay (which we denote as
B) is the difference between the selling price (₱6,000,000) and the down payment
(₱3,000,000); that is,
B = 6,000,000 –3,000,000
B = ₱3,000,000
To calculate the buyer’s monthly payment for 1 year or 12 months (which we denote as MP),
divide the balance by 12; that is: B
𝑀𝑃 =
12
3,000,000
𝑀𝑃 =
12
𝑀𝑃 = ₱250000
Now, compute for the commission
C2 = r x MP
C2 = 0.10 x 250,000
C2 = ₱25,000
Therefore, the sales agent will receive a commission of ₱25,000 monthly for 1 year
SALARIES, WAGES and INCOME
Many people use the terms salary, wages, and income interchangeably. However, these
three terms are different from each other and the necessary distinction will be provided in this
module.
Salary refers to the compensation paid on the basis of a fixed annual rate. It does not depend
on the actual number of hours worked. It is the compensation for managerial or administrative
employees. Managerial employee means an individual who is engaged predominantly in executive
and management functions and is charged with the responsibility of directing the effectuation of
management policies and practices. Administrative employee means an employee who normally
supervises persons engaged in office administration, construction, security or maintenance work who
are represented by another trade union. This definition includes employees who share a community
of interest with“supervisors”.
Wage is the compensation paid on the basis of a rate per hour worked. It is calculated by
multiplying the number of hours worked by the hourly rate of pay. It is the compensation for the
employees doing manual work. If they work more than 40 hours per week, they are entitled to an
overtime pay. An individual earning a wage has an opportunity to earn overtime. Hence, even if you
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are just earning a wage, you can have a better compensation than the person receiving a salary.
Income, or earnings, refers to the amount of money received by an individual for the work he
or she has done. In this context, income may mean salary or wages.
The following are some of the wage and wage-related benefits from the Labor Code and the
pertinent amendatory laws.
HOURS OF WORK
In computing the salaries, deductions and benefits of the employees, one must understand the
concept of Hours of Work. Article 84 of the Labor Code provides that the normal hours of work of any
employee shall not exceed eight (8) hours a day. In connection with this, Article 84 of the same Code
Hours worked shall include (a) all time during which an employee is required to be on duty or to be at a
prescribed workplace; and (b) all time during which an employee is suffered or permitted to work.
Rest periods of short duration during working hours shall be counted as hours worked.
Excluded in the counting of the 8 hours is the Meal Period. It shall be the duty of every employer
to give his employees not less than sixty (60) minutes time-off for their regular meals. (Art. 85 of the Labor
Code)
TIME OF PAYMENT
Wages shall be paid at least once every two (2) weeks or twice a month at intervals not
exceeding sixteen (16) days. If on account of force majeure or circumstances beyond the employer’s
control, payment of wages on or within the time herein provided cannot be made, the employer shall
pay the wages immediately after such force majeure or circumstances have ceased. No employer shall
make payment with less frequency than once a month. (Article 103 of the Labor Code)
TAXABLE COMPENSATION INCLUDES THE FOLLOWING:
1. MINIMUM WAGE
The minimum wage rates for agricultural and non-agricultural employees and workers in each and
every region of the country shall be those prescribed by the Regional Tripartite Wages and Productivity
Boards. (Article 99 of the Labor Code.)
The following are the current minimum wage on the country:
AREA Non-Agriculture Agriculture Domestic Workers

Metro Manila ₱610 ₱573 ₱6,000
CAR ₱400 ₱400 ₱4,500
Ilocos Region 30 or more employees: ₱400 ₱372 ₱5,000
10 to 29 employees: ₱400
1 to 9 employees: ₱372
Cagayan Valley ₱435 ₱415 ₱5,500
Bataan, Bulacan, General Plantation: ₱470 Cities and first class
Nueva Ecija, Establishments with 10 or more Non-plantation: ₱454 municipalities: ₱5,000
Pampanga, Tarlac, workers: ₱500 Other municipalities:
Zambales Establishments with less than ₱4,500
10 workers: ₱493
Service and retail

Establishments with 10 or more
workers: ₱489
Establishments with less than
10 workers: ₱475
Aurora General Plantation: ₱434 Cities and first class
₱449 Non-plantation: ₱422 municipalities: ₱5,000
Other municipalities:
Service and retail: ₱P4,500
₱384
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CALABARZON ₱385-₱520 ₱385-₱479 Cities and first class

municipalities: ₱5,000
₱4,000
MIMAROPA Establishments with 10 or more Establishments with 10 or ₱4,500
workers: ₱355 more workers: ₱355
Establishments with less than Establishments with less
10 workers: ₱329 than 10 workers: ₱329
Bicol ₱365 ₱365 ₱4,000
Western Visayas Establishments with more than ₱410 ₱4,500
10 workers: ₱450
Establishments with 10 workers
or less: ₱420
Central Visayas Class A: ₱468 Class A: ₱458 Cities and first class
Class B: ₱430 Class B: ₱425 municipalities: ₱5,500
Class C: ₱420 Class C: ₱415 Other municipalities:
₱4,500
Eastern Visayas General: ₱375 ₱345 Cities and first class
Service and retail municipalities: ₱5,000
Establishments with more than Other municipalities:
10 workers: ₱375 ₱4,500
Establishments with 10 workers
or less: ₱345
Cottage and handicraft: ₱345
Zamboanga ₱381 Establishments with 31 Cities and first class
Peninsula service and retail workers or more: ₱381 municipalities: ₱4,000
Establishments with 31 workers Establishments with 10 to Other municipalities:
or more: ₱381 30 workers: ₱381 ₱3,500
Establishments with 10 to 30 Agricultural enterprises,
workers: ₱381 and establishments with 1
to 9 workers: ₱368
Northern Mindanao: Cities and first class
municipalities: ₱4,500
Cagayan de Oro, Other municipalities:
Iligan, Tagoloan, ₱3,500
Villanueva, Jasaan,
Malaybalay,
Valencia, Gingoog,
El Salvador, Ozamiz,
Opol, Maramag, ₱393
₱405
Quezon, Manolo
Fortich, and Lugait
All other areas, and ₱378

service and retail ₱390
establishments with
10 or less workers:
Davao Region ₱443 ₱438 ₱4500
SOCCKSARGEN General: ₱390 ₱369 Cities and 1st class

Service and retail: P369 municipalities: ₱5,000
₱4,500
CARAGA
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Butuan City, and

provinces of
Agusan del Norte, ₱350 ₱350 ₱4,000
Agusan del Sur, and
Surigao del Sur
Dinagat Islands and ₱350 ₱350

Surigao Del Norte
Bangsamoro
Provinces of
Maguindanao,
Lanao Del Sur, Sulu, ₱316 ₱306
Tawi-tawi, and the
cities of Marawi
and Lamitan
Cotabato City and ₱341 ₱316

the special
geographic area
2. OVERTIME
Work may be performed beyond eight (8) hours a day provided that the employee is paid for
the overtime work, an additional compensation equivalent to his regular wage plus at least twenty-
five percent (25%) thereof. Work performed beyond eight hours on a holiday or rest day shall be paid
an additional compensation equivalent to the rate of the first eight hours on a holiday or rest day plus
at least thirty percent (30%) thereof. (Art. 87 of the Labor Code)
Note: As earlier discussed, Minimum wage is based on a work week of 40 hours or 8 hours per
day. The daily 60-minute mandatory meal break is not included in the 8-hour work day and is not
compensated.
Overtime pay rates vary depending on when the overtime work takes place: regular work
day, holiday, rest day, or night (between the hours of 10pm to 6am).
NOTE:
Undertime not offset by overtime. Undertime work on any particular day shall not be offset by
overtime work on any other day. Permission given to the employee to go on leave on some other day
of the week shall not exempt the employer from paying the additional compensation required. (Article
88 of the Labor Code)
NOTE: An employee may not be forced to render overtime work unless the reason of the overtime is
one of the causes enumerated on the Article 89 of the Labor Code:
Any employee may be required by the employer to perform overtime work in any of the
following cases:
 When the country is at war or when any other national or local emergency has been
declared by the National Assembly or the Chief Executive;
 When it is necessary to prevent loss of life or property or in case of imminent danger to
public safety due to an actual or impending emergency in the locality caused by serious
accidents, fire, flood, typhoon, earthquake, epidemic, or other disaster or calamity;
 When there is urgent work to be performed on machines, installations, or equipment, in
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order to avoid serious loss or damage to the employer or some other cause of similar
nature;
 When the work is necessary to prevent loss or damage to perishable goods; and
 Where the completion or continuation of the work started before the eighth hour is
necessary to prevent serious obstruction or prejudice to the business or operations of the
employer.
Any employee required to render overtime work under this Article shall be paid the additional
compensation required in this Chapter.
3. PREMIUM PAY
Premium pay is given on non-working days (rest days/special holidays). The laws pertaining to the
premium pay are provided in the Articles 91, 92 and 93 of the Labor Code.
Article 91. Right to weekly rest day.
It shall be the duty of every employer, whether operating for profit or not, to provide each
of his employees a rest period of not less than twenty-four (24) consecutive hours after every six (6)
consecutive normal work days.
The employer shall determine and schedule the weekly rest day of his employees subject to
collective bargaining agreement and to such rules and regulations as the Secretary of Labor and
Employment may provide. However, the employer shall respect the preference of employees as to
their weekly rest day when such preference is based on religious grounds.
Article 92. When employer may require work on a rest day. The employer may require his
employees to work on any day:
 In case of actual or impending emergencies caused by serious accident, fire, flood,

typhoon, earthquake, epidemic or other disaster or calamity to prevent loss of life and
property, or imminent danger to public safety;
 In cases of urgent work to be performed on the machinery, equipment, or installation,
to avoid serious loss which the employer would otherwise suffer;
 In the event of abnormal pressure of work due to special circumstances, where the
employer cannot ordinarily be expected to resort to other measures;
 To prevent loss or damage to perishable goods.
 Where the nature of the work requires continuous operations and the stoppage of work
may result in irreparable injury or loss to the employer; and
 Under other circumstances analogous or similar to the foregoing as determined by the
Secretary of Labor and Employment.
Article 93. Compensation for rest day, Sunday or holiday work.
Where an employee is made or permitted to work on his scheduled rest day, he shall be
paid an additional compensation of at least thirty percent (30%) of his regular wage. An employee
shall be entitled to such additional compensation for work performed on Sunday only when it is his
established rest day.
When the nature of the work of the employee is such that he has no regular workdays and
no regular rest days can be scheduled, he shall be paid an additional compensation of at least
thirty percent (30%) of his regular wage for work performed on Sundays and holidays.
Work performed on any special holiday shall be paid an additional compensation of at

least thirty percent (30%) of the regular wage of the employee. Where such holiday work falls on
the employee’s scheduled rest day, he shall be entitled to an additional compensation of at least
fifty per cent (50%) of his regular wage.
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Where the collective bargaining agreement or other applicable employment contract

stipulates the payment of a higher premium pay than that prescribed under this Article, the
employer shall pay such higher rate.
In summary:
 On a rest day or special holiday, an employee is entitled to an additional 30% of his

daily basic rate, or a total of 130%.
 On a rest day which is also a special holiday, an employee is entitled to an additional
50% of his daily basic rate, or a total of 150%.
 On a regular holiday which is also an employee’s rest day, an employee is entitled to an
additional 30% of the regular holiday rate of 200%, or a total of 260%. Note that it is only
applicable to employees covered by the holiday-pay rule.
The “no work, no pay” principle applies during special non-working days and such other
special days as may be proclaimed by the President of the Philippines. Workers who are not required
or permitted to work on these days are, therefore, not entitled to any compensation. This, however, is
without prejudice to any voluntary practice or CBA providing for payment of wages and benefits for
declared special days even if unworked.
4. HOLIDAY PAY
The Labor Code requires the payment of an employee’s daily basic wage for all non-working
regular holidays.
Every worker shall be paid his regular daily wage during regular holidays, except in retail and
service establishments regularly employing less than ten (10) workers;
The employer may require an employee to work on any holiday but such employee shall be
paid a compensation equivalent to twice his regular rate (Article 94 of the Labor Code)
12 regular holidays are (Republic Act No. 9849):

1. New Year’s day
2. Maundy Thursday
3. Good Friday
4. Araw ng Kagitingan
5. Labour Day
6. Independence Day
7. National Heroes’ Day
8. Eidl Fitr
9. Eidl Adha
10. Bonifacio Day
11. Christmas Day
12. Rizal Day
Rate Example:
If work is accomplished on a regular holiday (up to 8 hours), an employee is entitled to at least
twice (200%) of his basic wage. If the holiday corresponds to a scheduled rest day, the employee is
entitled to an additional 30% based on his regular holiday rate of 200%, which comes to a total of at
least 260%.
Absences
a) All covered employees shall be entitled to holiday pay when they are on leave of absence
with pay on the workday immediately preceding the regular holiday. Employees who are on
leave of absence without pay on the day immediately preceding a regular holiday may not
be paid the required holiday pay if they do not work on such regular holiday.
b) Employers shall grant the same percentage of the holiday pay as the benefit granted by
competent authority in the form of employee’s compensation or social security payment
whichever is higher, if the employees are not reporting for work while on such leave benefits.
c) Where the day immediately preceding the holiday is a non-work day in the establishment or
the scheduled rest day of the employee, he/she shall not be deemed to be on leave of
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absence on that day, in which case he/she shall be entitled to the holiday pay if he/she
worked on the day immediately preceding the non-work day or rest day.
Successive Regular Holidays

Where there are two (2) successive regular holidays, like Maundy Thursday and Good
Friday, an employee may not be paid for both holidays if he/she absents himself/herself from
work on the day immediately preceding the first holiday, unless he/she works on the first
holiday, in which case he/she is entitled to his/her holiday pay on the second holiday.
5. NIGHT SHIFT DIFFERENTIAL

Every employee shall be paid a night shift differential of not less than ten percent (10%) of his
regular wage for each hour of work performed between ten o’clock in the evening and six o’clock in
the morning. (Article 86 of the Labor Code)
6. SERVICE CHARGES
Republic Act No. 11360 provides that ALL service charges collected by an employer must be
distributed fully and equally, based on actual hours or days of work or service rendered, among all
covered employees.
The service charges collected must be distributed and paid to such employees:
1. Not less than once every two weeks; or

2. Twice a month at intervals not exceeding 16 days.
The Service Charge Law will cover all employees, except managerial employees, under direct
employment of the establishment, regardless of their positions, designations or employment status and
irrespective of the method by which their wages are paid.
These mentioned benefits apply to all employees except:

1. Government employees.
2. Workers of retail and service establishments regularly employing less than 10 workers.
3. Managerial employees and officers or members of a managerial staff.
4. Househelpers and persons in the personal service of another.
5. Workers who are paid by results/output.
6. Field personnel if they regularly perform their duties away from the office or place of
business.
7. SERVICE INCENTIVE LEAVE

Every employee who has rendered at least one (1) year of service is entitled to a Service
Incentive Leave (SIL) of five (5) days with pay. SIL may be used for sick and vacation leave purposes.
The unused SIL at the end of the year can be converted into cash using the salary rate at the date of
conversion. It is the employer’s prerogative to grant additional vacation leave.
Meaning of “one year of service”
The phrase “one year of service” of the employee means service within 12 months, whether
continuous or broken, reckoned from the date the employee started working. The period includes
authorized absences unworked weekly rest days, and paid regular holidays. Where by individual or
collective agreement, practice or policy, the period of working days is less than 12 months, said
period shall be considered as one year for the purpose of determining entitlement to the service
incentive leave.
NON-TAXABLE BENEFITS INCLUDE THE FOLLOWING:
The Labor Code of the Philippines covers three different types of parental leaves: maternity leave,
paternity leave and solo-parent leave.
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Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
A. Maternity Leave
Republic Act No. 11210 mandated for the increase of the Maternity Leave Period to 150 days for
female workers with an option to extend for an additional 30 days without pay, and granting an
additional fifteen days for Solo Mothers, and for other purposes.
Enjoyment of maternity leave cannot be deferred but should be availed of either before or
after the actual period of delivery in a continuous and uninterrupted manner, not exceeding one
hundred five (105) days, as the case may be.
Maternity leave shall be granted to female workers in every instance of pregnancy,

miscarriage or emergency termination of pregnancy, regardless of frequency: Provided, That for
cases of miscarriage or emergency termination of pregnancy, sixty (60) days maternity leave with
full pay shall be granted.
For the duration of the maternity leave, the employee receives a fraction of his regular
monthly salary from the company which is in turn reimbursed by the SSS. It is common for
companies to give the whole regular pay and shoulder what is not covered by the SSS.
To benefit from a maternity leave, it is required for the employee to be registered with the SSS
and be employed at the time of the expected delivery. Furthermore, the SSS must be notified by
the employer and at least three monthly contributions must have been made to the SSS for that
employee within the past year.
The maternity leave benefit being given instead of a regular wage, it cannot be included in
an employee’s 13th month wage.
B. Paternity Leave
All married male employees are entitled to a 7-day paternity leave for the delivery or
miscarriage of his legitimate spouse with whom he must live, for up to four pregnancies. The
paternity leave is at the cost of the employer and is not reimbursed by the SSS.
C. Solo-Parent Leave
In addition to parental leaves at the time of a child’s birth, the Filipino Labor Code drew a
special leave for solo-parent employees as described in the Solo Parents Welfare, Republic Act
No. 8972. The employee must have been working for at least a year to be entitled to a solo-
parent leave, which allows him to 7 working days of leave in a year.
OTHER LEAVES
D. Gynecological Leave
A woman employee having rendered continuous aggregate employment service of at least
six (6) months for the last twelve (12) months shall be entitled to a special leave benefit of two (2)
months with full pay based on her gross monthly compensation following surgery caused by
gynecological disorders.
E. Violence Against Women and their Children (VAWC) Leave
Section 43 of the Republic Act No. 9262 provides that victims under the VAWC act shall be
entitled to take a paid leave of absence up to ten (10) days in addition to other paid leaves under
the Labor Code and Civil Service Rules and Regulations, extendible when the necessity arises as
specified in the protection order.
F. 13th MONTH PAY

Each year, a 13th month pay is given to all rank-and-file employees. By law, this benefit must
be paid before December 24th and is mandatory. Employees who have resigned or have been
severed from the company before the payment of the 13th month pay are still entitled to it in
Page 13 of
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Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
proportion to the length of time they worked for during that year.
The 13th month pay must be at least 1/12th of the total basic salary of each employee earned
during that calendar year.
G. SEPARATION PAY
Following the labor code of the Philippines, articles 283 and 284 state that an employee can
claim separation pay if his contract is ended under authorized causes. According to article 282 an
employee terminated for just cause (neglect of duties, fraud, crime…) is generally not entitled to
separation pay.
A separation pay of ½ month pay for every year of service can be claimed under the
following authorized causes:
 Retrenchment of person for loss prevention.
 Cessation of operation of a branch not due to serious losses or financial difficulties.
 If the employee has contracted a disease not curable within 6 months and that his presence
at work can be harmful to himself or his co-workers.
A separation pay of 1 month pay for every year of service can be claimed under the following
authorized causes:
 Labor-saving devices installed by the employer.
 Redundancy of the employee’s services for the company.
 Impossibility to reinstate the employee to his former position or to an equivalent position, for
reasons outside of the employer’s power.
The employer has the right to terminate the contract of an employee following any of the
above authorized causes through a written notice to both the employee and the Department of
Labor and Employment of the Philippines at least one month before the contract cessation date.
2. RETIREMENT PAY
All employees from the private-sector may retire from age 60 up to age 65, at which
retirement becomes compulsory, and must have served the establishment for at least 5 years.
Retirement pay must at least be equivalent to half of a month’s salary for each year of service and
a fraction of at least 6 months is therefore considered as one whole year.
One “half month salary” must include the following: a) 15 days salary based on the last salary pay,
b) the pay equivalent of a five days of incentive leave, c) 1/12 of the 13th month pay. Therefore, one
½ month salary is equivalent to 22.5 days.
Minimum Retirement pay = Latest daily pay rate x 22.5 days per month x number of years of
service
Depending on the agreements between the employer and employee other benefits can be
included in the retirement pay such as a Collective Bargaining Agreement (CBA).
3. GROSS BENEFITS & DE MINIMIS BENEFITS

To reward employee performance and to set incentives it is common for employers to give
compensations in cash or in kind to employees. According to the Philippine regulations, these
benefits are exempt of taxes under certain conditions.
Following the tax code, benefits received are excluded from the computation of gross income
as long as it remains below ₱90,000. “Gross benefits” include: the 13th month pay, Christmas bonuses,
productivity and incentive bonuses, and other benefits of the same nature in cash or in kind.
In addition to that, compensations of small value, called De Minimis Benefits, are also
excluded from the computation of gross income. De Minimis Benefits have the purpose to promote
the well-being and efficiency of employees and are limited to facilities or privileges of relatively small
size.
Page 14 of
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Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
De Minimis Benefits include:

 Monetized unused vacation leave credits of employees not exceeding ten (10) days during
the year; (RR No. 5-2011).
 Monetized value of vacation and sick leave credits paid to government officials and
employees; (RR No. 5-2011)
 Medical cash allowance to dependents of employees, not exceeding ₱1,500 per employee
per semester or ₱250 per month; (RR No. 11-2018)
 Rice subsidy of ₱2,000 or one (1) sack of 50 kg. rice per month amounting to not more than
₱2,000; (RR No. 11-2018)
 Uniform and Clothing allowance not exceeding ₱6,000 per annum; (RR No. 11-2018)
 Actual medical assistance, e.g. medical allowance to cover medical and healthcare needs,
annual medical/executive check-up, maternity assistance, and routine consultations, not
exceeding ₱10,000 per annum; (RR No. 5-2011)
 Laundry allowance not exceeding ₱300 per month; (RR No. 5-2011)
 Employees achievement awards, e.g., for length of service or safety achievement, which must
be in the form of a tangible personal property other than cash or gift certificate, with an
annual monetary value not exceeding ₱10,000 received by the employee under an
established written plan which does not discriminate in favor of highly paid employees; (RR No.
5-2011)
 Gifts given during Christmas and major anniversary celebrations not exceeding ₱5,000 per
employee per annum; (RR No. 5-2011)
 Daily meal allowance for overtime work and night/graveyard shift not exceeding twenty-five
percent (25%) of the basic minimum wage on a per region basis; (RR No. 5-2011)
 Benefits received by an employee by virtue of a collective bargaining agreement (CBA) and
productivity incentive schemes provided that the total monetary value received from both
CBA and productivity incentive schemes combined do not exceed ₱10,000.00 per employee
per taxable year. (RR No 1-2015).
**Meal allowance is non-taxable only for overtime or graveyard shift. Maximum ₱120.00 per day
based on ₱481.00 (Metro Manila minimum wage – Wage Order No. NCR-19).
4. SOCIAL SECURITY SYSTEM

By law, private sector employees must be covered under the Social Security System (SSS).
Based on each employee’s gross monthly pay, both the employer and employee remit monthly
contributions to the SSS. In turn, the SSS benefits cover maternity, retirement, sickness, disability, death
and pension benefits. SSS
5. PHILHEALTH
For all employees covered by the SSS medical coverage is mandatory and automatic. Both
the employer and employee contribute equal monthly amounts to the PhilHealth Insurance
Corporation. PhilHealth
6. HOME DEVELOPMENT MUTUAL FUND

The Home Development Mutual Fund (HDMF), also known as the Pag-IBIG Fund, is mandatory
to all employees who are compulsorily covered by the Government Service Insurance System (GSIS,
for Filipino Government employees) or the SSS. Through the Republic Act No. 9679, the HDMF answers
two important needs for Filipino workers by establishing a national savings program and an
affordable house financing system. HDMF members benefit of 1. savings, 2. short term loans and 3.
access to low cost housing programs. Both the employee and the employer contribute to the fund.
For a monthly compensation of ₱1,500 and less the employee contributes 1% and above PHP
1500 monthly compensation it is 2%. The employer’s contribution always remains at 2%. Contributions are
deducted from gross income before computation of the income tax. Note that the maximum
employee contribution is set at ₱5,000. Hence the minimum contribution for employees and
employers is now set at ₱100.
Page 15 of
12
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
References:
 BAL 650.0151 Si79 2016 Sirug, Winston S. (2016), Business mathematics for senior high school -
ABM specialized subject: a comprehensive approach, Mindshaper Co., Inc., Intramuros,
Manila
 Jerico, B. B., & Jeffrey, S. M. (2017). Business Mathematics for Senior High School. Quezon City:
C & E Publishing.
 https://www.lawinsider.com/dictionary/managerial-employee
 https://www.lawinsider.com/dictionary/administrative-employee
 https://www.dayananconsulting.com/tag/salary/
Page 16 of
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Business Math Module 7 Salaries and Wages

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Business Math Module 7 Salaries and Wages

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Business Mathematics

Governor Pack Road, Baguio City, Philippines 2600

MODULE 7 – BUS MATH Subject Teacher: JOAN A. MALA

Commission and Introduction to salaries and wages

“It’s not your salary that makes you rich, it’s

Salary and wages are important aspects in

MODULE 7 – BUS MATH Subject Teacher: JOAN A. MALA

Formula in Calculating the Commission

There are three commonly known type of commission; namely,

EXAMPLE 1. Determining the Straight Commission.

MODULE 7 – BUS MATH Subject Teacher: JOAN A. MALA

SOLUTIONS AND ANSWERS

To determines Ghan Dhakagurl’s commission, use the formula C = r x S; that is,

Therefore, Ghan Dhakagurl will get ₱250,000 as straight commission

EXAMPLE 2. Determining the Straight Commission.

SOLUTIONS AND ANSWERS

S = 12,000 + 17,000 + 8,000

Therefore, Pou Gikaboy received a straight commission of ₱2,220

Although salespersons can expect to receive a fixed amount of salary in a salary-plus-

MODULE 7 – BUS MATH Subject Teacher: JOAN A. MALA

Study how this formula is used in the next example.

EXAMPLE 3. Determining the Salary-Plus-Commission

First, determine the commission that he received,

EXAMPLE 4. Determining the Graduated Commission

What is her total commission if she closed a deal worth ₱25,000?

MODULE 7 – BUS MATH Subject Teacher: JOAN A. MALA

SOLUTIONS AND ANSWERS

To compute, we must follow the conditions:

Always remember to follow the conditions set in a graduated commission.

Under the salary-plus-commission, it may be also that the computation of commission is a

EXAMPLE 5. Calculating Commission on Installment Basis

Determine how much the sales agent would receive as commission:

1. At the point of sale; and

MODULE 7 – BUS MATH Subject Teacher: JOAN A. MALA

SOLUTIONS AND ANSWERS

SALARIES, WAGES and INCOME

MODULE 7 – BUS MATH Subject Teacher: JOAN A. MALA

TAXABLE COMPENSATION INCLUDES THE FOLLOWING:

AREA Non-Agriculture Agriculture Domestic Workers

Service and retail

MODULE 7 – BUS MATH Subject Teacher: JOAN A. MALA

CALABARZON ₱385-₱520 ₱385-₱479 Cities and first class

All other areas, and ₱378

SOCCKSARGEN General: ₱390 ₱369 Cities and 1st class

MODULE 7 – BUS MATH Subject Teacher: JOAN A. MALA

Butuan City, and

Dinagat Islands and ₱350 ₱350

Cotabato City and ₱341 ₱316

MODULE 7 – BUS MATH Subject Teacher: JOAN A. MALA

Article 91. Right to weekly rest day.

 In case of actual or impending emergencies caused by serious accident, fire, flood,

Article 93. Compensation for rest day, Sunday or holiday work.

Work performed on any special holiday shall be paid an additional compensation of at

MODULE 7 – BUS MATH Subject Teacher: JOAN A. MALA

Where the collective bargaining agreement or other applicable employment contract

 On a rest day or special holiday, an employee is entitled to an additional 30% of his

12 regular holidays are (Republic Act No. 9849):

MODULE 7 – BUS MATH Subject Teacher: JOAN A. MALA

Successive Regular Holidays

5. NIGHT SHIFT DIFFERENTIAL

1. Not less than once every two weeks; or

These mentioned benefits apply to all employees except:

7. SERVICE INCENTIVE LEAVE

Meaning of “one year of service”