Gross

and
Net Earnings
⧠ The total amount that people earn for
performing a specific job during a specific
period is called the gross earnings.
⧠ For almost all employees, however, a part of
their earnings is usually taken out before they
even receive their take-home pay.
⧠ The resulting amount after the deductions
had been applied on the gross earnings is
called the net earnings.

2
 Example 1: Calculating the
Annual Gross Earnings
Pilong is an area manager in J&S
Mart. He receives a monthly salary of
₱25,000. He also owns a bond that has
a face value of ₱200,000 and that
earns at an annual simple interest rate
of 6%. How much is his gross earnings
in a year?

3
 Solution and Answer
It was given that Pilong’s monthly salary is ₱25,000; hence
his yearly salary is:
Yearly Salary = 12(25,000) = 300,000
Also, his ₱200,000 investment earns an annual simple
interest at a rate of 6%; so his earnings from such
investment can be computed as follows:
Earnings From Investment = (0.06)(200,000) = 12,000
His gross earnings in a year can be computed by adding his
total salary and his earnings from his investment; that is,
Yearly Gross Earnings = 300,000 + 12,000 = 312,000
Therefore, Pilong’s gross earnings in a year is ₱ 312,000

4
 Example 2: Calculating the
Weekly Gross Earnings
Bareg works as a part-time tutor in RCUBED
Tutorial and Review Center and is paid on a
weekly basis. His hourly rate is ₱75 for grades
1 to 6 students, and ₱100 for grades 7 to 10
students. The table shows Bareg’s schedule in
tutoring students during a certain week. The
names and grade levels of his students are
given.

5
 Time Mon Tue Wed Thu Fri Sat
10-11 Neena None Neena None Neena Lance
AM Grade Grade Grade Grade
1 1 1 7
Compute for his gross earnings that week.

11-12 Monica Monica Monica Monica Monica Lance

PM Grade Grade Grade Grade Grade Grade
1 1 1 1 1 7
12-1 PM Break Break Break Break Break Break
1-2 PM Razel None Razel None Razel None
Grade Grade Grade
4 4 4
2-3 PM Vynice Trisha Vynice Trisha Vynice Shiela
Grade Grade Grade Grade Grade Grade1
2 5 2 5 2 0
3-4 PM Jon Jon Jon Jon Jon Shiela
Grade Grade Grade Grade Grade Grade1
5-6 PM 2
Grace 2
Alliyah 2
Grace 2
Alliyah 2
Grace 0
None
4-5 PM Grade
Break Grade
Break Grade
Break Grade
Break Grade
Break Break
7 7 7 7 7
6-7 PM None Patricia None
6 Patricia None None
 Solution and Answer
To determine Bareg’s total gross earnings that week, we first determine
the number of hours he taught grades 1 to 6 students and the number of
hours he taught grades 7 to 10 students. The table below summarizes the
needed data, which also includes the earnings per group.

Grade Level Number of Hourly Rate Earnings

Hours
Rendered
Grades 1 to 6 21 ₱75 ₱1,575

Grades 7 to 10 11 ₱100 ₱1,100

The earnings can be obtained by multiplying the number of hours by the
corresponding hourly rate. Then we add the two earnings to determine
Bareg’s total earnings; that is,
Gross Earnings = 1,575 + 1,100 = 2,675
Therefore, Bareg’s weekly gross earnings have a total amount of ₱2,675.

7
 Example 3: Calculating the
Monthly Gross Earnings
As a sales agent, Amlong earns a basic
monthly salary of ₱22,000 plus a 12%
commission on his total monthly sales. His
total sales in a particular month was ₱30,000.
In the same month, Amlong worked during 2
holidays. His employer entitles an employee
twice the daily rate if the employee works
during a holiday. How much was the total
amount of his gross earnings then? Assume
that there are 22 working days that month.

8
 Solution and Answer
To determine Amlong’s total gross earnings
that month, we need to consider three things-
his basic salary, his monthly commission, and
his extra pay for working during 2 holidays.

It was given that his monthly basic salary is

₱22,000. Since there are 22 working days, his
daily rate can be computed as follows:

Daily Rate = 22,000 ÷ 22 = 1,000

9
 It was also mentioned that he would receive twice his daily
rate if he works during a holiday. This means that he will get an
additional pay of ₱1,000 for each holiday; so for the 2 holidays,
his pay can be computed as follows:
Extra Pay for the 2 Holidays = 2(1,000) = 2,000
His commission that month is 12% of his total sales of
₱30,000; that is,
Commission = (0.12)(30,000) = 3,600
His total gross earnings can be computed by adding his
salary, his extra pay for the 2 holidays, and his commission;
that is,
Gross Earnings = 22,000 + 2,000 + 3,600 = 27,600
Therefore, the amount of his gross earnings that month is
₱27,600.
10
⧠ By law, employers are required to withhold taxes
and other legal deductions from their employees’
salaries and to forward these to the concerned
government agencies.
⧠ Earlier we defined net earnings as the resulting
amount after the deductions are applied on the
gross earnings. The formula for computing the net
earnings is stated below.
Formula for Computing Net Earnings
The net earnings (N) can be determined by
subtracting the total legal deductions (d) from the
gross earnings (G). In symbols,
N=G-d

11
 Example 4: Calculating the
Net Earnings
An employee has a monthly salary
of ₱10,000. His legal deductions are
the following: ₱363 for the SSS
premium, ₱125 for PhilHealth, ₱200 for
Pag-IBIG fund, and ₱500 for the income
tax. How much is his net earnings in a
month?

12
 Solutions and Answers
The total deductions (d) can be computed by
adding the following amounts: ₱363 for SSS, ₱125
for PhilHealth, ₱200 for Pag-IBIG, and ₱500 for the
income tax. So we have:
d = 363 + 125 + 200 + 500 = 1,188
The amount of his gross earnings (G) is given as
₱10,000. So the net earnings can be computed as
follows:
N=G–d
= 10,000 – 1,188 = 8,812
Therefore, the employee’s net earnings is ₱8,812
13
 Example 5: Calculating the
Monthly Gross Earnings
Pilong works as a call center agent.
After his employer deducted ₱726 for
his SSS premium, ₱250 for PhilHealth,
₱400 for Pag-IBIG, and ₱1,000 for his
income tax, he received an amount of
₱17,624 as net earnings. How much is
his monthly gross earnings?

14
 Solution and Answer
We are asked to determine the monthly gross earnings
of Pilong. The amounts of his deductions were given in the
problem: ₱726 for SSS, ₱250 for PhilHealth, ₱400 for Pag-
IBIG, and ₱1,000 for his income tax. So the total deductions
(d) can be computed as follows:
d = 726 + 250 + 400 + 1,000 = 2,376
It was also given that the amount of his net earnings (N)
was ₱17,624. So from the formula for net earnings (N = G
+ d), we can derive the following formula for G, and then
substitute the known values of N and d; that is,
G=N+d
= 17,624 + 2,376 = 20,000
Therefore, Pilong’s monthly gross earnings is ₱20,000
15
 Taxable and
Nontaxable
Compensation
and Benefits
16
⧠ In the previous lesson, we
discussed that wage earners are
individuals who receive compensation
based on an hourly or daily rate of
pay and the number of hours or day
that they worked.
⧠ In this lesson, we will discuss the
basic Philippine labor laws and
regulations one by one, specifically
those that are related to the
compensation and benefits of wage
earners.
17
 MINIMUM WAGE
◊ Every Filipino wage earner should at least earn the
minimum wage in his or her region.
◊ Republic Act 6727 or the Wage Rationalization Act
states the required minimum wage per region, province,
and industry. The following table presents the daily
minimum wage rates (in Philippine pesos) in the different
regions and industries, as of August 2016:
Region Non- Agriculture: Agriculture:
Agriculture Plantation Non-
Plantation
CAR 454.00- 454.00 454.00
491.00
NCR 265.00- 255.00- 255.00-285.00
285.00 285.00
I 227.00- 233.00 227.00
253.00 18
 III 313.00- 298.00- 298.00-
364.00 334.00 334.00
IV-A 285.00- 275.00- 275.00-
378.50 353.50 333.50
IV-B 225.00- 230.00- 230.00-
285.00 235.00 235.00
V 248.00- 248.00 248.00
265.00
VI 256.50- 266.50 256.50
298.50
X
VII 303.00-
295.00- 291.00-
275.00- 291.00-
275.00-
318.00
353.00 306.00
335.00 306.00
335.00
XI
VIII 317.00
260.00 307.00
241.00 307.00
235.00
XII
IX 275.00
280.00 257.00
255.00 257.00
235.00
XIII 275.00 275.00 275.00
ARMM 265.00 255.00 255.00
Source: National Wages and Productivity Commission

19
 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.
◊ The Philippine Labor Code requires that the
maximum number of working hours per day should
be 8 hours. If a wage earner performs work beyond
8 hours, he or she is already working overtime.
◊ For every hour in excess of 8 hours in a day, he or
she should be entitled to an overtime pay that is
equivalent to at least 125% of his or her hourly
wage.

20
 Example 1: Calculating
Overtime Pay on a Regular
Working Day
During a mall sale, Amlong, who is
working as a bagger, rendered 4 hours
more than his required working hours.
If he is paid ₱50.50 an hour, how much
is his overtime pay?

21
 Solution and Answer
The overtime pay hour should be equal to
125% of an employee’s hourly wage. Thus,
Amlong’s overtime pay per hour is:
(1.25)(50.50) = 63.125
Since Amlong rendered 4 extra hours, his total
overtime pay is:
(4)(63.125) = ₱252.50

22
 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 holidays.
◊ 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.

23
◊ The Labor Code requires at least one (1) rest day per week
for all wage earners. Hence, every week, the maximum number
of working days should be 6 days.
◊ There are also three (3) identified special holidays in the
Philippines: Ninoy Aquino Day, All Saints Day, and the last
day of the year.
◊ Wage earners are not entitled to any compensation if they do
not work on these days. But if they work during such days, they
are entitled to a premium pay based on the following rates:
⦁If a wage earner performs work on his or her scheduled rest (for
example, Sunday) or on a special holiday, he or she is entitled to
a premium pay that is equivalent to his or her regular
daily wage plus at least 30% of his or her daily wage.
⦁If a wage earner performs work on a special holiday that falls
on his or her scheduled rest day, he or she is entitled to a
premium pay that is equivalent to his or her regular daily
wages plus at least 50% of his or her daily wage.
24
 Example 2: Computing the
Premium Pay on a Rest Day
or Special Holiday
Amlong works as a manager in a certain
company and earns a daily wage of ₱875. On
one of his rest days, the company needs his
service.
1. How much will be his premium pay if he
works during his rest day?
2. Suppose his rest day falls on All Saints Day
and he needs to work. How much will be his
premium pay?
25
 Solutions and Answers
1. If Amlong works on his rest day, he is entitled to
an additional compensation of 30% of his daily
wage. It was given that his daily wage is ₱875.
Hence, his additional compensation is:
30% of 875 = 0.3(875) = 262.50
Therefore, his premium pay on his rest day is
875 + 262.50 = ₱1,137.50

26
2. If his rest day falls on All Saints Day, which
is a special holiday, and he needs to work on
that day, then his premium pay is 50% higher
than his basic daily wage. So we get first the
50% of his daily rate; that is,
50% of 875 = 0.5(875) = 437.50
To get his premium pay, we get the total
amount of his additional pay and his daily
wage; that is,
437.50 + 875 = 1,312.50
Therefore, his premium pay on that day is
₱1,312.50

27
 PREMIUM PAY DURING
REGULAR HOLIDAYS
◊ Every Filipino wage earners is entitled to a holiday pay for
performing work on nonworking regular holidays.
◊ Unlike in the case of special holidays for which wage earners are
not compensated if they do not work, during regular holidays they
receive their basic wage even if they do not work. In the
Philippines, there are 12 regular holidays, as stated in the
Republic Act 9849. These are the following:
⦁ New Year’s Day ⦁ National
Heroes’ Day
⦁ Maundy Thursday ⦁ Eid ul Fitr
⦁ Good Friday ⦁ Eid ul Adha
⦁ Araw ng Kagitingan ⦁ Bonifacio Day
⦁ Labor Day ⦁ Christmas
Day
28
◊ A holiday pay refers to the additional
compensation required by law for work
performed within 8 hours on nonworking
regular holidays. The following are the holiday
pay rates:
⦁ If a wage earner performs work on a regular
holiday, he or she is entitled to a holiday pay
that is equivalent to at least twice his
regular daily wage.
⦁ If a wage earner performs work on a regular
holiday that falls on his or her scheduled rest
day, he or she is entitled to the holiday pay
rate (which is twice or 200% of his regular
daily wage) plus at least 30% of his or her
holiday pay rate. 29
 Example 3: Computing the
Holiday Pay
Suppose the daily wage of Amlong
is ₱620. Compute his holiday pay if he:
1. Did not work on a regular holiday
2. Worked on a regular holiday
3. Worked on a regular holiday which
happens to be his rest day

30
 Solutions and Answers
Since it is a regular holiday, Amlong will still receive his
daily wage of ₱620 even if he did not work on that day.
If Amlong worked on a regular holiday, then his holiday pay
should be at least twice of his basic wage; that is,
2(620) = 1,240
If Amlong worked on a regular holiday which happens to be
his rest day, then he will receive an amount that is 30% higher
than his regular holiday pay rate. His additional compensation
is computed as follows:
30% of 1,240 = (0.3)(1,240) = 372
Hence, his total pay is:
1,240 + 372 = ₱1,612

31
 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 employee who
works during the abovementioned condition.
For work performed between the given times,
the employee receives a night shift differential
that is equivalent to at least 10% of his
regular daily wage. The night shift
differential is given in order to encourage
employees to work during this less preferred
work shift. 32
 Example 4: Computing the
Night Shift Differential
A call center agent works 8 hours a
day and earns a daily wage of ₱750. If
he needs to work on a night shift (that
is, 10 PM to 6 AM) for 5 days in a
certain month, how much will he earn
for that month? Assume that there are
22 working days in a month.

33
 Solution and Answer
His monthly basic salary is computed as follows:
22(750) = 16,500
If he works on a night shift for 5 days, then he is
entitled to an additional payment of 10% of his daily
wage for 5 days; that is,
5(0.10)(750) = 375
Thus, he receives a night shift differential of ₱375
To find his gross earnings in a month, we add his basic
monthly salary and the night shift differential; that is,
16,500 + 375 = 16,875
Therefore, his gross earnings for that month is ₱16,875

34
 SERVICE CHARGE
◊ A wage earner in a company that collects service
fees from its clients is entitled to a service charge.
◊ A service charge is the amount that hotels,
restaurants, and similar establishments receive
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. The share of the employees shall be
equally distributed among them. Also, in cases
when the service charge is abolished for any reason,
the share of the covered employees should be
integrated in their wages.
35
 Example 5: Computing the
Share of a Wage Earner From a
Service Charge
An auto mechanic was asked to
change the oil and tune up Mr. Brent
Gustafson’s truck. After finishing the
work, Mr. Gustafson paid ₱800 for the
service charge. If the shop has 16
employees, how much of the service
charge will the mechanic receive?

36
 Solution and Answer
It was given that the service charge is ₱800. To get
the employees’ total share, we need to compute for 85%
of the service charge; that is,
85% of 800 = (0.85)(800) = 680
Since the result is the total share of the employees,
we need to divide it by the number of employees (which
is 16) to get each employee’s share; that is,
680 ÷ 16 = 42.50
Therefore, the mechanic will receive ₱42.50 from the
total service charge.

37
Note that the 6 types of compensation and
benefits that we discussed previously apply
to all wage earners except for the
following:

⧠ government employees
⧠ managerial employees
⧠ field personnel
⧠ domestic helpers
⧠ persons who are performing personal
service for another
⧠ workers who are paid by results or based
on their output
38
 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. If the service incentive leave
is not used at the end of the year, it can be converted
into cash by applying the daily wage rate of the
employee. One year of service means a service within
12 months, whether continuous or broken, reckoned
from the date the employee started working.

39
 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 for 60
days in case of normal delivery, or for 78 days in case of
caesarean delivery, for up to four pregnancies. The full
payment shall be advanced by the employer within 30
days from the filing of the maternity leave application
and the amount will be reimbursed by SSS to the
employer upon completion of all required documents.

40
◊ 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 paid by the employer and is not
reimbursed by the SSS. The paternity leave benefit is
one of the provisions in the Paternity Leave Act.
◊ 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. In order to be entitled
to this benefit, a solo-parent employee should have
rendered at least one year of service, whether
continuous or broken, for the same employer.

41
 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 basic
salary. It is computed on a prorated basis according
to the number of months within a year that the
employee has rendered service for the employer. It
is usually given by employers before December
24 of every year.
42
 Example 6: Computing the 13th
Month Pay of a Wage Earner
Amlong is a cashier in a department store. Below is a summary of
his basic salary each month in one year.

Month Basic
Salary
January ₱9,000 August ₱8,800
February ₱9,200 Septembe ₱9,300
March ₱8,800 r

April ₱9,300 October ₱9,200

May ₱9,000 Novembe ₱9,000

r
June ₱9,100
Decembe ₱9,000
July ₱9,000 r
How much is Amlong’sTotal
13th month ₱108,70
pay?
0
43
 Solution and Answer
It was given that Amlong’s annual basic salary
is ₱108,700. This amount can also be obtained by
adding all his basic monthly salaries in one year.
Recall that the 13th month pay must be at least
one-twelfth of an employee’s annual basic salary.
Thus, we compute 1/12 of ₱108,700; that is,
1/12(108,700) = 9,058.33
Hence, Amlong will receive a 13th month pay of at
least ₱9,058.33

44
 SEPARATION PAY
◊ Filipino wage earners who are validly dismissed from a company for
causes other than serious misconduct are entitled to a separation pay.
◊ The Labor Code has enumerated the following instances during which a
separation pay must be paid to a dismissed employee, including the
corresponding separation pay rate:
Cause of Dismissal Separation Pay Rate
1. Automation or installation of labor- At least one-month pay, or at least
saving devices one-month pay for every year of
2. Redundancy service, whichever is higher
3. Retrenchment
One-month pay or at least half-
4. Closure or cessation of operation of month pay for every year of
the establishment service, whichever is higher

Other specific provisions and requirements regarding the dismissal of

employees and the granting of separation pay are stated in the Labor Code.
45
 RETIREMENT PAY
◊ Upon reaching the retirement age, every eligible Filipino
wage earner is entitled to a retirement pay.
◊ Under the Labor Code, the retirement pay is equivalent
to at least half-month salary for every year of service. A
fraction of at least 6 months is considered as one whole
year.
◊ The retirement age is established in employment
contracts or in any agreement between employees and
their employer. In the absence of agreement, employees
may retire upon reaching the age of 60 or more, but not
more than 65, provided that they have served for at least
5 years in the same company. An age of 60 or more, but
below 65 is considered as the voluntary retirement age.
An age of 65 is considered as the compulsory
retirement age. 46
 Based on the tax code, the following benefits
are excluded from the computation of gross
income, provided that the amount remains below
₱82,000:

⦁ 13th month pay

⦁ Christmas bonuses
⦁ Productivity and incentive bonuses
⦁ Other benefits of the same nature in cash or in
kind

All of the abovementioned benefits are

nontaxable benefits.
In addition to these benefits, compensations of
small value, which are called de minimis
benefits, are also excluded from the
47
 The following are some examples of de minimis benefits,
all which are nontaxable, as identified by the Bureau of
Internal Revenue (BIR):

1. Monetized unused vacation leave credits of employees

not exceeding 10 days during the year
2. Monetized value of vacation and sick leave credits paid
to government officials and employees
3. Medical cash allowance to dependents of employees, not
exceeding ₱750 per employee per semester or ₱125 per
month
4. Rice subsidy of ₱1,500 or one sack of 50kg of rice per
month amounting to not more than ₱1,500
5. Uniform and clothing allowance not exceeding ₱5,000
per annum
48
6. Actual medical assistance: medical allowance to
cover medical and healthcare needs, annual
medical/executive checkup, maternity assistance, and
routine consultations, not exceeding ₱10,000 per annum
7. Laundry allowance not exceeding ₱300 per month
8. Employees’ achievement awards, which must be in
the form of tangible personal property other than cash
or gift certificate, with an annual monetary value not
exceeding ₱10,000
9. Gifts given during Christmas and major anniversary
celebrations not exceeding ₱5,000 per annum
10. Daily meal allowance for overtime work and night or
graveyard shift not exceeding 25% of the basic
minimum wage on a per-region basis

49
 For tax computation purposes, all other
benefits that are not included in the given list
are subject to applicable taxes; hence, they are
taxable benefits.
◊ A common example of a taxable benefit is the
housing or car benefits that are given to
eligible employees of a company.
◊ In general, all benefits and allowances that are
above the stated ceiling amount are taxable
and any excess on the stated maximum
amounts for de minimis benefits will also be
subjected to applicable taxes.

50
 Quiz
1. What do you call the total amount that people earn
for performing a specific job during a specific period?
2. What do you call the resulting amount after the
deductions had been applied on the gross earnings?
3. The Philippine Labor Code requires that the
maximum number of working hours per day should
be?
4. It refers to the additional compensation required by
law for work during nonworking days such as rest days
and special holidays.
5. Give one regular holiday in the Philippines.

51
6. It is the amount that hotels, restaurants, and similar
establishments receive from their clients as payment
for performing certain services.
7. It is a form of monetary benefit equivalent to the
monthly basic salary of an employee or at least one-
twelfth of his annual basic salary.
8-10. Suppose you have a monthly salary of ₱12,000
as an employee. During your free time, you also do
typing jobs in which you earn approximately ₱1,000 a
month. Aside from that, you also have 4 rooms that you
rent out to tenants at a monthly fee of ₱1,500 for each
room. Determine your monthly gross earnings.

52
1. Gross earnings
Answers
2. Net earnings
3. 8 hours
4. Premium pay
5. Any from the following:
⦁ New Year’s Day ⦁ National
Heroes’ Day
⦁ Maundy Thursday ⦁ Eid ul Fitr
⦁ Good Friday ⦁ Eid ul
Adha
⦁ Araw ng Kagitingan ⦁ Bonifacio
Day
⦁ Labor Day ⦁
Christmas Day
53
⦁ Independence Day ⦁ Rizal Day
6. Service charge
7. 13th month pay
8-10. Solution:
Rent fees (4 rooms):
4(1,500) = 6,000
Gross earnings:
12,000 + 1,000 + 6,000 = 19,000
Therefore the monthly gross earnings is
₱19,000.

54
-End of Presentation-

Thank you for listening!

Group 8 Members:
Avila, Princess Ann
Magpale, Mariz
Sy, Mikaela

55