Standard Deductions

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People are
mindful when it
comes to their
pay.

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Employees must
understand that their basic
pay may not be equivalent
to their “take-home pay.”

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One way to avoid
confusion is to understand
the standard items
deducted from one’s basic
salary.

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WHERE DID JAMES’S MONEY GO?

James works in AA Company. He notices a 1.75% deduction

for health insurance for his first payslip, another 4.5% for
life insurance and, ₱1,083 for the income tax. If his basic
salary is ₱28,000, how much do you think is the take-home
pay of James?

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SOLUTION

Step 1: Identify what is required in the problem.

You are asked how much is James’ take-home pay (T)
after deductions (d) are subtracted from his basic salary.

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SOLUTION

Step 2: Identify the given in the problem.

₱ 28,000 basic pay (b)

₱ 1,083 income tax (i)

1.75% health insurance (h)

4.5% life insurance (l)

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SOLUTION

Step 3: Write the working equation.

Step 4: Substitute the given values.

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SOLUTION

Step 5: Find the answer.

James’s take-home pay is ₱25,167 after standard deductions are

subtracted from the total salary amount.

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QUESTIONS TO PONDER
1. What are the different standard deductions?
2. How are standard deductions computed?
3. How important is the understanding of standard
deduction?

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How will standard deductions affect an
employee in the long run?

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 STANDARD DEDUCTIONS

The Philippine Labor Code prohibits employers

from withholding their employees’ wages or
deducting any amount.

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 STANDARD DEDUCTIONS

However, there are certain exceptions:

● social insurance premiums
● income taxes
● union dues

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 STANDARD DEDUCTION

what is left of the gross

NET EARNINGS earning after deductions are
applied

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 STANDARD DEDUCTION

the amount subtracted

directly from the gross
STANDARD
earnings as regular payment
DEDUCTION
for insurance, taxes, and
even loans

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 SSS CONTRIBUTION

● covers all employees of

private companies and
enterprises
● fixed percentage of 13%
○ employee share: 4.5%
○ employer share: 8.5%

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 SSS CONTRIBUTION

Table 1. SSS Contribution Table

Monthly Salary Employee’s Share

₱3,000 and below (minimum) ₱135

₱3,001 - ₱24,999.99 4.5%

₱25,000 and above (maximum) ₱1,125

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 SSS Contribution: Example 1

If the monthly salary is ₱30,000, how much will their

SSS contribution be?
Solution:
Since ₱30,000 belongs to the maximum salary bracket,
the SSS contribution must be ₱1,125.

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 SSS Contribution: Example 2

2. How much should be deducted from an

employee’s salary for SSS contribution if the salary is
equal to ₱18,000?
Solution:

SSS Contribution = Monthly salary x 4.5%

SSS Contribution = ₱18,000 x 0.045

SSS Contribution = ₱810

SSS contribution should be ₱810.

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 PHILHEALTH CONTRIBUTION

● covers both private and government employees

● provides health-related assistance to its clients
● follows a salary bracketing

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 PHILHEALTH CONTRIBUTION

Table 2. PhilHealth Contribution

Year Basic Monthly Salary Employee’s Share

₱10,000 and below ₱175

2021
₱10,001 - ₱ 69 999.99 1.75%

₱70,000 and above ₱1,225

₱10,000 and below ₱ 200

2022
₱10,001 - ₱ 79 999.99 2%

₱80,000 and above ₱1,600

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 PHILHEALTH CONTRIBUTION

Table 2. PhilHealth Contribution

Year Basic Monthly Salary Employee’s Share

₱10,000 and below ₱225

2023
₱10,001 - ₱ 89 999.99 2.25%

₱90,000 and above ₱2,025

₱10,000 and below ₱250

2024-2025
₱10,001 - ₱99,999.99 2.5%

₱100,000 and above ₱2,500

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 PhilHealth Contribution: Example 1

For 2021, how much will be deducted for PhilHealth’s

contribution if the salary is equal to ₱15,000?

Solution

PhilHealth Contribution = Monthly salary x rate

PhilHealth Contribution = ₱15,000 x 0.0175

PhilHealth Contribution = ₱262.5

Therefore, the PhilHealth contribution is equal to ₱262.50.

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 PhilHealth Contribution: Example 2

How much is the PhilHealth contribution of an employee

with a monthly salary of ₱85,000? (Assume that the year
is 2021)

Solution
Since ₱85,000 is the maximum salary bracket for 2021,
the PhilHealth contribution must be ₱1,225.

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 GSIS CONTRIBUTION

● a government-owned and
controlled social
insurance institution
● covers all government
personnel (permanent
and non-permanent)

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 GSIS CONTRIBUTION

Table 3. GSIS Contribution

Monthly Salary Employee’s Share

No minimum/maximum 9%

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 GSIS Contribution: Example 1

How much is deducted from a government employee's pay

for GSIS contribution if they have a monthly salary of ₱28,276?

Solution:

GSIS Contribution = Monthly salary x 9%

GSIS Contribution = ₱28,276 x 0.09

GSIS Contribution = ₱2,544.84

A government employee with a monthly salary of ₱28,276

pays ₱ 2,544.84 for GSIS contribution.
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 GSIS Contribution: Example 2

How much is the deduction for the GSIS contribution an

employee receives ₱33,556 monthly?

Solution:

GSIS Contribution = Monthly salary x 9%

GSIS Contribution = ₱33,556 x 0.09

GSIS Contribution = ₱3,020.04

The employee with a monthly salary of ₱33,556 pays

₱3,020.04 for GSIS contribution.
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 PAG-IBIG CONTRIBUTION

● includes both private and

government employees
provides various savings
programs, loans, and
affordable home financing

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 PAG-IBIG CONTRIBUTION

Table 4 Pag-Ibig Contribution

Monthly Salary Employee’s Share

₱1,500 and below 1%

₱1,501 - ₱4,999 2%

Over ₱ 5,000 ₱100

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 Pag-IBIG Contribution: Example 1

If the monthly salary is ₱30,000, how much will their

Pag-IBIG contribution be?
Solution:
Since the employee receives a salary more than the
maximum bracket of ₱5,000, the Pag-IBIG contribution
must be ₱100.

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 Pag-IBIG Contribution: Example 2

How much will an employee’s Pag-IBIG contribution

be if he receives a monthly salary of ₱15,000?
Solution:
Since the employee receives a salary more than the
maximum bracket of ₱5,000, the Pag-IBIG contribution
must be ₱100.

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 INCOME TAX

● based on salary brackets

● the higher the income, the
higher the income tax rate

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 INCOME TAX

Table 5. Income Tax

Annual Taxable Income Annual Income Tax

₱250 000 and below None (0%)

over ₱250,000 up to ₱400,000 ₱ 0 + 20% of excess over ₱ 250,000

over ₱400,000 up to ₱800,000 ₱30,000 + 25% of excess over ₱400,000

over ₱800,000 up to ₱2,000,000 ₱130,000 + 30% of excess over ₱800,000

over ₱2,000,000 up to ₱8,000,000 ₱490,000 + 32% of excess over ₱2,000,000

above ₱8,000,000 ₱2,410,000 + 35% of excess over ₱8,000,000

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 Putting Everything Together: Income Tax

How much is the income tax of an employee

working in a private company if he earns ₱25,000
monthly?

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 Putting Everything Together: Income Tax

Compute for standard deductions:

● SSS Contribution (Private). Since ₱25,000 belongs to the
maximum salary bracket, the SSS contribution must be
₱1,125.
● PhilHealth Contribution. PhilHealth Contribution equals
₱25,000 x 0.0175 or ₱437.50
● Pag-IBIG Contribution. Since the salary is more than ₱5,000,
then the Pag-IBIG contribution must be ₱100.

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 Putting Everything Together: Income Tax

Total annual contribution:

Total annual contribution = (SSS+PhilHealth+Pag-IBIG) x 12

Total annual contribution = (₱1,125+ ₱437.5+ ₱100) x 12

Total annual contribution = (₱1,662.5) x 12

Total annual contribution = ₱19,950

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 Putting Everything Together: Income Tax

Annual gross income:

Annual gross income = gross monthly income x 12

Annual gross income = ₱25,000 x 12

Annual gross income = ₱300,000

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 Putting Everything Together: Income Tax

Annual Taxable Income:

Annual Taxable Income = annual gross income - total annual

contribution

Annual Taxable Income = ₱300,000 - ₱19,950

Annual Taxable Income = ₱280,050

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 Putting Everything Together: Income Tax

Excess

Excess = Annual Taxable Income - Minimum

Excess = ₱280,050 - ₱250,000

Excess = ₱30,050

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 Putting Everything Together: Income Tax

Monthly Income Tax

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 AN EMPLOYEE RECEIVES ₱24,400 MONTHLY SALARY.
1 HOW MUCH IS THE DEDUCTION FOR HIS SSS
CONTRIBUTION?

Answer area

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 WHAT IS THE TOTAL DEDUCTION FOR SSS,
2 PHILHEALTH, AND PAG-IBIG ON A SALARY EQUAL TO
₱14,900?

Answer area

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 PROBLEMS INVOLVING STANDARD
DEDUCTIONS
You can use our knowledge about standard deductions
to solve some salary and wages problems. Examine how
the following problems involving standard deductions
were solved.

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 Example 1

Jerome works in a government hospital. His usual income

tax is ₱4,760. If his monthly salary is ₱55,880, how much
will his gross pay be after other standard deductions are
applied?

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 Example 1

Solution
Step 1: Identify what is required in the problem.
You are asked to determine the gross pay (GP).

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 Example 1

Step 2: Identify the given in the problem.

₱ 55,880 salary (s)
₱ 4,760 income tax (t)
9% (s) GSIS
1.75% (s) PhilHealth
₱ 100 Pag-IBIG

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 Example 1

Step 3: Write the working equation.

Step 4: Substitute the given values.

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 Example 1

Step 5: Find the answer.

Therefore, Jerome will have a gross pay of ₱ 45,012.9.

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 Example 2

Example 2
As a sales attendant, Jane receives a basic monthly salary
of ₱17,500. How much will her total deduction be if all
standard deductions are applied?

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 Example 2

Solution
Step 1: Identify what is required in the problem.
You are asked to determine total standard
deductions (T).

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 Example 2

Step 2: Identify the given in the problem.

₱ 17,500 monthly salary (m)
₱0 income tax (i) (annual income <
₱ 250,000)
4.5%(m) SSS contribution
1.75%(m) PhilHealth contribution
₱ 100 Pag-IBIG contribution (p)
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 Example 2

Step 3: Write the working equation.

Step 4: Substitute the given values.

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 Example 2

Step 5: Find the answer.

Jane’s total deduction is equal to ₱1,193.75.

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 LUKE, A NEWLY HIRED GOVERNMENT EMPLOYEE, SIGNS A
CONTRACT. THE CONTRACT SPECIFIES HIS MONTHLY SALARY,
3 WHICH IS ₱49,190. HOW MUCH WILL HIS MONTHLY INCOME
TAX BE?
Answer area

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 THELMA WORKS IN A HIGH-END RESORT. HOW MUCH IS
4 THELMA’S NET PAY IN 2021 IF THE RESORT PAYS HER ₱35,000 A
MONTH?
Answer area

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● Standard deduction is the amount subtracted directly from the
gross earnings as regular insurance, taxes, and even loans. After the
deduction, what’s left is called the net earnings.
● Some standard deductions are SSS, GSIS, PhilHealth, Pag-IBIG, and
Income Tax.

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 Standard
Salary Employee’s Share
Deductions

₱ 3 000 and below ₱ 135

SSS ₱ 3 001 - ₱ 24 999.99 4.5%

₱ 25 000 and above ₱ 1 125

GSIS No max/min 9%

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 Standard
Salary Employee’s Share
Deductions

₱ 10 000 and below ₱ 175

PhilHealth ₱ 10 001 - 69 999.99 1.75%

₱ 70 000 and above ₱ 1 225

₱ 1 500 and below 1%

Pag-IBIG ₱ 1 501 - ₱ 4 999 2%

Over ₱ 5 000 ₱ 100

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Identify the standard deduction being described by each statement

1. It covers employees from private companies.

Answer area

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Identify the standard deduction being described by each statement

2. A standard deduction with the lowest rate.

Answer area

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Identify the standard deduction being described by each statement

3. Employee’s share is uniform in rate no matter the salary.

Answer area

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Identify the standard deduction being described by each statement

4. Minimum wage earners are exempted to pay this

contribution.

Answer area

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Identify the standard deduction being described by each statement

5. A standard contribution which has a staggering increase

for the next 4 years.

Answer area

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Complete the table by computing each of the standard deductions of
each employee. Calculate the net earnings for each.

Monthly
Phil Pag- Income Net
Employee Basic SSS GSIS
Health IBIG Tax Earnings
Salary

1
₱6,000

2
₱19,000

3 ₱46,000

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Solve the following problems:
1. Hanna is torn between two opportunities; a position in a
government office or a position in a private company. Both
offer the same salary, which is ₱ 28,000. If Hanna wants
higher take-home pay, what should she choose? (Assume
all standard deductions are applied).
Answer area

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Solve the following problems:
2. Julie has observed how much deduction is taken from his
monthly salary for working in a private firm for the past
months. If he is paid ₱29,500 monthly, how much did he
pay for ten months?

Answer area

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