Employee Compensation + Payroll Deductions

EMPLOYEE COMPENSATION
PAYROLL DEDUCTIONS
Lesson Objectives
At the end of this lesson, the students should be able to:
1. define employee compensation;
2. differentiate salary, wage, and income;
3. solve problems related to piece-rate earners and hourly-paid earners
including overtime pay;
4. convert annual salaries to monthly, semi-monthly, and weekly
salaries;
5. enumerate and define the different benefits given to an employee;
6. compute for overtime pay;
7. compute for gross earnings to include overtime pay and net
earnings/pay considering the different payroll deductions;
8. distinguish taxable from non-taxable employee benefits; and
9. use e-spread sheet in the computation of regular pay, overtime pay,
gross earnings, deductions, and net pay.
Lesson Objectives
At the end of this lesson, the students should be able to:
1. identify the different payroll deductions;
2. compute the different standard payroll deductions;
3. compute for net pay;
4. prepare a salary graph; and
5. use Excel to compute for gross earnings and net pay.
Wages
refer to the earnings received by a worker on a piece rate,
hourly rate, or daily rate
Piece Rate
Tammy is paid on a per piece basis at the rate of ₱1.20 per
piece. If she finishes 360 pieces for a week, how much is her
total earnings?
Total earnings = Quantity × Rate
= 360 × ₱1.20
= ₱432
Hourly Rate
If an employee worked for 40 hours during the week and his
rate is ₱10 per hour, his wage is:
40 hours × ₱10/hour = ₱400.
Consumption of Overtime Pay
Assuming that the minimum daily wage rate is ₱340, how
much is the overtime rate per hour?
On Ordinary Day
Regular hourly rate = Daily wage rate ÷ 8 hours
= ₱340 ÷ 8 hours = ₱42.50 per hour
Overtime rate = Regular rate + 25% of Regular rate
= ₱42.50 + (25% of ₱ 42.50)
= ₱42.50 + ₱10.625
= ₱53.125
On Rest Day and Special Day
The hourly rate on rest day and special day is 130% of the regular rates.
Hourly rate = 130% of Regular hourly rate

= 130% × ₱42.50 = ₱55.25
Overtime rate = Rate on rest day + 30% of rate on rest day
= ₱55.25 + (30% of ₱ 55.25)
= ₱55.25 + ₱16.575
= ₱71.825
On Rest Day which Falls on a Special Day

= 150% × ₱42.50 = ₱63.75
Overtime rate = Rate on rest day + 30% of rate on rest day
= ₱63.75 + (30% of ₱63.75)
= ₱63.75 + ₱19.125
= ₱82.875
On a Regular Holiday

= 200% × ₱42.50 = ₱85
Overtime rate = Rate on rest day + 30% of rate on reg holiday
= ₱85 + (30% of ₱85)
= ₱85 + ₱25.50
= ₱110.50
On a Rest Day which Falls on a Regular Holiday

= 260% × ₱42.50 = ₱110.50
Overtime rate = Rate on rest day + 30% of rate on reg holiday
= ₱110.50 + (30% of ₱110.50)
= ₱110.50 + ₱33.15
= ₱143.65
Salary
refer to the earnings of employees paid on a monthly or annual basis
Let us study the conversions, assuming an annual salary of ₱72,000:

𝐴𝑛𝑛𝑢𝑎𝑙 𝑠𝑎𝑙𝑎𝑟𝑦 ₱72,000
a. Monthly = = = ₱6,000
12 12
b. Semi-monthly = = = ₱3,000
24 24
c. Weekly = = = ₱1,384.62
52 52
d. Bi-weekly = = = ₱2,769.23
26 26
𝑊𝑒𝑒𝑘𝑙𝑦 𝑟𝑎𝑡𝑒 ₱1,384.62
If week load is 40 hours: Hourly rate = = = ₱34.62
40 ℎ𝑜𝑢𝑟𝑠 40 ℎ𝑜𝑢𝑟𝑠
𝑊𝑒𝑒𝑘𝑙𝑦 𝑟𝑎𝑡𝑒 ₱1,384.62
If week load is 48 hours: Hourly rate = = = ₱28.85
48 ℎ𝑜𝑢𝑟𝑠 48 ℎ𝑜𝑢𝑟𝑠
Income
is a broader term than waves or salary
Janine is a stockholder of the Wisdom Corporation. For the

current year, the corporation declared a 10% cash dividend to
stockholders. Janine owns 1,000 shares of the company’s ₱10
par value shares.
Dividend income = No of shares × Par value × Dividend rate

= 1,000 × ₱10 par value × 10%
= ₱1,000
Net Pay
Joy receives a basic pay of ₱8,500 a month and a 1% commission on her
sales. She sold ₱65,000 for the month. Her deductions are: 4% for SSS
based on her basic monthly pay; ₱100 for PhilHealth; Pag-IBIG, 2%; and
10% Withholding Tax based on gross earnings.
Gross earnings = Monthly pay + Commission

= ₱8,500 + (1% × ₱65,000) = ₱9,150
Deductions: SSS = 4% × ₱8,500 = ₱340
PhilHealth = ₱100
Pag-IBIG = 2% × ₱9,150 = ₱183
Withholding tax = 10% × ₱9,150 = ₱915
Net Pay = Gross Earnings – Deductions
= ₱9,150 – (₱340 + ₱100 + ₱183 + ₱915) = ₱7,612
Salary Graph
Gross earnings ₱9,150 100%
SSS ₱340 4%
PhilHealth ₱100 1%
₱1,538 17%
Pag-IBIG ₱183 2%
Witholding tax ₱915 10%
Net pay ₱7,612 83%
PhilHealth
Pag-IBIG
W Tax
Net Pay
Exercises
1. Mia was able to finish 435 pieces of their product. Find
her gross earnings using the piece-rate plan: ₱0.95 for the
first 100, ₱1.2 for the next 200, ₱1.4 for the rest.
2. Ana’s regular daily rate is ₱420. If she works 11 and a half
hours on a regular day, how much would she be paid?
3. Mike receives a monthly salary of ₱20,000. Compute for
his annual, weekly, semi-monthly, and hourly rate for 40-
hour week salary.
4. Ria has a basic monthly pay of ₱20,000. She pays 9% for
Withholding tax , ₱500 for PhilHealth, 4.5% for SSS, and
2% for Pag-IBIG. Compute for her “take home” pay.

Employee Compensation + Payroll Deductions

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EMPLOYEE COMPENSATION

Hourly rate = 130% of Regular hourly rate

Hourly rate = 150% of Regular hourly rate

Hourly rate = 200% of Regular hourly rate

Hourly rate = 260% of Regular hourly rate

Let us study the conversions, assuming an annual salary of ₱72,000:

Janine is a stockholder of the Wisdom Corporation. For the

Dividend income = No of shares × Par value × Dividend rate

Gross earnings = Monthly pay + Commission

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