For those who do not know how to compute payroll in the Philippines, this is a simple payroll computation guide. In this guide, I will be breaking down the payroll process into simple steps with an example. You should already have some knowledge about the different compensation related regulations in the Philippines.
Day Factor and Employee’s Daily Rate
|Payroll Philippines||5 days work week||6 days work week|
|Not Paid on
|Not Paid on
|Daily Rate||P15,000 × 12 / 365 = P493.15||P15,000 × 12 / 261 = P689.66||P15,000 × 12 / 365 = P493.15||P15,000 × 12 / 313 = P575.08|
- Formula to compute the employee’s daily rate = Monthly Salary × 12 ÷ Day Factor
- Daily rate must be higher than the minimum daily wage.
Payroll Computation Rates
|Payroll Philippines||Normal Day||Rest Day||Special Non Working Day||Regular Holiday|
|Night Shift Differential (NSD)||110%||143%||143%||220%|
|OT + NSD||143%||185.9%||185.9%||286%|
- Overtime is beyond 8 hours in a single workday, except in flexible work arrangements such as compressed work week.
- Night shift differential is from 10pm to 6am the following day.
- If the day factor is 365, rest day is paid even when no work is done.
Processing of Payroll
|Monthly Salary (Day Factor = 261)||P15,000|
|Salary Rate||Daily = P689.66
Hourly = P86.21
|Undertime||2 Hours||P86.21 × 2 =||– P172.42|
|Absences||1 Day||P689.66 × 1 =||– P689.66|
|Overtime on Normal Day||4 Hours||P86.21 × 4 × 125% =||+ P431.05|
|Night Shift Differential||4 Hours||P86.21 × 4 × 10% =||+ P34.48|
|Rest Day Work||1 Day||P689.66 × 130% =||+ P896.56|
|Special Non Working Day Work||1 Day||P689.66 × 30% =||+ P206.90|
- Gross salary is how much the employee earned, including overtime, night shift differential and other additional compensation, based on actual number hours of work.
- Deduction of undertime must be based on the employee’s tardiness and salary. If the employee is late for 1 minute, the deduction must not be based more than 1 minute. In essence, the employer must not deduct more than what the employee would have earned if the employee is not late.
If you compute your own payroll, you are required to keep track of the number of hours of undertime, overtime and night shift differential accurately.
Mandatory Payroll Deductions in the Philippines
|SSS Contribution||– P581.30|
|Philhealth Contribution||– P187.50|
|HDMF Contribution||– P100.00|
|Withholding Tax||– P1,717.33|
|Loan (SSS Loan, HDMF Loan if any)||0|
- SSS, Philhealth and HDMF contribution is based on their individual contribution schedule
- Taxable income is excluding SSS, Philhealth and HDMF contributions. The withholding tax amount used in the example is assuming the employee is single without any dependent.
- Any loan amount will be deducted last.
The example used in this payroll computation guide is based on monthly cut-off. However, most companies process their payroll on a semi-monthly schedule. That may affect how a company process the mandatory deductions.