What Is HRIS?

HRIS

HRIS is an abbreviation for Human Resource Information System. It is a system designed to help human resource professionals to achieve greater efficiency in handling human resources activities and improve effectiveness in HR decision making.

A complete suite of HRIS usually covers all functions of human resources department. Therefore, a HRIS is often split into multiple separate modules so that companies only need to purchase or subscribe to the services that they need. And these are the common modules of a HRIS.

Core HR

The core HR module is also commonly known as personnel management or the 201 file of the employees. This module maintains all employees information including personal information, qualifications, work experience etc. The information in this module is used by all other modules of the HRIS.

Attendance, Timekeeping and Leave Management

The attendance, timekeeping and leave management module focuses on tracking the attendance, absences and the working hours of the employees. It helps companies to understand the amount of time employees spent at work, including tardiness, overtime and night shift differential. And it also tracks the type of employees’ absences from work, such as vacation, sick, maternity leave etc.

Payroll Management

The payroll module of a HRIS is responsible for the processing of the payroll. It is an advantage to have an integrated payroll system so that employees information flow seamlessly from the other modules to ensure the accuracy of the payroll.

Recruitment Management

The recruitment management module, sometimes known as applicant tracking system helps companies to manage their recruitment needs. It can be used to handle job postings across different platforms, sort and manage resumes, schedule interviews and communicate with the applicants.

Onboarding and Offboarding

This module automates the procedure of bringing an employee into a company and the procedure of exiting from the company. For onboarding, it may include tracking and monitoring of the submission of pre-employment documents, induction, and orientation. For offboarding, it helps to ensure a smooth transition to related employees, managing clearance procedures and addressing any outstanding issues between the company and the employee.

Talent Management

Talent management or performance management, this module focuses on understanding and developing employees for the future. It involves establishing, communicating, monitoring and evaluating of employee’s achievement of the targets and goals. Companies can also identify gaps in key competencies and develop these competencies in their employees. This module in HRIS may also include succession planning which allows companies to identify and develop potential employees for leadership roles.

Compensation & Benefits

This module of the HRIS allows companies to analyze, review and manage the company’s compensation plan and structure to ensure internal and external equity. Companies can define salary ranges for different job grades, adjust the different compensation components, and set up any number of benefits plan to suit their requirements. These allow companies to easily develop unique and competitive compensation package to attract and retain talents in the company.

Learning & Development

The learning and development module, or the learning management system (LMS) is used to identify the training needs within the company; schedule and manage the training; and, evaluate and review the training after it is done. This will help companies to ensure their employees are equipped with the right skills and certification to do their job. Depending on the HRIS, some LMS also allows employees to share their knowledge and relevant content through videos and quizzes.

How does the Company decide Your Salary?

How does the company decide your salary

Salary may not be the most important factor, but it has consistently been the top 5 factors that employees are looking for. Since it is so important, do you know how does the company decide your salary? And by knowing how the company decides your salary, it also helps you to understand what to do to increase your salary.

Same Job, Same Pay vs Competency based

Most companies decide an employee’s salary based on the job scope, duties and responsibilities. These companies generally follow a same job, same pay philosophy although there may be variances in different employees’ salary who are doing the same job. This is to cater to differences in the individual’s qualification, experience and competencies. However, generally, all jobs of the same job grade will fall under the same salary range. Therefore, in order for you to have a jump in your salary, you need to move to a higher level job. Otherwise, the increment may be only marginal.

On the other hand, some employees may be paid mainly based on their competencies. This may happen when the job has unique duties and responsibilities within the company or the industry. The competencies required for the job are in high demand or not commonly found in the labor market. For such jobs, the increment of salary is usually based on acquiring additional skills or knowledge.

There are also companies adopting a mixed approach to employees’ compensation. While there is a fixed job and compensation structure, the companies also take into consideration the individual’s competencies and the potential for leadership succession.

What About Qualification and Experience?

Contrary to popular belief, qualification and experience are not the main factors to receiving high salary. They are most of the time requirements to qualify for the job interview.

In fact, the only way to increase your salary is to increase your value by expanding your knowledge and upgrading your skills. But don’t mistake your qualification as knowledge and years of doing the same job as skills.

Types of Payroll System in the Philippines

Types of Payroll System in the Philippines

With so many different payroll systems in the Philippines, it may be confusing for some companies to choose the right payroll system for them without understanding their differences. So what are the different types of payroll system in the Philippines? And how to choose the right type of payroll system for the company?

On-Premise Payroll Software vs Cloud-based Payroll System

The first question that companies need to ask themselves is if they wish to buy a payroll software or subscribe to a cloud-based payroll system. Before deciding on the type of payroll system, the company needs to consider several factors such as the customization and integration of the system, and the cost of the payroll system.

Companies who choose to purchase an on-premise type of payroll software will have full control over the security of the system and the privacy of their employees’ information. They also have a greater flexibility to customize the payroll software to cater to their needs. Therefore, these companies are more likely to be able to integrate their payroll software with other ERP software. However, that means these companies are also more likely to require dedicated IT staff to customize, maintain and update the payroll software themselves.

On the other hand, companies subscribing to a cloud-based type of payroll system need not worry about the technical aspect of the system such as hardware and software compatibility, and data storage and security. It is also much easier to setup and implement the payroll system with standardized settings. Furthermore, the cost of subscription is likely to be monthly rather than a one-time fee which is usually substantially higher.

On-Premise Payroll Software Cloud-based Payroll System
Data Security Full control Depending on provider
Information Privacy Full control Depending on provider
Hardware & Software Compatibility Must be compatible No problem
Integration with other Software Highly Achieveable Depending on provider
Cost & Budget One-time fee Monthly subscription
IT Staff requirement Yes or outsource Generally no

Modular HRMS vs Dedicated Payroll System

Another consideration is the extent of automation for the human resources department. Besides the payroll system, some companies may also require learning and development management system, performance management system and applicant tracking system. All of these can be found in a human resources management system (HRMS) or human resources information system (HRIS). The payroll system is only a module of the HRMS or HRIS.

If the company intends to automate other functions of the human resources department, it will be advisable to choose a HRMS or HRIS. Because the integration will be much smoother. The whole system should be able to work together properly without much problems and without much modification if any. However, modular HRMS or HRIS usually cost higher than a dedicated payroll system. And when the company does not purchase or subscribe to the whole service, some parts of the core HR module may be redundant.

How to choose a Payroll System in the Philippines

How to choose a payroll system in the Philippines

Choosing the right payroll system is critical for a smooth transition and effective execution of the human resources policies. Because not all payroll systems are the same. Besides, changing from one system to another system is tedious. Other than the migration of data and learning how to use the system, the company may also need to update their procedures. Therefore, there are a lot of work involved in setting up a payroll system. Therefore, it is important to choose a payroll system that is suitable for the company.

Payroll System in the Philippines

So, to choose a payroll system in the Philippines, the company needs to understand the flexibility of the payroll system and what are the company’s requirements. A payroll system is basically made up of 5 areas – employee management, attendance management, leave management, payroll processing and reports and analytics. So follow the checklist below to mark out the company’s requirements and check with the payroll system vendors if they are able to meet the company’s requirements.

Employee Management

Employee management is basically the employee’s 201 files. However, a payroll system is only a part of a human resources management system, there may be some features that are desirable but not available in a typical payroll system.

Remarks
Does the company wish to upload employees picture?
Does the company wish to upload employees documents?
Does the company require an employee’s platform (employee e-service)?
Does the company allow online leave application?
Does the company allow checking and printing of payslip online?
Does the company allow employees to self-update their personal details?

Attendance Management

The monitoring of employees’ attendance in the Philippines is required by law as most employees are paid by the number of hours that they worked. So employers need to be able to adjust their employees’ attendance settings in the payroll system to accurately detect the employees working hours including their overtime and night shift differential if any.

Remarks
Can the company change the day factor for monthly salaried employees?
Does the company have shifting schedule?
Are the employees allowed to swap shifts on their own?
Are the managers allowed to allocate shifts?
Do employees have fixed rest day?
Are employees allowed to swap their rest day?
Do managers need to approve the swapping of employees’ rest day?
Are all employees entitled to overtime pay?
Can the company change the overtime pay rate?
Do employees need to apply for overtime pay?
Do managers need to approve employee’s overtime?
Can the company change the night shift differential rate?
Does the company have a grace period for tardiness?
Does the company have a different grace period for different groups of employees?
Does the company deduct employee’s salary for tardiness?
Does the company have flexible work arrangements?
Can the company change the premium pay rate?
Can the company change the holiday pay rate?

Leave Management

Different companies have different leave policies. Therefore the leave management system needs to be flexible enough to accommodate the different leave policies. For instance, the company may increase the number of vacation leaves according to the employee’s number of years of service. If the system is able to detect and apply the policy automatically, then the human resources officer does not need to track it manually.

Remarks
Does the company have an encashment policy?
Does the company have a limit for the maximum number of leaves to encash?
Does the company allow balance leaves to be brought forward to next year?
Does the company have a limit for the maximum number of leaves to be brought forward to next year?
Does the company have a different leave policy for different groups of employees?
Does the company have a leave increment policy according to years of service?
Does the company require supporting documents for leave application?
Do managers need to approve the leave?
Does the company pro-rate the leaves?

Payroll Processing

Payroll processing may be the most standardized component of a payroll system. This is after all supposed to be the expertise of the payroll system vendors. However, not all companies follow the best practices in the processing of payroll. Therefore, there may be some differences in the way different companies process their payroll.

Remarks
What is the employee’s withholding tax on compensation category?
Does the company provide de minimis benefits?
Does the company provide non-taxable compensation?
Is the mandated contribution fixed based on employee’s monthly basic salary?
Is the mandated contribution based on the employee’s monthly gross salary?
Is the mandated contribution deducted every payroll?
Is the mandated contribution deducted every end of the month?
Does the payroll need to be approved?
When does the company pay out the 13th-month pay?
When does the company perform the reconciliation?
How does the company process employee’s final pay?

Report And Analytics

All payroll systems should provide the standard reports for submission to DOLE, BIR, SSS, Philhealth and HDMF. For the required reports, please refer to the respective institution website. However, there are some additional reports and documents that can help human resources staff to be more efficient if these are automated.

Remarks
Does the company provide a standard certificate of employment?
Does the company provide a standard reference letter?
Does the company require a quitclaim deed for separated employees?
Does the company analyze the cost of employees’ tardiness?
Does the company analyze employees’ leave and attendance?
Does the company analyze the demographics of the employees?
Does the company analyze the manpower cost of different departments?
Does the company analyze the manpower cost of different projects?
Does the company analyze the total manpower cost per month, quarter, year?

These are just some of the simple settings that may affect the choice of the company’s payroll system. Companies may also have their own consideration such as the communication between the HR, managers and employees. It is important to go through the requirements and add in the missing ones. Then compare the cost and functionalities of the different payroll system in the Philippines before making a choice.

Different Types of Attendance Monitoring System in the Philippines

Attendance Monitoring System

It is important to be able to monitor the employees’ attendance accurately as most employees are paid based on the number of hours that they worked. Therefore, most companies use a time and attendance monitoring system to track the employees’ working hours. However, when choosing the type of attendance monitoring system, different companies have different considerations. So what are the different types of attendance monitoring system that companies can consider?

Bundy Clock

Bundy clock is the traditional way of monitoring an employee’s attendance. Before the rise of other more efficient time and attendance system, the bundy clock is the most widely used device to monitor the employee’s working hours. Every employee has his or her time card or punch card which they will slot into the bundy clock. The bundy clock will then print the current date and time onto the time card which will be used to compute the employee’s working hours for the day. So the employee needs to punch in when he reports to work and punch out when he leaves the office. This is the cheapest attendance monitoring system among all.

Biometric Attendance System

In replacement of the bundy clock is the biometric attendance system. The biometric attendance system uses unique individual biological traits as the employee ID to identify the person and record the attendance. The most common form of biometric attendance system is the fingerprint attendance system.

First, employees will register their fingerprint pattern in the system using the fingerprint scanner. Thereafter, employees will be able to time in and time out by scanning their fingerprint. Most of the biometric attendance systems can be integrated with the company’s payroll system. If not, companies can export the data to process the payroll, usually in .csv or .txt format.

Application based Attendance System

Application based attendance system is another type of attendance monitoring system that is gaining popularity for office based jobs. It is a software that can capture the time that the employee login and logout. Some of these softwares also captures the activity of the user after logging in. This not only allows the companies to monitor the employees’ attendance but also their efficiency in doing the job. Therefore, application based attendance system is often used for freelance jobs.

Web based Attendance System

Web-based attendance system is usually part of a cloud-based payroll system. Each employee is given an account to log into the system. There will be a timestamp when the employee logs in and out of the system which is used to count the number of working hours. The working hours will then be used to compute the employee’s salary for the day. Most of the web based attendance system allow the companies to restrict the logging into the system to a range of IP (Internet Protocol) Address. This is to prevent employees from logging into the system while being absent from work.

Mobile Application Attendance System

With every employee owning at least 1 mobile device, what can be more convenient than having a mobile application attendance system? Companies just need to setup the employee ID and the application is good to go. The mobile application attendance system is easy to set up and easy to implement. Furthermore, some of the payroll systems already have their own mobile attendance application. However, for those standalone mobile attendance applications, most of them have limited settings and may not be suitable for all companies.

Contactless Smart Card Attendance System

Contactless smart card attendance system is more commonly used in companies with hundreds or thousands of employees. Each employee is issued with a contactless smart card which stores some information about the employee. The employee will scan the card over a reader which reads the information and transmit the information with a timestamp to the system. The same contactless smart card can also be used as an access control measure to grant the user access to a building, room or device.

Payroll Computation in the Philippines

Computation of Payroll Philippines

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
Paid on
Rest Days
Not Paid on
Rest Days
Paid on
Rest Days
Not Paid on
Rest Days
Monthly Salary P15,000 P15,000 P15,000 P15,000
Day Factor 365 261 365 313
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
No Work 0% 0%* 0% 100%
Normal Work  100% 130%  130% 200%
Overtime (OT)  125% 169%  169%  260%
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

Payroll Philippines Time Calculation Amount
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 P15,913.81
  • 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

Payroll Philippines Amount
Gross Salary P15,913.81
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
Net Salary P13,327.68
  • 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.

How to handle Payroll for Small Business

how to handle payroll for small business

Processing of the payroll requires an understanding of taxation and compensation regulations. However, small businesses may not have a dedicated payroll personnel to process their payroll. Because, besides the need to be in compliance with the law, businesses are also mindful about the cost of processing the payroll. So how to handle payroll for small business in the Philippines? And what are the things to look out for?

Payroll in Microsoft Excel

Most small business prefers to handle their payroll themselves because it is free. Besides, with a smaller number of employees and less complicated compensation structure, the processing of payroll for small business would be simpler and faster. Therefore, many of them choose to process their payroll using Microsoft Excel.

Although the payroll for small business is simpler, businesses may still commit mistakes in the computation of the payroll. In order to ensure high accuracy of computation, these businesses should generally possess a certain level of expertise in Microsoft Excel to create a new or to modify a downloaded payroll template to suit their needs. And they should also regularly update the payroll template to reflect any changes in regulation.

So one of the issues when handling payroll for small business using Microsoft Excel is the updating of the payroll template. Another common issue is the process of rectifying the payroll errors if any.

However, if you use excel to process your payroll, you can use this free excel timesheet with formulas that automatically calculates the number of hours of undertime, overtime and night shift differential.

Payroll System

Another way of handling payroll for small business is through the use of payroll system. The number of small businesses using payroll system in the Philippines has been steadily increasing over the last few years. Besides, with the rising competition in the ERP industry, many of these payroll systems also provide a free version or trial period that small businesses can take advantage of.

Some of the free payroll systems limit the number of employees that a business can process in a month while others may require the businesses to pay for their premium features. Therefore, when choosing the free payroll system to use, the business needs to understand the constraint of the system and if it suits the business needs. Most importantly, the system must be able to process the payroll for small business in the Philippines.

Outsource Payroll

Outsourcing of payroll for small business may be the easiest way to process payroll. It helps the small businesses to save time, effort and take advantage of the outsourced company expertise in processing of payroll. Due to the nature of their service, these outsourcing companies are also naturally required to be constantly updated and be in compliance with the latest regulations. So the small businesses can have a peace of mind knowing that they have an assistance of a payroll expert. Furthermore, these outsourcing companies also help to prepare monthly, quarterly and annual government forms and other reports for their clients.

Download free Excel Timesheet Template with formulas

Excel Timesheet Template

One of the most routinary task when processing the payroll is to consolidate and tally all employees’ attendance record. More so when employees clock in using bundy clock before encoding it into an excel timesheet. But because most employees are paid by the number of hours they worked, companies need to track their working hours accurately.

To save time and effort, most companies use a biometric system to capture the clock in and clock out time and export it into excel or into a payroll system. However, if you are not using a payroll system, the overtime and night shift differential are usually not calculated automatically.

Therefore, I have created an excel timesheet calculator that automatically calculates the number of hours of undertime, overtime and night shift differential for companies in the Philippines. Download the excel timesheet template and read the instructions and FAQs below.


Excel Timesheet Template with Formulas in the Philippines

Download the Employee Timesheet here.

Instructions on using the Excel Timesheet Template

This is a basic excel timesheet that automatically calculates the number of hours of normal work, overtime, undertime and night shift differential. It can also take into account of the compressed workweek so companies working more than 8 hours per day can also use this timesheet template in excel.

After downloading the excel timesheet template with formulas, follow this 5 simple steps and read the FAQs below if you have any questions.

  1. Fill in the Employee Name and Department.
  2. Select the Year and Month from the dropdown.
  3. Input the employee’s normal ‘Work Start Time‘. If the ‘Work Start Time‘ is not fixed, leave it blank.
  4. Input all the ‘Time In‘ and ‘Time Out‘.
  5. The rest of this excel timesheet is automatically calculated.

Frequently Asked Questions for the Excel Timesheet Template

  • How to change the ‘Work End Time‘?

The ‘Work End Time‘ is automatically calculated based on the ‘Work Start Time‘ plus ‘No. of Working Hours Without Overtime Pay‘ plus ‘Breaktime‘.

  • What if the employee does not have a fixed ‘Work Start Time‘?

You can leave the ‘Work Start Time‘ blank. If it is blank, then the timesheet calculator will count all the hours worked from ‘Time In‘ to ‘Time Out‘.

  • What is ‘No. of Working Hours Without Overtime Pay‘?

It is the company’s normal working hours. By default, it is set to 8 hours a day. If your company is working on a compressed workweek scheme, you can change it according to your company normal working hours. There will be a warning message, click ‘Yes‘.

  • Why is the ‘Overtime‘ not working?

Make sure the ‘Allow Work After Work End Time‘ under ‘Additional Settings‘ is set to ‘Yes‘. By default, it is already set to ‘Yes‘.

  • Why is the ‘Night Shift Differential‘ not working?

Make sure the time input is correct. The problem usually lies with mixing up of ‘AM‘ and ‘PM‘. The ‘Night Shift Differential‘ also assumes 1 hour of break time with 5 or more hours of work.

  • Why is the ‘Hours Worked‘ always 8 hours?

The maximum number of ‘Hours Worked‘ is the number under ‘No. of Working Hours without Overtime Pay‘. By default, it is set to 8 hours a day. The total number of hours an employee worked a day is the number of ‘Hours Worked‘ plus ‘Overtime

  • What is ‘Allow Work Before Work Start Time‘?

By default, this is set to ‘Yes‘. So for instance, if the company starts work at 8am but the employee ‘Time In‘ at 7am, the employee would be considered working for 1 hour. However, if this is set to ‘No‘, the timesheet calculator will only start counting the ‘Hours Worked‘ from the ‘Work Start Time‘. If ‘Work Start Time‘ is left blank, then timesheet calculator will count all the hours worked from ‘Time In‘ to ‘Time Out‘.

  • What is ‘Allow Work After Work End Time‘?

By default, this is set to ‘Yes‘. So for instance, if the company ends work at 5pm but the employee ‘Time Out‘ at 6pm, the employee would be considered overtime for 1 hour. However, if this is set to ‘No‘, the timesheet calculator will stop counting the ‘Hours Worked‘ upon the ‘Work End Time‘. So the calculator will not count any overtime for the employee. If ‘Work End Time‘ is blank, then the timesheet calculator will count all the hours worked from ‘Time In‘ to ‘Time Out

It is definitely easier to use an attendance monitoring system and a payroll system to process the employee’s payroll. Besides, it is more accurate too.

Philippine Salary Grade – The Salary Standardization Law IV (SSL IV)

Philippine Salary Grade

The public service faces the same challenges of attracting and retaining good employees as the private sector. In order to be able to compete for good employees, the Philippines has passed a salary standardization law to adjust the compensation of government personnel to be competitive with the market rates.

Among the changes, one of it is to increase the compensation of government personnel to at least 70% of the median of the market for all salary grades. The increment of the monthly salary shall be carried out in 4 tranches:

  • 1st Tranche – Starting January 1, 2016
  • 2nd Tranche – Starting January 1, 2017
  • 3rd Tranche – Starting January 1, 2018
  • 4th Tranche – Starting January 1, 2019

The current compensation structure for government personnel has a total of 33 salary grades with a maximum of 8 steps within each grade. Step increment shall be granted based on the employee’s performance and length of service as prescribed in Presidential Decree No. 985.

The monthly salary used in this article are of step 1. To view the increment of all salary grades and steps, please refer to Executive Order No. 201, s. 2016.

Philippine Salary Grade

Benchmark Position Schedule Monthly Salary (Step 1)
Position Title Salary Grade 1st Tranche (2016) 2nd Tranche (2017) 3rd Tranche (2018) 4th Tranche (2019)
Laborer I 1 9,478 9,981 10,510 11,068
Messenger 2 10,159 10,667 11,200 11,761
Clerk I 3 10,883 11,387 11,914 12,466
Driver I 3 10,883 11,387 11,914 12,466
Stenographer I 4 11,658 12,155 12,674 13,214
Mechanic I 4 11,658 12,155 12,674 13,214
Carpenter II 5 12,488 12,975 13,481 14,007
Electrician II 6 13,378 13,851 14,340 14,847
Secretary I 7 14,331 14,785 15,254 15,738
Bookkeeper 8 15,368 15,818 16,282 16,758
Administrative Assistant 8 15,368 15,818 16,282 16,758
Education Research Assistant I 9 16,512 16,986 17,473 17,975
Cashier I 10 17,730 18,217 18,718 19,233
Teacher I 10 17,730 18,217 18,718 19,233
Agrarian Reform Program Technologist 10 17,730 18,217 18,718 19,233
Budget Officer I 11 19,077 19,620 20,179 20,754
Chemist I 11 19,077 19,620 20,179 20,754
Agriculturist I 11 19,077 19,620 20,179 20,754
Social Welfare Officer I 11 19,077 19,620 20,179 20,754
Engineer I 12 20,651 21,387 22,149 22,938
Veterinarian I 13 22,328 23,257 24,224 25,232
Legal Officer I 14 24,141 25,290 26,494 27,755
Nurse I 15 26,192 27,565 29,010 30,531
Administrative Officer II 15 26,192 27,565 29,010 30,531
Dentist II 16 28,417 30,044 31,765 33,584
Postmaster IV 17 30,831 32,747 34,781 36,942
Forester III 18 33,452 35,693 38,085 40,637
Associate Professor I 19 36,409 39,151 42,099 45,269
Rural Health Physician 20 39,768 43,250 47,037 51,155
Information Not Available 21 43,439 47,779 52,554 57,805
Information Not Available 22 47,448 52,783 58,717 65,319
Information Not Available 23 51,826 58,310 65,604 73,811
Information Not Available 24 56,610 64,416 73,299 83,406
Information Not Available 25 61,971 71,476 82,439 95,083
Information Not Available 26 67,690 78,960 92,108 107,444
Information Not Available 27 73,937 87,229 102,910 121,411
Information Not Available 28 80,760 96,363 114,981 137,195
Information Not Available 29 88,214 106,454 128,467 155,030
Member of a Constitutional Commission under Article IX, 1987 Constitution 30 96,354 117,601 143,534 175,184
Chairman of a Constitutional Commission under Article IX, 1987 Constitution 31 117,086 152,325 198,168 257,809
Associate Justices of the Supreme Court 31 117,086 152,325 198,168 257,809
Member of the House of Representatives 31 117,086 152,325 198,168 257,809
Senator 31 117,086 152,325 198,168 257,809
Chief Justice of the Supreme Court 32 135,376 177,929 233,857 307,365
Speaker of the House of Representatives 32 135,376 177,929 233,857 307,365
President of the Senate 32 135,376 177,929 233,857 307,365
Vice-President of the Philippines 32 135,376 177,929 233,857 307,365
President of the Philippines 33 160,924 215,804 289,401 388,096

With the increase of salary, the monthly salary of government personnel under grade 1 will increase from the original P9,000 to P11,068 in 2019. As the increment will be implemented in 4 tranches, effective January 1, 2017, their monthly salary were increased to P9,981 then to P10,510 in 2018, and eventually to P11,068 in 2019.

The monthly salary of Teacher I, salary grade 10, was also increased to P18,217 this year. Their monthly salary will be eventually increased to P19,233 in 2019.

Periodic revision of the compensation structure can ensure that the organization, whether public or private, to keep up with the market competition. As technology advances, the jobs evolve. The competencies required for the job also changes. Therefore, regular review of the compensation structure allows the organization to update and reflect these changes.

Developing a Compensation Strategy

Compensation Strategy

A compensation strategy is to align all employees, top to bottom, in understanding what the organization wants to achieve; how each employee contributes to the achievement of the organization objectives; and, how the organization is going to reward desirable attitude and behavior. It is to outline an organization view on the employees’ compensation and benefits.

Therefore, in order to come up with a compensation strategy, it is imperative to understand the value of each job function within the organization. Every job has a role in either creating and supporting sales or to keep expenses to a minimum or sometimes both. By understanding the value, then the organization can evaluate if each function is able to meet their clients’ needs profitably.

Essentially, a good compensation strategy should take into consideration of the SPED factors – Sustainability, Perception of Value, Employee’s Behavior and Performance, Development of Organization.

Sustainability of the Compensation Strategy

Before designing the compensation plan and structure, the organization needs to understand the compensation budget. Many organizations lack a compensation budget despite the fact that manpower cost is often one of the highest expenses in the organization. Besides that, these organizations also often mistake the cost of compensation as the salary of the employees. The cost of compensation is often much higher than just the salary of the employees.

The organization needs to design a compensation strategy that is suitable for the organization’s finance. Organizations need to understand how much they can and willing to pay and how can they structure it in a way that is attractive to the employees they are trying to attract and retain.

Perception of Value of the Different Compensation Components

One of the main objectives of a good compensation and benefits plan is to be able to attract and retain good employees. However, that is not possible without understanding how employees view the different types of compensation and benefits. An employee with family may value more paid time off while a younger employee may be looking for a higher salary to pay off school debts.

Therefore the organization needs to find the point of balance for different groups of employees within the company. Some organizations have also introduced flexible rewards program by providing employees the option to customize their own compensation and benefits package within a pre-defined range.

Employees’ Behavior and Performance

The compensation and benefits plan should identify and reward organization’s desirable attitude and behaviors that contribute to the achievement of the organizational objectives. If the organization values teamwork, then it should reflect in the compensation plan. If the organization values teamwork but focuses on rewarding individual achievements, then the organization will not be able to instill the attitude and behaviors that the organization wants to.

The attitude and behavior that the organization desires should also result in better employee’s performance. This means that these attitude and behavioral traits should have been recognized to be associated with better performance. Therefore the emphasis on this particular set of attitude and behavior within the organization.

There are also an increasing number of organizations adopting performance-based compensation. Through the use of these performance-based compensation schemes, the organization rewards employees accordingly to the employee’s performance.

Development of the Organization

Besides sustainability, it is also important that the compensation strategy drives the development of the organization. Depending on how the compensation plan is designed, it may result in employees sacrificing the organization long term goals for short term gains. This often happens when the employees do not view themselves as a long-term member of the organization. Therefore, they make decisions to maximize their compensation and benefits within the few years they are with the organization.

The compensation plan should encourage the employees to act in the best of interest of the organization, and not maximize personal gains in expense of the organization’s long-term goals.

How to create a Compensation Structure

Compensation Structure

The compensation structure gives the organization an idea of the cost of any position within the organization. Therefore, allowing the organization to budget, monitor and control the cost of compensation.

Through the use of compensation structure, the organization can also ensure that employees are paid fairly throughout the entire organization; employees are rewarded according to the value of their job; and, ensure the competitiveness of the organization in attracting and retaining employees.

What is a Compensation Structure?

A compensation structure determines how much an organization can and willing to pay an employee. It includes the creation of job grades; the establishment of compensation range for every job within the organization; and, the allocation of compensation budget to different compensation and benefits components.

An organization needs to consider the following factors when establishing a compensation structure:

Market Rate

Organizations in the same industry often compete for employees with similar competencies. Therefore, organizations need to understand the market value of the job. If the organization offers much lower than the market value, then it is likely that the organization will not be able to attract qualified candidates. However, if the organization offers much higher than the market value, the organization may not be able to sustain the cost of compensation in the long term.

Some organizations conduct research or find information online to determine the market rate of a particular job in a specific location. Other organizations may engage HR consultancy firms or vendors to assist them in establishing their compensation and benefits program.

Job Grade

Organizations can establish a number of job grades depending on the size of the organization, diversity of the job or other relevant factors. Different jobs may be grouped into the same job grade due to similar levels of difficulty of the job and, the supply and demand of the job market. However, not every job function will start at the lowest grade or be able to reach the highest grade. For instance, an entry-level lawyer may start at a higher job grade than an entry-level human resources officer in the same organization.

Compensation Range

Developing compensation ranges allow the organization to pay employees according to the value of the job. The organization can set up compensation ranges in accordance to how it determines the value of the job. Employees of similar job value are grouped together and paid within the same range. The maximum and minimum levels are to account for variations in employees’ experience and skill levels.

Compensation ranges usually correspond to the job grades within the organization. And if the organization operates in different geographic location, there may also be different compensation structure for different locations.

Components of Compensation and Benefits

After the establishment of the compensation range, the organization needs to understand the breakdown of the employee’s compensation. For instance, 80% of the compensation will form the basic salary, 10% will form the variable salary component while the rest of the 10% will be used in employee’s benefits. The breakdown may be different for different job grades or compensation ranges.

Budget

The compensation structure should reflect the compensation strategy and fall within the allocated budget. The organization should be able to find its balance between the manpower plan, budget and compensation structure to attain sustainability.

Or when put in a formula, the compensation structure (compensation cost per employee) x the manpower (total number of employees) = less than the budget (what the organization can afford) to be sustainable.

Types of Compensation and Benefits in the Philippines

Compensation and Benefits in the Philippines

Compensation and benefits is a term commonly used in human resource management. It may also sometimes be known as compensation, benefits and rewards. At first look, most people may relate it only to an employee’s salary. However, salary is merely a part of the compensation package.

So what are the other types of compensation in the Philippines? And what are some of the common benefits given to employees in the Philippines?

What is Compensation and Benefits?

Compensation and benefits (C&B) is a sub-discipline of human resources. This discipline focuses on employee compensation and benefits policy making to attract and retain good employees. In layman terms, it is about paying people fairly for what they are doing.

However, fairly in this context is subjective. Furthermore, it has to be within the budget and balanced for the employer to make a profit and the employee to feel appreciated. Therefore, it is also about communicating a mutual understanding of the value of the job and the employee. A good compensation and benefits strategy takes into account of these 4 different aspects: Sustainability, Value, Performance and Development.

As such, different organizations offer different types of compensation and benefits as part of the employee’s compensation package. The compensation package can be divided into 4 basic categories: Guaranteed Pay; Variable Pay; Benefits; and Equity-based Compensation. However, most of the time in the Philippines, only senior management receive equity-based compensation.

Types of Compensation in the Philippines

Compensation refers to the monetary payment that an employee receives as a result of an employer employee relationship. The employee may receive different types of compensation from the employer.

This may be due to a legal obligation, taxation complications and the organization’s consideration of the compensation and benefits strategy. For instance, the payment of overtime pay, holiday pay and night shift differential is regulated by law; while rice subsidy may be given because it is considered a de minimis benefit and may be exempted from taxation; and the design of a commission scheme is to encourage better performance from the employee. Therefore an employee’s compensation package in the Philippines may include one or more of the following components:

Different Types of Compensation in the Philippines

  • Basic Salary;
  • Cost of Living Allowance;
  • Rice Subsidy;
  • Clothing Allowance;
  • Transport Allowance;
  • Meal Allowance;
  • Holiday Pay;
  • Overtime Pay;
  • Night Shift Differential;
  • Commission;
  • Performance Incentive;
  • 13th month pay;
  • Year-end bonus such as 14th month pay;
  • Christmas bonus; and,
  • Conversion of unused leave credits.

In the Philippines, the employee’s daily minimum wage is regulated by law. The minimum wage in the different cities may be different and the rate is revised regularly to reflect the rise in the cost of living. So always check the latest minimum wage rate from the National Wages and Productivity Commission.

Employee Benefits in the Philippines

Employee benefit refers to other non-monetary forms of compensation or indirect payments to employees. These benefits are usually paid by the organization but they may also be co-paid with the employee. For instance, the organization may pay in full or share the medical insurance premium with the employee.

It is important to note that employee benefits are usually non-performance based. This means that employees receive the benefits regardless of their performance. Therefore, employee benefits as a whole have no direct impact on the employees’ performance.

However, the benefits that different employees receive in the same organization may differ due to differences in length of service, job responsibilities and job grade. Examples of employee benefits in the Philippines include:

List of Employee Benefits in the Philippines

  • SSS Benefits;
  • Philhealth Benefits;
  • HDMF Benefits;
  • Retirement Benefits;
  • Insurance Plans such as Life Insurance, Health Insurance, etc;
  • Leave Provisions such as Vacation Leave, Sick Leave, Bereavement Leave, etc;
  • Work Life Balance such as Flexible Work Arrangements, Shorter Working Hours, etc; and,
  • Organization sponsored activities such as Holiday Trips, Team Building activities, etc;
  • Other non-monetary benefits such as Gift Vouchers, Gifts, etc.

Organizations may also join programs that provide flexible employee benefits. It helps organizations to be able to provide a wide range of benefits to their employees without the cost of maintaining them individually. On the other hand, it also allows employees to choose the benefits with the highest perceived value to them.

When designing the compensation and benefits strategy, different organizations need to understand their own strengths in attracting and retaining employees. Not every organization can afford to pay in the 75 percentile or provide tons of benefits to their employees. Therefore, an organization needs to design a compensation strategy that suits them.

Overtime Pay in the Philippines

Overtime Pay

The term ‘overtime’ has been commonly used for work done beyond the normal working hours. However, how exactly does the Labor Code of the Philippines define overtime work? And how to compute overtime pay?

This article will help you to understand the following:

  • What is overtime work?
  • What is the overtime rate in the Philippines?
  • Overtime Pay for Managers in the Philippines
  • Common question: is not paying overtime illegal?
  • Computation of Overtime Pay

Overtime Work

Overtime is defined as work performed beyond 8 hours in a work day. A work day is also defined as a 24 hours period from the start of work. So if an employee works from 8am to 4pm and then from 12am to 8am, even though there is a 8 hours gap in between, it is still considered a single work day. Therefore, overtime premium shall apply.

Overtime Rates

According to article 87 of the Labor Code of the Philippines, there are 2 different overtime rates. The overtime rate for a normal working day in the Philippines is 25% plus the employee’s regular wage. However, if overtime time is performed on a rest day or holiday, the overtime rate shall be increased to 30% plus the employee’s regular wage.

Overtime Pay for Managers in the Philippines

Managerial employees and officers or members of the managerial staff are not entitled to overtime pay. However, the designation or the employee’s job title does not automatically exclude the employee from overtime pay entitlement. It depends if the employee’s duties and responsibilities qualify to be considered as a managerial employee or a member of the managerial staff.

Is not paying overtime illegal?

If the employee does not fall under the exempted categories then the employer is required to pay the employee the overtime premium for work performed beyond 8 hours in a work day.

However, if the company is under the compressed work week scheme, then the employee may work up to 12 hours in a single workday without the corresponding overtime premium. This is also provided that the total number of working hours should not exceed 48 hours in a week. Exceeding which, overtime premium shall apply.

Illustration for Overtime in Compressed Work Week Scheme

Weekly Work Example 1 Example 2
Hours of Work Overtime Hours of Work Overtime
Monday 8.5 hours 0 12 0
Tuesday 8.5 hours 0 12 0
Wednesday 8.5 hours 0 10 0
Thursday 8.5 hours 0 10 0
Friday 8.5 hours 0 10 0
Total Working Hours: 42.5 hours 54 hours
Overtime for the week: 0 hours 54 – 48 = 6 hours

Total number hours of overtime for example 1 is 0 hours because hours of work for each day did not exceed 12 hours and the total number of working hours for the week did not exceed 48 hours.

Total number hours of overtime for example 2 is 6 hours because the total number of working hours for the week exceeded 48 hours.

Overtime Computation

Example 1: How to compute overtime pay
Regular Hourly Wage P50
Overtime Hourly Wage P50 × 125% = P62.50
Example 2: How to compute overtime pay with night differential
Regular Hourly Wage P50
Overtime Rate 25%
Night Differential 10%
Overtime with Night Differential Hourly Rate 125% × 110% = 137.5%
Actual Hourly Wage P50 × 137.5% = P68.75
Example 3: How to compute overtime pay on special non working holiday
Regular Hourly Wage P50
Overtime Rate 30%
Overtime Hourly Rate
on Special Holiday
130% × 130% = 169%
Actual Hourly Wage P50 × 169% = P84.50
Example 4: How to compute overtime with night differential on special non working holiday
Regular Hourly Wage P50
Night Differential Rate 10%
Overtime Rate 30%
Overtime with Night Differential Hourly Rate on Special Holiday 130% × 110% × 130% = 185.9%
Actual Hourly Wage P50 × 185.9% = P92.95
For more information on labor regulations, please see Presidential Decree No. 442, s. 1974.

Rest Day Pay in the Philippines

Rest Day in the Philippines

Every employee is entitled to at least 1 rest day after every 6 consecutive normal work days. However, there may be times when you are required to work on your rest day. So what is the rest day regulation in the Philippines? And how much is your rest day pay?

Find out the rest day regulation and the corresponding pay rules:

  • Rest Day in Labor Code of the Philippines
  • Common question: how much is Sunday premium pay?
  • Rest Day Pay
  • Rest Day Overtime Rate
  • Chart: Rest Day Pay Rate

Rest Day in Labor Code of the Philippines

Every employee is entitled to at least 1 rest day per week which shall be determined and scheduled by the employer with respect to the preference of employees as to their weekly rest day when such preference is based on religious grounds.

The employer shall make known of the employees’ scheduled weekly rest day by means of written notices posted conspicuously in the workplace at least 1 week before the effectivity of the schedule.

How much is Sunday premium pay?

Sunday is not necessarily the employee’s rest day. The employer may schedule the rest day(s) to be any other day of the week. If the employee’s rest day does not fall on Sunday, the employee shall not be entitled to additional compensation for working on Sunday. If the employee’s rest day falls on Sunday and the employee is required to work on Sunday, then the employee shall be entitled to rest day pay.

However, if the employee does not have a regular rest day, the employee may be entitled to an additional compensation equivalent to 30% of his regular wage for work performed on Sundays.

Rest Day Pay

Article 93 of the Labor Code stipulates that when the employee is required to work on his scheduled rest day, the employee shall be entitled to additional compensation of at least 30% of his regular wage. However, if a special non-working holiday falls on the scheduled rest day, the additional compensation shall be equivalent to at least 50% of the employee’s regular wage.

Illustration

Rest Day Special Holiday falls on Rest Day
Regular Daily Wage P500 P500
Premium Rate 30% 50%
Rest Day Pay P50 × 130% = P650 P50 × 150% = P750

Rest Day Overtime Rate

When the employee works beyond 8 hours on a rest day, the employee shall be entitled to additional compensation equivalent to 30% on top of his hourly wage of that day or a total of 130% of his rest day hourly wage.

Illustration

Rest Day Special Holiday falls on Rest Day
Regular Hourly Wage P50 P50
Premium Rate 30% 50%
Overtime Rate 30% 30%
Hourly Wage Rate 130% × 130% = 169% 150% × 130% = 195%
Actual Hourly Wage P50 × 169% = P84.50 P50 × 195% = P97.50

Rest Day Pay Rate

Rest Day Pay Rate

For more information on labor regulations, please see Presidential Decree No. 442, s. 1974.

Special Non Working Holiday Pay

Special Holiday Pay

There are 2 types of holidays in the Philippines, regular holidays and special non-working days. This article will you to understand more about the special non-working day:

  • Special Non Working Holiday Meaning
  • Special Holiday Rate
  • Example: How to compute the pay on special non-working day

What is Special Non Working Holiday?

Special non working day, also known to be special non-working holiday or special holiday is an additional holiday enacted by the congress or declared under the judgment of the President of the Philippines. It means an exclusive no work day. However, the ‘No Work, No Pay’ rule applies.

Unlike regular holiday which is commemorated nationwide, such additional holiday may be celebrated in a specific region, province or city. However, there are also nationwide special non working holiday such as 26 December 2016 (Monday) and 2 January 2017 (Monday) declared through Proclamation No. 117.

What is the Special Holiday Rate?

According to the ‘No Work, No Pay’ principle, if the employee did not work on the special non-working holiday, the employee shall not be paid for that day unless there is a favorable company policy, practice or collective bargaining agreement granting payment for that day.

If the employee reported for work on the special non-working holiday, the employee shall be entitled to an additional compensation equivalent to 30% of his regular daily wage. This means that if an employee’s regular daily wage is P500, on a special non-working holiday, the employee’s daily wage shall become P650.

Special Non Working Holiday Pay Rules

Special Holiday Pay

Special Holiday Computation

Example 1: How to compute special non working holiday pay
Regular Daily Wage P500
Daily Wage on Special Holiday P500 × 130% = P650
Example 2: How to compute overtime pay on special non working holiday
Regular Hourly Wage P50
Overtime Rate 30%
Overtime Hourly Rate
on Special Holiday
130% × 130% = 169%
Actual Hourly Wage P50 × 169% = P84.50
Example 3: How to compute night differential on special non working holiday
Regular Hourly Wage P50
Night Differential Rate 10%
Night Differential Hourly Rate
on Special Holiday
130% × 110% = 143%
 Actual Hourly Wage P50 × 143% = P71.50
Example 4: How to compute overtime with night differential on special non working holiday
Regular Hourly Wage P50
Night Differential Rate 10%
Overtime Rate 30%
Overtime with Night Differential Hourly Rate on Special Holiday 130% × 110% × 130% = 185.9%
Actual Hourly Wage P50 × 185.9% = P92.95

For more information on labor regulations, please see Presidential Decree No. 442, s. 1974.

13th Month Pay Law and Computation

13th Month Pay

Section 1 of Presidential Decree No. 851 is modified by Memorandum Order No. 28, s. 1986 to the extent that all employers are hereby required to pay all their rank-and-file employees a 13th month pay not later than December 24 of every year.

This article will help you to understand the following:

  • Employees Entitlement to 13 month Pay
  • 13th Month Pay Computation
  • How to compute 13th month pay for resigned employee?
  • Is 13th month pay taxable?

Who is entitled to 13th month pay?

All rank-and-file employees are entitled to the 13th-month pay regardless of the nature of their employment and irrespective of the methods by which they are paid provided they worked for at least one month during a calendar year. This means that probationary, project and contractual employees are also entitled to the 13th-month pay.

How to compute 13th month pay?

The basis in computing the 13th month pay is the employee’s basic salary. The following items are not included in the computation of the 13th-month pay unless these salary-related benefits are treated as part of the basic salary of the employee, through individual or collective bargaining agreement, company practice or policy.

Items  
Cost of Living Allowance Not Included
Overtime Pay Not Included
Night Differential Not Included
Holiday Pay Not Included
Premium Pay Not Included
Unused Paid Leave converted to Cash Not Included
Maternity Leave* Not Included

*Maternity leave is not included as Maternity Benefit is paid by SSS, the employee essentially has no compensation income from the company.

The 13th month pay is computed based on 1/12 of the total basic salary earned during the year.

Example of 13th-month pay computation
Month Attendance Basic Salary
Jan no absence P11,372.33
Feb no absence P11,372.33
Mar 1 day leave with pay P11,372.33
Apr no absence P11,372.33
May no absence P11,372.33
Jun 2 days leave with pay P11,372.33
Jul no absence P11,372.33
Aug 2 days leave with pay P11,372.33
Sep on maternity leave no salary
Oct on maternity leave no salary
Nov no absence P11,372.33
Dec 5 days leave without pay P9,192.33
Total Salary for the Year   P111,543.33
13th Month Pay P111,543.33 / 12 P9,295.28

How to compute 13th month pay for resigned employee?

An employee who separated from the company, by resignation or termination, is still entitled to the 13th-month pay in proportionate to the employee’s length of service. In other words, 13th-month pay is computed on a pro-rata basis.

Illustration:

An employee was hired on 1 January 2015 and effectively resigned on 1 March 2016. Assuming that the employee earn a monthly basic salary of PHP 12,000, the employee shall be entitled to 13th month pay equivalent to:

Basic Salary   P12,000
Total Months Worked 2 months
13th Month Pay (2/12) X P12,000 P2,000

*Illustration is based on perfect attendance with no deduction. Please check below example on how to compute 13th-month pay.

13th Month Pay Tax Computation

Under Republic Act No. 10653, 13th month pay and other benefits such as productivity incentives and Christmas bonus are non-taxable. However, the total exemption amount shall not exceed Php 82,000. Any amount in excess thereof may be subjected to tax.

For more information about the 13th month pay, please refer to Presidential Decree No. 851

Night Differential Rate and Computation of Night Differential Pay

Night Differential Pay Rate

Night Differential or Night Shift Differential (NSD) is an additional compensation provided to workers who worked during the night. This additional pay is also commonly known as Night Differential Pay or Night Shift Differential Pay.

This article will provide you with information on Night Differential entitlement; rate and examples on how to compute it with overtime and on holidays.

Who is entitled to night differential pay?

According to the Labor Code of the Philippines, all employees are entitled to night differential pay except government personnel; employees of retail and service establishments with not more than 5 employees; domestic helpers; managerial employees; and, those employees whose time and performance are unsupervised.

When is the night shift differential hours?

It starts from 10 p.m. to 6 a.m the following day.

What is the night differential rate?

Unless the company provides a higher night differential rate, the rate shall be 10%. This means that for every hour of work, the employee shall be paid a total 110% of his regular hourly wage. If the employee regular hourly wage is P50, then with night differential, his hourly wage shall become P55.

Computation of Night Differential

Example 1: How to compute Overtime Pay with Night Differential
Regular Hourly Wage: P50
Overtime Rate: 25%
Night Differential Rate: 10%
Actual Hourly Rate: 125% × 110% = 137.5%
Actual Hourly Wage: P50 × 137.5% = P68.75
Example 2: How to compute Night Differential on Special Non-Working Day
Regular Hourly Wage: P50
Special Holiday Rate: 30%
Night Differential Rate: 10%
Actual Hourly Rate: 130% × 110% = 143%
Actual Hourly Wage: P50 × 143% = P71.50
Example 3: How to compute Night Differential on Regular Holiday
Regular Hourly Wage: P50
Regular Holiday Rate: 100% (additional)
Night Differential Rate: 10%
Actual Hourly Rate: 200% × 110% = 220%
Actual Hourly Wage: P50 × 220% = P110

For more information on labor regulations, please refer to Presidential Decree No. 442, s. 1974.

Special Emergency Leave, Calamity Leave in the Philippines

Calamity Leave

An employer may grant calamity leave or emergency leave to employees for circumstances such as typhoon, flooding or other unforeseen circumstances.

  • What is Calamity Leave or Emergency Leave?
  • Government and private sector work rules on days with difficult weather conditions
  • Compensation for work on days with difficult weather conditions

What is Calamity Leave or Emergency Leave?

For government employees, 5 days special emergency leave shall be granted to those directly affected by natural calamity or disaster.

For employees in private sector, it is part of the employer’s discretion to grant emergency leave or calamity leave. Such leave benefit is not covered in the Labor Code of the Philippines. However, most employers do provide calamity leave or emergency leave for unforeseen circumstances. In such circumstances, the entitlement and availment of the leave benefit shall be in accordance with the company’s policy.

What is the rule on cancellation or suspension of work due to typhoons or other calamities?

For classes and work in government offices, the following shall apply:

  • When Signal No. 1 is raised by PAGASA, classes at the pre-school level, in the affected area, shall be automatically cancelled or suspended.
  • When Signal No. 2 is raised by PAGASA, classes at the pre-school, elementary and secondary levels, in the affected area, shall be automatically cancelled or suspended.
  • When Signal No. 3 or higher is raised by PAGASA, classes at pre-school, elementary, secondary, and tertiary levels, in the affected area, including graduate school, as well as work in all government offices, shall be automatically cancelled or suspended.

*In accordance with Executive Order No. 66, s. 2012

For work in private sector:

It is up to the employer’s discretion to suspend or cancel the work for the day. However, the government may also order the cancellation or suspension of work in view of a serious impending natural disaster. On such declared no-work day, the general applicable pay rule is ‘no work, no pay’, unless there is a favorable company policy, practice, or collective bargaining agreement (CBA) granting payment of wages on the said day.

Is there additional compensation for work done during inclement weather or natural calamities?

For employees who reported to work, that day of work is considered a normal working day. The employer is not obligated to provide additional compensation for that day of work, unless provided for under a company policy, practice, or other agreement. Instead, employers shall ensure the safety of their employees by providing free transportation, food, personal protective equipment and first-aid medicines, as may be necessary.

The Magna Carta of Women – Special Leave Benefits for Women

Special Leave Benefits for Women

What are the Special Leave Benefits for Women

The special leave benefits for women are mandated under Republic Act No. 9710, also known as ‘The Magna Carta of Women’ stipulating that a female employee may be entitled to 2 months of special leave with full pay following surgery caused by gynecological disorders.

What are the gynecological disorders covered for?

“Gynecological disorders” refers to disorders that would require surgical procedures such as, but not limited to dilatation and curettage and those involving female reproductive organs such as the vagina, cervix, uterus, fallopian tubes, ovaries, breast, adnexa and pelvic floor, as certified by a competent physician. It shall also include hysterectomy, ovariectomy and mastectomy.

What are the requirements to avail the special leave benefits for women?

A woman employee who meets all of the following requirements shall be entitled to the special leave benefit:

  • She has rendered at least six (6) months continuous aggregate employment service for the last twelve (12) months prior to surgery;
  • She has filed an application for special leave with her employer within a reasonable period of time from the expected date of surgery or within such period as may be provided by company rules and regulations or collective bargaining agreement; and
  • She has undergone surgery due to gynecological disorders as certified by a competent physician.

For more information on The Magna Carta of Women, please refer to Republic Act No. 9710.

Solo Parent Leave in the Philippines

Solo Parent Leave

An employee who is assuming sole responsibility for parenthood may be entitled to parental leave or more commonly known as solo parent leave.

Solo Parent Leave

Under Republic Act No. 8972 also known as the “Solo Parents’ Welfare Act of 2000”, a solo parent may be entitled to 7 days of parental leave, or solo parent leave, per year. It is a leave benefit granted to solo parents to perform their parental duties and responsibilities where physical presence is required.

Who is considered as a solo parent?

A solo parent is any individual who falls under the following categories:

  • A woman who gives birth as a result of rape and other crimes against chastity even without a final conviction of the offender, provided that mother keeps and raises the child;
  • Parent left solo or alone with the responsibility of parenthood due to the following circumstances
    • Due to death of spouse;
    • Spouse is detained or is serving sentence for a criminal conviction for at least 1 year;
    • Physical and/or mental incapacity of spouse as certified by a public medical practitioner;
    • Legal separation or de facto separation from spouse for at least 1 year, as long as he/ she is entrusted with the custody of the children; or
    • Declaration of nullity or annulment of marriage as decreed by a court or by a church as long as he/ she is entrusted with the custody of the children.
  • Unmarried mother/father who has preferred to keep and rear her/ his child/ children instead of having others care for them or give them up to a welfare institution;
  • Any other person who solely provides parental care and support to a child or children; or
  • Any family member who assumes the responsibility of head of family as a result of the death, abandonment, disappearance or prolonged absence of the parents or solo parent.

What are the requirements to avail the Solo Parent Leave?

An employee who meets all of the following requirements shall be entitled to solo parent leave:

  • Rendered at least 1 year of service;
  • Notified the employer of his/ her intention to avail the parental leave within a reasonable period of time; and
  • Has a valid Solo Parent Identification Card.

How to apply for Solo Parent ID?

  1. The applicant shall bring the following documents to City/Municipal Social Welfare and Development Office:
    • Barangay certification certifying Solo Parent’s residency in the barangay for the last six months;
    • Certificates e.g., birth certificates of children, death certificate of spouse and other appropriate documentary support; and
    • Income tax return or any document that will establish the income level of the solo parent.
  2. The social worker receives and ensures that all documents are complete and registers the applications with an appropriate case number in the log-book Registry of Solo Parents.

Note: The ID will be issued after 30 days from filing. The validity of the ID is one year and is renewable.

Information to apply for Solo Parent ID can be found here.

Nonconversion to Cash

In the event that the parental leave is not availed of, it shall not be convertible to cash, unless specifically agreed on previously.

For more information on the Solo Parent Welfare Act of 2000, please refer to Republic Act No. 8972.

Paternity Leave Act of 1996 in the Philippines

Paternity Leave Act of 1996 Philippines

Under Republic Act No. 8187 also known as the ‘Paternity Leave Act of 1996’, a male employee is entitled to 7 days of leave for the first 4 deliveries of his wife.

  • Who is entitled to Paternity Leave?
  • When can an employee avail the Paternity Leave?
  • Why there is no Paternity Leave provision in the Labor Code of the Philippines?

Paternity Leave Entitlement

The employee length of service and employment status are not part of the criteria to determine an employee’s eligibility. Therefore, the male employee shall be entitled to this benefit if he meets all the requirements below regardless of his length of service and employment status (probationary, regular, contractual or project-based):

  • He is an employee at the time of the delivery of his child;
  • He is cohabiting with his spouse at the time that she gives birth or suffers a miscarriage;
  • He has applied for paternity leave with his employer within a reasonable period of time from the expected date of delivery by his pregnant spouse, or within such period as may be provided by company rules and regulations, or by collective bargaining agreement; and
  • His wife has given birth or suffered a miscarriage.

Availment of Paternity Leave

The employee may avail the leave after the delivery of his wife. This is without prejudice to existing company policy, practice or agreement allowing the employee to avail the benefit before or during the delivery. If this leave benefit is not availed of, the benefit is not convertible to cash.

Why there is no Paternity Leave provision in the Labor Code of Philippines?

As mentioned above, this leave benefit is mandated under Republic Act No. 8187 and not in the Labor Code of Philippines.

For more information about the Paternity Leave Act of 1996, please refer to Republic Act No. 8187.

Maternity Leave Policy and SSS Maternity Benefit

Maternity Leave Policy and SSS Maternity Benefit

While Article 131 (previously article 133) of the Labor Code of the Philippines provides for maternity leave benefit, it has since been integrated with the Social Security Law which provides maternity leave benefit of 60 days for normal delivery and 78 days for cesarean delivery.

  • Maternity Leave Policy in the Philippines
  • Payment for Maternity Benefit
  • Maximum SSS Maternity Benefit
  • Computation of Maternity Benefit

Maternity Leave Policy Philippines

Under the Labor Code of Philippines, pregnant female employee who has served at least 6 months in the 12 months period immediately preceding the expected date of delivery, or the complete abortion or miscarriage, shall be entitled to a total of 6 weeks of maternity leave with full pay based on her regular wages or average weekly wages. Maternity leave benefit is only given to the first 4 deliveries or miscarriages of the employee.

This is however integrated and provided through the maternity benefit of the social security system under Republic Act No. 8282. Under SSS maternity benefit, a pregnant female member who has contributed at least 3 months in the 12 months period immediately preceding the semester of her childbirth or miscarriage shall be entitled to 60 days of paid maternity leave benefit for normal delivery or 78 days of paid maternity leave benefit for cesarean delivery. Maternity leave benefit is only given to the first 4 deliveries or miscarriages of the said member.

Who shall pay for the Maternity Benefit?

The employer shall make an advance payment of the maternity leave benefit within 30 days from the filing of the maternity leave application which is 100% reimbursable from SSS upon submission of all required documents.

However, the employer shall borne the cost of the maternity leave benefits if the employer fails to remit the required contributions; or the employer fails to notify SSS upon receipt of the maternity leave application.

How much is the Maximum Maternity Benefit

The maternity benefit received by the employee is dependent on the monthly SSS contribution. Effective 1 January 2014, the maximum monthly salary credit is PHP 16,000 as reflected in the SSS schedule of contribution. With that, the maximum maternity benefit that an employee may receive shall be PHP 32,000 for normal delivery and PHP 41,600 for cesarean delivery, assuming that every of the 6 highest monthly salary credit is PHP 16,000.

How to compute Maternity Benefit

The maternity benefit is equivalent to 100% of the member’s average daily salary credit, using the 6 highest monthly salary credit of the past 12 months before the semester of contingency as the basis.

  • A semester refers to a period of 6 consecutive months or 2 consecutive quarters
  • A quarter refers to a period of 3 consecutive months ending March, June, September or December

Illustration

An employee delivered her child on 4th of April, 2016. Assuming that the employee’s monthly salary credit is P15,000 a month. Compute her SSS Maternity benefit below:

  • Identify the semester (6 months period) of contingency. In the example, the semester of sickness would be from Jan 2016 to Jun 2016.
  • Identify the six highest monthly salary credits that were contributed to the SSS within the last 12 month before the semester. So that will be from Jan 2015 to Dec 2015.
Add the six highest monthly salary credits P15,000 x 6 = P90,000
Divide the total by 180 days to get the average daily salary credit P90,000 / 180 = P500
If Normal delivery: Multiply the daily maternity allowance by approved number of days (60 days) P500 x 60 = P30,000
If CS delivery: Multiply the daily maternity allowance by approved number of days (78 days) P500 x 78 = P39,000

Sick Leave Policy and SSS Sickness Benefit

Sick Leave and SSS Sickness Benefit

Falling sick sometimes is not within our control. As much as we try to keep ourselves strong and healthy, we inevitably fall sick at least once or twice a year. But it is not a statutory requirement to grant sick leave benefit, so what is your company’s sick leave policy?

Understand and find out the sick leave policies and practices as well as the SSS Sickness benefit:

  • Sick Leave Policy in the Philippines
  • Common question: is medical certificate required to avail sick leave?
  • Common question: is sick leave convertible to cash?
  • SSS Sickness Benefit
  • How to compute SSS Sickness Benefit?
  • What if the Employee has a Long Term Sickness?

Sick Leave

However, there is no sick leave provision in the Labor Code of the Philippines.

Sick leave is a type of leave benefit designed to allow employees to take time off from work for the employee to recover from an illness. It is usually granted as a paid absence from duty.

It allows employees to seek medical treatment and properly address their health needs before returning back to work; and also to prevent potential contagion in the workplace.

Sick Leave Policy

In the Philippines, it is not a statutory requirement to grant sick leave benefit. Therefore it is the employer’s prerogative to grant the sick leave benefit and decide on the corresponding pay rules on the day of absence. However, an employee may claim SSS sickness benefit for work absences due to sickness or injury if the employee meets the requirements for SSS Sickness benefit.

In practice, most employers do grant sick leave benefit to their employees and have their own sick leave policy and availment procedure. Generally, the employee must notify the supervisor of his intention to avail the sick leave benefit on or before the day of absence except in the case of an emergency. If in the case of an emergency, the employee may notify the employer or representative of the employer as soon as the health condition of the employee permits. Otherwise, the employee may also do so through a representative, usually a family member. It is the employee’s responsibility to notify and seek approval to avail the sick leave benefit.

Is medical certificate required to avail sick leave?

The conditions to avail the benefit depends on the company’s policy. However, it is not uncommon for the company to require the employee to provide a medical certificate for the day of absence. Some other companies may only require the submission of the medical certificate for absences of more than 2 days. Conclusively, the employer has the flexibility in imposing conditions on the employee’s entitlement and availment of the sick leave benefit.

Is Sick Leave Convertible to Cash?

The accumulation and conversion of unused sick leave to cash depend on the company’s policy. Most companies prohibit the accumulation of sick leave credits but allow unused sick leave to be converted to cash at the end of the calendar year or upon separation from the company to discourage abusive use of the sick leave benefit.

SSS Sickness Benefit

SSS benefit for sickness is a benefit provided by the Social Security System (SSS) of the Philippines for an employee who is sick for at least 4 days, has paid at least 3 months of contributions within the 12-month period immediately before the semester of sickness or injury and does not have remaining company-paid sick leave credits.

SSS Sickness Benefit Computation

The SSS Sickness benefit per day is equivalent to 90% of the member’s average daily salary credit, using the 6 highest monthly salary credit of the past 12 months before the semester of sickness as the basis.

  • A semester refers to a period of 6 consecutive months or 2 consecutive quarters
  • A quarter refers to a period of 3 consecutive months ending March, June, September or December

Illustration

An employee is sick from 4 April 2016 to 8 April 2016, for a total of 5 working days. Assuming that the employee’s monthly salary credit is P15,000 a month. Compute his SSS Sickness benefit below:

  • Identify the semester (6 months period) of sickness. In the example, the semester of sickness would be from Jan 2016 to Jun 2016.
  • Identify the six highest monthly salary credits that were contributed to the SSS within the last 12 month before the semester. So that will be from Jan 2015 to Dec 2015.
Add the six highest monthly salary credits P15,000 x 6 = P90,000
Divide the total by 180 days to get the average daily salary credit P90,000 / 180 = P500
Multiply the average daily salary credit by 90 percent to get the daily sickness allowance P500 x 90% = P450
Multiply the daily sickness allowance by approved number of days P450 x 5 = P2,250

What if the Employee has a Long Term Sickness?

For claim under SSS

An employee can be granted sickness benefit for a maximum of 120 days in one (1) calendar year. Any unused portion of the allowable 120 days sickness benefit cannot be carried forward and added to the total number of allowed compensable days for the following year.

The sickness benefit shall not be paid for more than 240 days on account of the same sickness or injury. If the sickness or injury still persists after 240 days, his claim will be considered a disability claim.

In the event that the employee is found unfit for duties

If an employee has been found to be suffering from a disease and whose continued employment is prohibited by law or is prejudicial to his health or to the health of the co-employees, the employer may terminate the services of such employee under the Labor Code of Philippines Art. 284 (renumbered Art. 299) provided that there is a certification by competent public health authority that the disease is of such nature and of at such a stage that it cannot be cured within a period of six months even with proper medical treatment. Under such termination, the employee shall, in turn, be entitled to separation pay from the employer.

If the disease can be cured within 6 months, the employer shall not terminate the employee but shall ask the employee to take a leave of absence and subsequently reinstate the employee to the former position immediately upon the restoration of the employee’s normal health.

For more information on SSS sickness benefit, please refer to the Social Security System of the Philippines.

Bereavement Leave, Compassionate Leave and Funeral Leave

Bereavement Leave

Bereavement leave, also known as compassionate leave or funeral leave, is not covered in the Labor Code of the Philippines. It is a management prerogative and usually granted to an employee upon the death of the employee’s immediate family member.

  • What is Bereavement, Compassionate or Funeral Leave?
  • Bereavement Leave Policy
  • Is the employee entitled to bereavement leave upon the death of a close friend or relative?
  • Is death certificate necessary to avail this leave benefit?

Bereavement, Compassionate and Funeral Leave

Bereavement refers to the state of sadness due to the loss of a loved one. Therefore this leave type is commonly known as bereavement leave. However, it is also known as compassionate leave as it is granted out of goodwill and compassion. Others know it as funeral leave simply for the time off to make arrangements for or to attend funeral.

Bereavement Leave Policy

Employers are not required by law to provide bereavement, compassionate or funeral leave. However, in practice, most companies provide up to 3 days of bereavement leave to regular employees upon the death of an immediate family member including spouse, children, parents, siblings, grandparents and parents-in-law.

The employee may seek approval to avail such leave benefit on the day of absence. In additional, the employer may also grant non-paid time off depending on the circumstances such as distance and the individual’s responsibility for funeral arrangements.

Is the employee entitled to bereavement leave upon the death of a close friend or relative?

It is part of the employer’s prerogative to grant bereavement leave benefit and to extend it to include non-immediate family members. However, it is uncommon for companies to extend such leave benefit to non-immediate family members. Employees are usually advised to avail their service incentive leave or vacation leave or arrange for non-paid time off.

Is death certificate necessary to avail the bereavement leave?

In granting the bereavement leave, the employer has the right to impose conditions on the entitlement, such as requiring the death certificate to avail the benefit. For instance, the employee may be required to submit the death certificate upon returning back to work to prevent employees from abusing the trust imposed upon them. Besides that, if the relationship between the employee and the deceased cannot be easily determined, the employee may also be required to show proof of relationship.

What is Income Tax Refund and how to compute your Tax Refund in the Philippines

Income Tax Refund in the Philippines

Income tax refund refers to the return of excess taxes withheld from the employees. This situation may occur when the total amount of withheld taxes for the year is more than the employee’s annual income tax for the year. Therefore, the employer will refund the excess withheld amount back to the employee. And here’s how to compute the income tax refund in the Philippines.

What You Will Learn

  • What is income tax refund?
  • When is tax refund given in the Philippines?
  • How to compute income tax refund for resigned employees?
  • Income Tax Refund Computation

Income Tax Refund in the Philippines

Income tax refund refers to the return of the excess withholding tax that the employer withheld from the employee. The employer is also authorized to withhold any shortfall income tax from the employee’s salary in December in the current year to be remitted to BIR.

At the end of the calendar year but prior to the payment of the compensation for the last payroll period, the employer shall perform a reconciliation process also known as annualization to determine each employee’s income tax based on the employee’s actual annual compensation.

The employer shall then withhold the shortfall or refund the excess through the employee’s salary in December of the current calendar year, not later than January 25 of the succeeding year. Separated employees shall have the shortfall withheld or excess refund to them in the final pay.

When is tax refund given in the Philippines?

Employers shall provide a tax refund upon employee’s separation from employment or not later than January 25 of the succeeding year. There will be a tax refund only when excess withholding tax is withheld. This may be due to one or more of following reasons:

  • Changes in taxation and related regulations;
  • Changes in the tax exemption amount due to change in employee’s status;
  • Shift in tax salary bracket due to situations such as absences without pay or additional compensation;
  • Employee who joined or separated from the company in the calendar year; or
  • Other similar reasons that may affect the employee’s taxable income or tax rate.

How to compute income tax refund for resigned employees?

The employer shall compute the income tax refund for the resigned employee upon the employee’s separation from the company. In fact, the tax refund computation for the resigned employee is the same as the rest of the employees. The only difference is the time when the tax refund will be computed and returned to the employee.

Income Tax Refund Computation

The employer shall compute the total compensation paid to the employee to determine the employee’s actual income tax. The shortfall or excess between the actual income tax and the tax withheld from the employee is the amount to be either deducted from the employee’s salary or returned to the employee.

Illustration

An employee started working on 1st of July with no compensation earned from 1st January to 30th June. He is married with 1 dependent, earns P16,000 basic salary without any additional compensation.

Item Computation Amount
Basic Salary   P16,000.00
SSS Contribution   P581.30
Philhealth Contribution   P200.00
Pag Ibig Contribution   P100.00
Taxable Income P16,000 – P881.30 = P15,118.70

Based on employee’s information, use the MONTHLY table B item (1) – ME1/ S1. As the employee’s taxable income is P15,118.70, the corresponding withholding tax amount shall be:

P708.33 + [(P15,118.70 – P12,083) x 20%] = P1,315.47

Month Salary Earned Tax Withheld
July P15,118.70 P1,315.47
August P15,118.70 P1,315.47
September P15,118.70 P1,315.47
October P15,118.70 P1,315.47
November P15,118.70 P1,315.47
December P15,118.70  
Total P90,712.20 P6,577.35

*Total tax withheld is P6,577.35

Actual Taxable Amount = P90,712.20 – P75,000 = P15,712.20
Actual Income Tax = P500 + [(P15,712.20 – P10,000) x 10%] = P1,071.22
Excess Withholding Tax to be returned = P6,577.35 – P1,071.22 = P5,506.13

For more information on taxation issues, please refer to the tax code of the Philippines.

Computation of Withholding Tax in the Philippines

Withholding Tax Computation

In the Philippines, employers act as the withholding agent for the Bureau of Internal Revenue (BIR). So employers are required to compute, deduct and remit the employees’ taxes to the BIR. And the employer shall be liable for the taxes not withheld or remitted to BIR. So it is imperative that employers are familiar with the withholding tax regulations and the computation of withholding tax in the Philippines.

What You Will Learn

  • What is withholding tax?
  • BIR Withholding Tax Table
  • What is the withholding tax formula?
  • How to compute withholding tax in the Philippines?

Withholding Tax in the Philippines

In this case, I will be explaining the withholding tax on compensation or the withholding of taxes from income payments arising from an employer-employee relationship. The employer must note that the employee’s total withheld taxes for the year may be different from the employee’s actual income tax. So the employer is required to perform a reconciliation to ensure it matches.

BIR Withholding Tax Table

Withholding Tax Table
You can download the withholding tax table from BIR here.

 

The BIR withholding tax table includes 4 different sections for the daily paid; weekly paid; semi-monthly paid; and, the monthly paid employees. However, the computation method is the same. But before that, let’s understand the withholding tax table and formula.

 

 

 

 

Understanding the Withholding Tax Formula

compute withholding tax exemption amount

Personal and Additional Exemption Amount

Under every section, there are 2 tables – A and B. Each row refers to a different amount of employee’s personal and additional exemption. For example, an employee who is single (S) or married (M) without any qualified dependent will be under row 2 with a P50,000 personal exemption.

And if you use the first amount of every row multiply by 12, you will get back the exemption amount. For example, 4,167 multiply by 12 = 50,004. The slight discrepancy is due to rounding differences in the entire table. The multiplying factor for ‘Daily’ section is 303; ‘Weekly’ section is 52; and, ‘Semi-Monthly’ section is 24.

withholding tax rateNext, what does the ‘0.00’ and the ‘+5% over’ means? It means the employer is required to withhold 5% tax for salary above P4,167. So if the employee earns P4,800 a month, the employer is required to withhold [5% × (P4,800 – P4,167)] + 0.00 = P31.65 tax. If the employee earns P12,000, then the employer will be required to withhold [20% × (P12,000 – P10,000)] + P708.33 = P1,108.33 tax.

And what is the P708.33? It is the total amount of [5% × (P5,000 – P4,167)] + [10% × (P6,667 – P5,000)] + [15% × (P10,000 – P6,667)] = P708.30. The slight discrepancy is due to the rounding differences in the entire table. Now you know how to compute the withholding tax, let’s go through an example below.

Computation of Withholding Tax in the Philippines

Example of Computation of Withholding Tax

  1. Ensure you are using the “Monthly” section.
  2. Determine the exemption status
    • Use table A for employees without qualified dependent
      • Status Z – for employees with zero exemption (those who failed to file Application for Registration and those with multiple employers)
      • Status S/ME – for both single and married employee with no qualified dependent
    • Use table B for single/married employee with qualified dependent child(ren)
      • Status ME1/S1 – with 1 qualified dependent
      • Status ME2/S2 – with 2 qualified dependent
      • Status ME3/S3 – with 3 qualified dependent
      • Status ME4/S4 – with 4 qualified dependent
  3. Determine the gross income.
    • Assuming the gross income is Php 14,000.
    • Gross Income = (Basic Salary + Allowances + Overtime Pay + Night Shift Differential + Holiday Pay) – (Absences + Tardiness + SSS + Philhealth + HDMF contributions)
  4. Computation of the withholding tax.
    • Assuming the employee has 1 qualified dependent – Status ME1/S1
    • Assuming the employee’s gross income is Php 14,000.
    • Using the row of ME1/S1, look for the highest amount not exceeding the gross income – which is in this case, Php 12,083 (Column 5)
    • Withholding tax formula for Column 5 is Php 708.33 + 20% above Php 12,083
    • 708.33 + (20% * (14,000 – 12,083)) = Php 1091.73

For more information about taxation, please refer to the tax code of the Philippines.

Personal Income Tax and Withholding Tax on compensation

Income Tax and Withholding Tax Philippines

Employers are required to act as withholding agents to ensure that their employees’ pay the right amount of income tax every year. Failure to do so may be liable to penalties. And therefore it is important to understand the income tax rate and the exemptions of taxation to compute the right amount of income tax.

This will provide you with a basic understanding of the current and new personal income tax and the Philippines withholding tax on compensation.

  • What is the income tax rate?
  • New Income Tax Table
  • What is not included in taxable income?
  • What are ‘De Minimis’ benefits?
  • What is included in non taxable income?
  • Income Tax Exemptions in the Philippines
  • Withholding Tax Table

What is the income tax rate?

Annual Income Tax Table Philippines:

Annual Income Tax Table Philippines
However, the government is working on the income tax reform bill which aims to reduce individual income tax. With the new income tax rate, 83% of the taxpayers will be exempted from paying personal income tax (according to data from BIR).

new income tax table philippines
Key Highlights

  • The reform will be carried out in 2 phases – 1st phase in 2017 onwards, 2nd phase in 2020 onwards.
  • Employees who earned less than 250,000 a year will be exempted from personal income tax.

Taxable Income Philippines

All compensation (including basic salary, allowances, overtime pay, etc) is taxable unless:

  • The employee is a minimum wage earner;
  • It is part of de minimis benefits;
  • It is the employee’s contribution for SSS, Philhealth and HDMF;
  • It is a non-taxable item such as 13th-month pay;
  • It was deducted from the salary for absences or tardiness.

De Minimis Benefits

Revenue Regulations Nos. 2-98 and 3-98 were amended by Revenue Regulations 5-2008, 5-2011, 8-2012 and 1-2015 to reflect the current ‘De Minimis’ benefits.

De Minimis Benefits are facilities or privileges that are of relatively small value given to the employees by the employer which are not subjected to income tax nor fringe benefit tax.

The 11 ‘De Minimis’ Benefits are:

  1. Monetized unused vacation leave credits of private employees not exceeding 10 days during the year;
  2. Monetized value of vacation and sick leave credits to government official and employees;
  3. Medical cash allowance to dependents of employees, not exceeding PHP 750 per employee per semester or PHP 125 per month;
  4. Rice subsidy of PHP 1,500 or 1 sack of 50kg of rice per month amounting to not more than PHP 1,500;
  5. Uniform and clothing allowance not exceeding PHP 5,000 per annum;
  6. 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 PHP 10,000 per annum;
  7. Laundry allowance not exceeding PHP 300 per month;
  8. Employees achievement awards, e.g. for length of service or safety achievement, which must be in the form of tangible personal property other than cash or gift certificate, with an annual monetary value not exceeding PHP 10,000 received by the employee under an established written plan which does not discriminate in favor of highly paid employees;
  9. Gifts made during Christmas and major anniversary celebrations not exceeding PHP 5,000 per employee per annum;
  10. Daily meal allowance for overtime work and night/ graveyard shift not exceeding 25% of the basic minimum wage on a per region basis, and
  11. 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 PHP 10,000 per employee per taxable year.

Any amount in excess of the stipulated de minimis benefit may still be exempted from taxation under Republic Act No. 10653, provided that the total exclusion shall not exceed P82,000.

Non Taxable Income Philippines

According to Republic Act No. 10653, 13th-month pay, productivity incentives, Christmas bonus and other benefits shall not be included in gross income and shall be exempt from taxation. The total exclusion shall not exceed eighty-two thousand pesos (P82,000).

Income Tax Exemption Philippines

Every employee is entitled to P50,000 income tax exemption and an additional P25,000 income tax exemption for each qualified dependent children, not exceeding 4 children.

However, if an employee has multiple employers, only the main employer shall claim personal and additional exemption. All other employers shall declare zero exemption for the employee. An employee who failed to file an application for registration shall likewise not entitled to any exemption.

Withholding Tax Table

Employers can withhold employee’s withholding tax based on the BIR Withholding Tax Table.

BIR Withholding Tax Table:
Withholding Tax Table
From Bureau of Internal Revenue

Overview of Leave Benefits in the Philippines

Leave Benefits in Philippines

This is the overview of the different types of leave benefits in the Philippines. Surprisingly (or not), not all of these leave benefits can be found in the Labor Code of the Philippines.

Vacation Leave

Contrary to popular belief, there is actually no vacation leave provision in the Labor Code of the Philippines. However, employers who grant at least 5 days of vacation leave per year is deemed to be in compliance with the service incentive leave provision. Find out more about vacation leave and its computation here.

Service Incentive Leave

An employee who has rendered at least 1 year of service shall be entitled to 5 days of paid service incentive leave (SIL) per year. Find out more about the service incentive leave and its computation here.

AWOL – Absent Without Official Leave

AWOL is the abbreviation for absent without official leave. It refers to the absence of an employee without seeking prior approval before the day of absent. AWOL may be a valid ground for termination when it constitutes gross or habitual neglect of duty. Find out what employer can do and should do when an employee is AWOL here.

Sick Leave

Sick leave benefit is also not covered in the Labor Code of the Philippines. Consequently, it is part of the employer’s prerogative to grant such leave benefit and decide on the corresponding pay rules on the day of absence. However, an employee may claim SSS sickness benefit for work absences due to sickness or injury if the employee meets the criteria. Find out more about the sick leave policy in the Philippines and the SSS sickness benefit here.

Bereavement Leave

Bereavement leave, also known as compassionate leave or funeral leave, is not covered in the Labor Code of Philippines. It is a management prerogative and usually granted to an employee upon the death of the employee’s immediate family member. Find out more about the bereavement leave here.

Calamity Leave or Special Emergency Leave

For government employees, 5 days special emergency leave shall be granted to those directly affected by natural calamity or disaster. For employees in private sector, it is part of the employer’s discretion to grant emergency leave. Emergency leave is not covered in the Labor Code of the Philippines. Find out the rules on suspension of work due to calamities here.

Maternity Leave

Although Article 131 (previously article 133) of the Labor Code of the Philippines provides for maternity leave benefits, it has since been integrated with the Social Security Law which provides maternity leave benefit of 60 days for normal delivery and 78 days for cesarean delivery. Find out the maximum maternity benefit and how to compute it here.

Special Leave Benefits for Women

The special leave benefits for women are mandated under Republic Act No. 9710, also known as ‘The Magna Carta of Women’ stipulating that a female employee may be entitled to 2 months of special leave with full pay following surgery caused by gynecological disorders. Find out the gynecological disorders that are covered here.

Paternity Leave

Paternity leave is mandated under Republic Act No. 8187 also known as the ‘Paternity Leave Act of 1996’ stipulating that a male employee may be entitled to 7 days of paternity leave. Find out if you meet all of the requirements here.

Solo Parent Leave

Parental leave, or more commonly known as solo parent leave, is mandated under Republic Act No. 8972 also known as the “Solo Parents’ Welfare Act of 2000”. A solo parent is entitled to 7 days of parental leave per year. Find out who is entitled to solo parent leave and how to avail the solo parent leave here.

Working Hours in the Philippines

Working Hours Philippines

In the Philippines, most employees are paid by the number of hours they work. And when an employee receives a fixed monthly salary, the salary is for a fixed number hours of work. So the number of working hours of employee matters. But what is the normal working hours in the Philippines? And is break time paid? What about the waiting time and training time?

What You Will Learn

  • Working Hours in the Philippines
  • Break Time Policy
  • Common question: is waiting time considered work hours?
  • Common question: should I be paid for training?

Labor Code of the Philippines – Working Hours

According to the Labor Code of the Philippines, normal working hours should be 8 hours a day, 6 days a week. And the employee shall be entitled to overtime pay for work done beyond the 8 hours in a single workday. However, the company may adopt flexible work arrangement such as compressed workweek that allows an employee to work up to 12 hours without overtime premium.

However, there are some scenarios where employers and employees may not agree on the actual working hours which may result in a labor dispute. These common disputes include those involving travelling time, training time and, meal and rest period. In general, hours worked includes all the time an employee is required to be at a specific place and all the time the employee spent working.

Break Time Policy

The employer is required to provide the employee with at least 1 hour meal period and such time-off may not be considered as part of the working hours. However, coffee breaks not more than 20 minutes are considered as work time. In practice, such rest period or coffee break is regulated by company policy.

Is waiting time considered work hours?

The time spent waiting to perform work by an employee shall be considered as working time if the time spent waiting is controlled by the employer even if no work is performed. Furthermore, an employee whose duty requires him to maintain his availability for work purposes shall also be compensated for the said period.

Should I be paid for training?

When employees (1) voluntarily participate in training activities, (2) which are conducted outside office hours, and (3) no work was done, it shall not be considered as work time. However, if any of the conditions is not met, the time spent shall be part of the working hours.

For more information on labor regulations, please refer to Presidential Decree No. 442, s. 1974.