TaxesHow to Compute Daily Rate of Pay – Philippines

Understanding how to calculate the daily rate of pay is fundamental for ensuring correct compensation for employees in the Philippines. This comprehension is vital for both employers and employees, as it establishes the basis for various forms of compensation, including overtime pay, holiday pay, and other additional remuneration. This guide presents a systematic approach to computing the daily rate of pay, including special and regular holidays, the 13th-month pay, disparities in pay rates for workers with distinct work schedules, and the implications of withholding tax.

Conceptualizing Daily and Monthly Rates

In the context of Philippine labor laws, the daily rate signifies an employee’s remuneration per working day. In contrast, the monthly rate denotes the fixed salary for a month’s worth of work. The daily rate forms the basis for calculating various forms of additional compensation.

Procedure for Calculating Daily Rate of Pay

To calculate the daily rate of pay, dividing the monthly rate by the number of working days in a month is necessary.

The formula is outlined as follows:

Daily Rate of Pay = Monthly Rate / Number of Working Days

Example:

Consider an employee with a monthly rate of PHP 30,000 and 22 working days in a month (excluding weekends and holidays).

The computation is as follows:

Daily Rate of Pay = PHP 30,000 / 22 = PHP 1,363.64

Calculation of Daily Rate of Pay for Special and Regular Holidays:

In the Philippines, special holidays and regular holidays entail distinct calculations for the daily rate of pay. Special holidays like National Heroes’ Day typically warrant compensation at 130% of the basic daily rate. In contrast, regular holidays, like Christmas Day or New Year’s Day, necessitate compensation at 200% of the basic daily rate.

For computing the daily rate of pay for Special Holidays, the following formula applies:

Daily Rate of Pay for Special Holidays = Daily Rate of Pay + (Daily Rate of Pay * 30%)

For instance, if an employee’s daily rate of pay is PHP 1,363.64 and it corresponds to a special holiday, the computation would be:

Daily Rate of Pay for Special Holidays = PHP 1,363.64 + (PHP 1,363.64 * 30%) = PHP 1,772.73

Calculation of Daily Rate of Pay for 13th Month Pay:

The 13th-month pay in the Philippines is a mandatory benefit provided to employees, equivalent to one-twelfth (1/12) of their total basic salary earned within a calendar year. To determine the 13th-month pay for a daily wage earner, both the daily rate and the number of days worked must be considered.

To compute the 13th-month pay for an employee working 5 days a week, the following steps are undertaken:

1. Ascertain the daily rate.
2. Compute the basic salary earned within the given period.
3. Calculate the 13th-month pay.

For instance, let’s calculate the 13th-month pay for an employee working 5 days a week, with a daily rate of PHP 500, and having worked for 7 months and 10 days:

Step 1: Daily Rate = PHP 500

Step 2: Basic Salary Earned = Daily Rate x Number of Days Worked

= PHP 500 x (7 months x 22 days/month + 10 days)

= PHP 500 x (154 days + 10 days)

= PHP 500 x 164 days

= PHP 82,000

Step 3: 13th-Month Pay = Basic Salary Earned / 12

= PHP 82,000 / 12

= PHP 6,833.33

Thus, the 13th-month pay for an employee working 5 days a week, having worked for 7 months and 10 days, with a daily rate of PHP 500, amounts to PHP 6,833.33.

The procedure is analogous for an employee working 6 days a week, except the number of working days per month is 26, accounting for an average of 4 weeks in a month.

Tax Withholding and Daily Rate of Pay:

Tax withholding is pertinent to the daily rate of pay computation, with deductions made based on the applicable tax bracket determined by the employee’s annual income and other relevant factors. Employers are responsible for deducting and remitting the requisite withholding tax to the Bureau of Internal Revenue (BIR).

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