Written by Rafael
I was doing my daily online reading marathon and saw an article written in The Philippine Star dated 20 May 2016 by Mayen Jaymalin that read: Metro workers to get wage hike. The article said, “the workers in Metro Manila are getting a much-awaited increase. Under the new order, minimum wage earners shall receive an additional P10 cost of living allowance (COLA) in their daily take home pay while the previous P15 COLA shall be integrated to the basic pay.”
When this new order will take effect, the new minimum wage for the non-agricultural sector in Metro Manila will stand at P491 per day and the agricultural, manufacturing and retail sector will receive P454 per day.
This is an exciting news! For business owner and employees, knowing the per day rate is very important. Knowledge for both business owner and employee about the minimum wage rate in the Philippines have an impact in tax calculation.
For business owners, not only knowing how much will be deducted for unpaid leaves and absences from an employee monthly pay or computing for overtime pay, determining the per day rate of your employee will also be a big factor whether they are exempted from income tax or withholding tax on compensation with respect to Basic salary pay, Holiday pay, Hazard pay, Overtime pay and Nightly shift differential (BHHON).
The Department of Labor and Employment National Wages and Productivity Commission (DOLE-NWPC) is the go-to website for publications on latest minimum wage orders and exemptions by regions. A Metro Manila worker is under NCR region and currently the minimum wage is P481 per day (P466 basic wage plus P15 Cost of Living Allowance/ COLA) for non-agricultural workers, but as soon as the new wage order will take effect, the minimum wage order will then be P491 per day for the non-agricultural sector. By comparing, if your employee per day rate is equal to the published minimum wage rate per day, there will be no deductions of withholding tax on compensation for your employee.
How do you calculate Employee per day rate?
By now you know the importance of calculating the per day rate of your employee. Now, if you have a fixed monthly salary paid to your employee, let us calculate the daily rate to be able to compare with the DOLE-NWPC published minimum wage rates. Here’s how:
For Illustration purposes only.
You are a startup company in Metro Manila employing not more than ten (10) workforce. For our example, we take Employee A as our subject. Employee A is earning P10,000 per month and works from Monday to Friday and he is not paid for Saturdays, Sundays and rest days. Employee A is a non-agricultural worker.
1.Determine the number of working days in a year for your employee.
a.261 Days – for those who do not work and are not considered paid on Saturdays and Sundays or rest days.
b.313 Days – for those who do not work and are not considered paid on Sundays and rest days.
c.365 Days – for those who do not work but are considered paid on rest days, special days and regular holidays
d.392.5 Days – for those required to workevery day including Sundays or rest days, special days and regular days
This is how the number of days is calculated, for illustration purposes, 261 days is calculated:
261 days – simply calculate 5 working days per week multiplied by 52 weeks per year + 1 day (this is to account for 1 day extra in case of leap year).
2.Determine the per day rate of your Metro Manila employee.
Equivalent per day rate = (P10,000 multiplied by 12 months) divided by 261 days
Equivalent per day rate = P460 per day
3.Compare the DOLE-NWPC published wage rate with your Employee per day rate
Employee per day rate = P460 per day
NCR Minimum Wage = P481 per day
Employee A is considered as a minimum wage earner, thus, the salary is tax exempt that means there will be no deductions of withholding tax on compensation for your employee. The same equivalent per day rate will be your basis for deductions of unpaid leaves, absences and or overtime pay.
All calculation shown here are all for illustration purposes only. It is always my strong suggestion for business owners to follow DOLE-NWPC published wage orders. You can also check out Bureau of Internal Revenue (BIR) Withholding Tax Calculator () And most important of all, don’t forget to file your BIR Form 1601-C: Monthly Remittance Return of Income Taxes Withheld on Compensation.
Department of Labor and Employment – National Wages and Productivity Commission (DOLE-NWPC)
Bureau of Internal Revenue (BIR)
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