Calculating daily rate pay is essential to ensuring accurate compensation for employees in the Philippines. Understanding the concepts of daily and monthly rates and the calculations involved is crucial for both employers and employees. This article provides a step-by-step guide to computing daily rate pay, including special and regular holidays, 13th-month pay, pay rate differences for workers with different work schedules, and the applicability of withholding tax.

Understanding Daily and Monthly Rates:

In the Philippines, the daily rate refers to the amount an employee earns for each day worked, while the monthly rate represents the employee’s fixed salary for an entire month of work. The daily rate is primarily used to compute overtime pay, rest day pay, holiday pay, and other forms of additional compensation.

Calculating the Daily Rate Pay:

To calculate the daily rate pay, we need to divide the monthly rate by the number of working days in a month. The formula is as follows:

Daily Rate Pay = Monthly Rate / Number of Working Days

Example:

Let’s assume an employee’s monthly rate is PHP 30,000, and the number of monthly working days is 22 (excluding weekends and holidays). The calculation would be:

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

Calculating Daily Rate Pay for Special and Regular Holidays:

In the Philippines, special holidays and regular holidays are treated differently when calculating daily rate pay. Special holidays, such as National Heroes’ Day, are typically paid at 130% of the basic daily rate. On the other hand, regular holidays, like Christmas Day or New Year’s Day, are paid at 200% of the basic daily rate.

To calculate the daily rate pay for Special Holidays, you can use the following formula:

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

For example, if an employee’s daily rate pay is PHP 1,363.64 and it is a special holiday, the calculation would be:

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

Calculating Daily Rate Pay for 13th Month Pay:

In the Philippines, the 13th-month pay is a mandatory benefit provided to employees, which is equivalent to one-twelfth (1/12) of their total basic salary earned within a calendar year. To calculate the 13th-month pay for a daily worker, you need to consider their daily rate and the number of days they have worked.

To calculate the 13th-month pay for an employee working 5 days a week, follow these steps:

Step 1: Determine the daily rate.

If the employee has a fixed monthly salary, divide their monthly salary by 22 (the number of working days in a month on average) to get the daily rate. If the employee is paid on a daily basis, the daily rate is already known.

Step 2: Calculate the basic salary earned within the given period.

Multiply the daily rate by the total number of days worked in the given period. In this case, the employee worked for 7 months and 10 days.

Step 3: Calculate the 13th-month pay.

Divide the basic salary earned within the given period by 12 to get the 13th-month pay.

Now let’s calculate the 13th-month pay for an employee working 5 days a week, assuming their daily rate is 500 PHP and they have worked for 7 months and 10 days:

Step 1: Daily Rate = 500 PHP

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

= 500 PHP x (7 months x 22 days/month + 10 days)
= 500 PHP x (154 days + 10 days)
= 500 PHP x 164 days
= 82,000 PHP

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

= 82,000 PHP / 12
= 6,833.33 PHP

Therefore, the 13th-month pay for an employee working 5 days a week, who has worked for 7 months and 10 days with a daily rate of 500 PHP, would be 6,833.33 PHP.

For an employee working 6 days a week, the calculation is the same, except the number of working days per month is 26, considering an average of 4 weeks in a month.

Let’s calculate the 13th-month pay for an employee working 6 days a week, assuming their daily rate is 500 PHP and they have worked for 7 months and 10 days:

Step 1: Daily Rate = 500 PHP

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

= 500 PHP x (7 months x 26 days/month + 10 days)
= 500 PHP x (182 days + 10 days)
= 500 PHP x 192 days
= 96,000 PHP

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

= 96,000 PHP / 12
= 8,000 PHP

Therefore, the 13th-month pay for an employee working 6 days a week, who has worked for 7 months and 10 days with a daily rate of 500 PHP, would be 8,000 PHP.

Pay Rate Differences for 5-Day and 6-Day Workers:

There is a distinction between employees who work five days a week and those who work six days a week. The daily rate pay for 5-day workers remains the same as calculated previously. However, for 6-day workers, the monthly rate is divided by 26 days (regardless of the actual number of working days in a month).

Example:

Suppose an employee’s monthly rate is PHP 30,000, and they work 6 days a week. The calculation would be as follows:

Daily Rate Pay (6-Day Worker) = PHP 30,000 / 26 = PHP 1,153.85

Withholding Tax and Daily Rate Pay:

Withholding tax is applicable when calculating the daily rate paid. It is deducted from the employee’s salary based on the tax bracket they fall into. The tax rates may vary depending on the employee’s annual income and other factors. Employers are responsible for deducting and remitting the appropriate withholding tax to the Bureau of Internal Revenue (BIR).

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Accurate computation of daily rate pay is crucial for ensuring fair and transparent compensation for employees in the Philippines. By understanding the concepts of daily and monthly rates and following the calculation methods explained in this article, employers can accurately determine employees’ daily rate pay, including special and regular holidays, 13th-month pay, and differences between 5-day and 6-day workers. Additionally, employers must consider the applicable withholding tax based on the employee’s income and tax bracket to ensure proper taxation compliance.

At Triple i Consulting, we take pride in our distinction as the pioneering company in the Philippines to achieve ISO 9001:2008 certification. We specialize in offering comprehensive business registration services and a wide range of business support consulting solutions. With our extensive experience and expertise in Accounting and Payroll Outsourcing, we are fully dedicated to providing unwavering support throughout the entire process.

Our team of highly skilled payroll experts is ready to provide dedicated assistance every step of the way. To schedule a free initial consultation with one of our payroll experts, please reach out to us using any of the following channels:

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