How to Make a Sample Payroll? A Guide to Philippine Payroll Computations

February 5, 2026

Payroll Outsourcing Services Philippines

In the Philippines, payroll isn’t just about issuing salaries—it’s a critical compliance obligation that ties together labor laws, statutory contributions, tax withholding, and employee expectations. With costs often reaching 50-70% of operating expenses, even small errors can lead to penalties from SSS, PhilHealth, Pag-IBIG, BIR, or DOLE, while also affecting retention in a talent-competitive market.

Understanding Payroll Fundamentals and Legal Requirements

Payroll computation in the Philippines follows the Labor Code (Article 103), requiring semi-monthly payments not exceeding 16 days per cycle, with daily/weekly payments for certain workers. Beyond basic pay, it incorporates overtime premiums, holiday differentials, statutory deductions, and creditable withholding tax, all updated quarterly via SSS/PhilHealth tables.

The process demands precision: late payments risk ₱100,000 DOLE fines per violation, under-remitted contributions draw 3% monthly SSS interest, and BIR surcharges hit 25% for withholding lapses. Accurate payroll builds trust—63% of employees prioritize it, according to Mercer 2025—while supporting growth.

Breaking Down Payroll Components and Formulas

A typical payroll starts with gross earnings (taxable and non-taxable), adds adjustments, and then subtracts mandatory deductions for net pay. Key components include basic salary rates, premiums for extra work, allowances, and absences.

Essential Formulas:

Monthly salary → Semi-monthly: divide by 2
Daily rate: monthly × 12 / factor (365 days common: 365; 313 for 5-day weeks)
Hourly: daily / 8
Overtime: hourly × premium (125% regular, 130% rest day, 200% regular holiday)
Night differential: 10% basic hourly (10 PM-6 AM)
De minimis non-taxable: rice up to ₱2,400/year, medical ₱10,000/year

For example, a ₱25,000 monthly salary yields semi-monthly ₱12,500, daily ₱821.92 (365 factor), and hourly ₱102.74. Absences deduct daily rate × days; de minimis adds non-taxable portions.

Step-by-Step Gross Pay Calculation

Gross pay sums all earnings before deductions, using work days and premiums for fairness.

Establish Basic Rates
From ₱25,000 monthly: semi ₱12,500; daily ₱821.92; hourly ₱102.74.
Add Premium Pays
2 regular OT hours: ₱102.74 × 1.25 × 2 = ₱257; special holiday 4 hours: ₱102.74 × 1.3 × 4 = ₱534; night diff on 3 hours: ₱102.74 × 1.1 × 3 = ₱339.
Adjust for Absences/Tardiness
1 full absence: -₱821.92; 2 half-days tardy: -₱410.96 total.
Include Allowances
Rice de minimis ₱100 semi-monthly (non-taxable).

Sample semi-monthly gross: ₱12,500 basic + ₱257 OT + ₱534 holiday + ₱339 night – ₱821.92 absence = ₱12,808.08 taxable + ₱100 non-taxable.

Navigating Statutory Contributions

Statutory deductions are non-negotiable shares for social security, health, and housing funds, split between employer and employee.

2026 Contribution Tables (Sample ₱12,808 Taxable Gross):

SSS EE share: ₱1,125 (up to 4.7% on ₱30,000 ceiling)
PhilHealth EE: ₱320 (2.5% basic, ₱40k cap)
Pag-IBIG EE: ₱200 (max ₱5,000 base)
Total EE statutory: ₱1,645

Loans amortize separately (SSS: ₱600; Pag-IBIG: ₱300). Employer matches SSS/PhilHealth + provident (1%). Remit SSS by 10th, PhilHealth/Pag-IBIG by month-end. Consulting firms like Triple i Consulting help automate these processes for greater accuracy.

Withholding Tax Mechanics and Tables

Creditable withholding tax is deducted from taxable gross post-statutory (ex-loans), using BIR tables for fairness.

Process:
Taxable ₱12,808 – ₱1,645 statutory = ₱11,163.
Semi-monthly table (REVWT 2026): Base ₱0-33k bracket yields ~₱850 withheld (progressive).

Annual reconciliation via ITR credits over/under. De minimis exempts; bonuses >₱90k EWT 20%.

Complete Sample Payroll Example

Putting it together for Juan Dela Cruz (₱25k monthly, NCR, semi-period 1-15 Feb 2026).

Net pay ₱9,513 (₱12,808 + ₱100 – ₱3,395). Employer contributions ₱2,300+. A full payslip includes the employer details, period, and signature.

Managing Special Payroll Scenarios

Beyond regular cycles, handle prorated bonuses and finals with care.

Key Types:

Prorated (partial month): days worked / total × monthly
13th month: Pro-rata by Dec 24, EWT if >₱90k
Final pay: Unpaid wages + 13th pro-rata + SIL + separation (pay within 30 days)
Retroactive: Adjust prior payslips, issue new 2316

Document with BIR 2316 annually and COE for quits.

Payroll Processing Options

Choosing the right way to run payroll depends on your headcount, complexity, and in-house expertise.

Manual spreadsheets for very small teams
Off-the-shelf or cloud payroll software for growing SMEs
Fully outsourced payroll services for complex or multi-entity setups

Manual processing can work for microbusinesses with fewer than 10 employees, but it is highly vulnerable to errors once overtime, night differentials, and loans start to add up. Software solutions help standardize formulas and apply the latest contribution and tax tables automatically, which is useful for businesses that are scaling but still want control in-house. For companies with multiple sites, mixed employment arrangements, or foreign reporting requirements, outsourcing to a specialist like Triple i Consulting allows payroll to be managed by a team that tracks regulatory changes, prepares reports, and handles remittances end-to-end, freeing internal staff to focus on operations instead.

Proven Strategies for Payroll Success

Adopt these to minimize errors and risks.

Verify Data Sources: DTRs, masterlists, and tables quarterly.
Automate Where Possible: Software computes premiums/contributions.
Reconcile Monthly: Payroll vs remittances/bank.
Train and Document: Payslip reviews, policy manual.
Conduct Audits: Quarterly internal checks.
Outsource Expertise: Tap firms like Triple i Consulting for compliance scaling.

Identifying and Mitigating Risks

Common traps amplify penalties—spot and fix them.

Risks:

Factor confusion (365 vs 313)
Missed premiums (night diff, holidays)
Loan over-amortization
Late remittances (SSS 3%/month)

Mitigate: Software validation, checklists, backups. DOLE/BIR audits focus here—2316 accuracy key.

Essential Reporting and Payslip Rules

DOLE mandates itemized payslips; BIR requires annual reports.

Payslip Must-Haves: Earnings breakdown, deductions, net, employer/employee info, period, stamp.
Reports: BIR 1601C quarterly, 2316 by Jan 31, SSS R3 Feb 15.

Emerging Payroll Trends in 2026

Digital mandates shape future processing.

Trends:

ePayslips mandatory (DO 183)
AI for anomaly detection
SSS e-remittances are fully phased
Remote allowances tax-free

Final Insights

Sample payroll computations illuminate the structured yet nuanced Philippine system, where factors, premiums, and deductions demand vigilance for compliance and efficiency. From gross builds to net delivery, precision protects against fines while supporting teams.

As digital tools evolve, businesses pairing internal processes with expert outsourcing like Triple i Consulting achieve scalable, audit-proof payroll—fueling sustainable operations.

Is Assistance Available?

Yes. Triple i Consulting provides comprehensive payroll outsourcing, such as custom computations, e-payslips, remittances, 2316/1601C, and compliance reviews for any scale.

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