Minimum Wage Earner (MWE)

 refers to a worker in the private sector who is paid with a statutory minimum wage (SMW) rates, or to an
employee in the public sector with compensation income of not more than the statutory minimum wage
rates in the non-agricultural sector where the worker/employee is assigned. Such statutory minimum wage
rates are exempted from income tax. Likewise, the exemption covers the holiday pay, overtime pay, night
shift differential pay, and hazard pay earned by an MWE.
Tax Rules for Minimum Wage Earners
Minimum wage earners shall be exempt from the payment of income tax based on their statutory minimum wage
rates. The holiday pay, overtime pay, night shift differential pay and hazard pay received by such earner are
likewise exempt.
Sample Tax Computation: Minimum Wage Earners under TRAIN
Here is a sample computation showing the applicable tax rules for Minimum Wage Earners (MWE), as reiterated
in BIR Revenue Regulations 8-2018.
Tax Rules for Minimum Wage Earners
From the Bureau of Internal Revenue’s (BIR) RR 8-2018:
Sample Tax Computation: Minimum Wage Earners
Sample Computation
Mr. X, a minimum wage earner, works for 123 Co. Mr. X is not engaged in business nor has any other source of
income other than his employment. For 2018, Mr. X earned a total compensation income of P135,000.00.
a. The taxpayer contributed to the SSS, Philhealth, and HDMF amounting to P5,000.00 and has received
13th month pay of P11,000.00. His income tax liability will be computed as follows:

CONCLUSION: Taxpayer Mr. X is exempt since he is considered a minimum income earner.

b. The following year, Mr. X earned, aside from his basic wage, additional pay of P140,000.00 which consists
of the overtime pay (P80,000.00), night shift differential (P30,000.00), hazard pay (P15.000.00) and
holiday pay (P15,000.00). He has the same benefits and contributions as in Example (a) above

CONCLUSION: Taxpayer is tax-exempt as an MWE. The statutory minimum wage as well as the holiday pay,
overtime pay, night shift differential pay and hazard pay received by such MWE are specifically exempted from
income tax under the law.