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Module 6

Other Forms of Compensation

In the past module, we talked about salaries and wages. As a recall,

these are given by employer to its employees as payment for the
services they have rendered for the business entity. In this module, we
will talk about things given to employees aside from salaries and
wages.

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6.2 Holiday Pay

Holiday pay refers to the payment of the regular daily wage for any
unworked regular holiday. Every employee covered by the Holiday
Pay Rule is entitled to the minimum wage rate (daily basic wage plus
Cost of Living Allowance). This means that the employee is entitled to
at least 100% of his/her minimum wage rate even if he/she did not
report for work, provided he/she is present or is on leave of absence
with pay on the work day immediately preceding the holiday. Work
performed on that day merits at least twice (200%) the wage rate of the
employee.

Premium pay refers to the additional compensation for work

performed within eight (8) hours on non-work days, such as rest days
and special days. Workers who are not required or permitted to work
on special days are not entitled to any compensation unless there is a
favorable company policy that grants payment on special days. On the
other hand, work performed on special days merits additional
compensation of at least thirty percent (30%) of the basic pay or a total
of one hundred thirty percent (130%). Where the employee works on a
special day falling on his rest day, he/she shall be entitled to an
additional compensation of at least fifty percent (50%) of his/her basic
wage or a total of one hundred fifty percent (150%).

The Labor Code requires the payment of an employee’s daily basic

wage for all non-working regular holidays. Unless otherwise modified
by law, there are 12 regular holidays and 3 special days in the
Philippines. Regular holidays are those that usually have a fixed date,
such as New Year's Day, Independence Day, and Christmas Day. The
only exceptions to this rule are National Heroes Day and the religious
holidays of Maundy Thursday, Good Friday, Eid'l Fitr, and Eidul
Adha. Special nonworking days, on the other hand, are more flexible.
Apart from being enacted by Congress, they can also be declared
under the judgment of the President

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Computation of Compensation for Regular Holiday

A. If it is a Regular Workday

If Unworked

John is a minimum wage earner in an NCR –based Company. The

minimum wage rate set by the government is Php491 per day. This is
composed of the basic wage worth Php481 and the Cost of Living
Allowance (COLA) worth Php10. Regularly, he works during
weekdays (Monday-Friday). He did not render his services on Friday-
January 1, 2016 because he enjoyed this day with is family. How
much is his earning for that day?

Holiday Pay = Php491

John is entitled for holiday pay worth Php491.

If Worked

John is a minimum wage earner in an NCR –based Company. The

minimum wage rate set by the government is Php491 per day. This is
composed of the basic wage worth Php481 and the Cost of Living
Allowance (COLA) worth Php10. Regularly, he works during
weekdays (Monday-Friday). With proper company authorization, he
worked on Friday-January 1, 2016. How much is his earning for that
day?

Holiday Pay = (Php491)(200%) = Php982

For that day, John is entitled for holiday pay worth Php982.

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B. If it is a Rest Day

If Unworked

John is a minimum wage earner in an NCR –based Company. The

minimum wage rate set by the government is Php491 per day. This is
composed of the basic wage worth Php481 and the Cost of Living
Allowance (COLA) worth Php10. Regularly, he works during
weekdays (Monday-Friday). He did not render his services on
Sunday-January 1, 2017 because he enjoyed this da with is family.
How much is his earning for that day?

Holiday Pay = Php491

Even if the holiday falls in a Sunday, John is entitled for holiday pay
worth Php491.

If Worked

John is a minimum wage earner in an NCR –based Company. The

minimum wage rate set by the government is Php491 per day. This is
composed of the basic wage worth Php481 and the Cost of Living
Allowance (COLA) worth Php10. Regularly, he works during
weekdays (Monday-Friday). Because there are things that are needed
to be done as soon as possible, the company required John to work on
Sunday -January 1, 2017. How much is his earning for that day?

Holiday Pay = (Php491)(200%) = Php 982.00

Additional Compensation = (Php481)(200%)(30%) = 288.60
TOTAL Php 1,270.60

John is entitled for a total earning worth Php1,106.30 for that day.
Because he worked during a holiday, he is entitled of 200% pay based
on his minimum wage plus 30% premium computed based on the
200% of basic wage.

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Computation of Compensation for declared Special Non-Working

Day:

A. If it is a Regular Workday

If Unworked

Example

John is a minimum wage earner in an NCR –based Company. The

minimum wage rate set by the government is Php491 per day. This is
composed of the basic wage worth Php481 and the Cost of Living
Allowance (COLA) worth Php10. Regularly, he works during
weekdays (Monday-Friday). He did not render his services on
Tuesday-November 1, 2016 because it’s All Saints day. How much is
his earning for that day?

John has no earning for that day because it is just a special non-
working day. Only regular non-working holidays are paid. There will
be no pay, unless there is a favorable company policy, practice or
Collective Bargaining Agreement (CBA) granting payment of wages
on special days even if unworked.

If worked

John is a minimum wage earner in an NCR –based Company. The

minimum wage rate set by the government is Php491 per day. This is
composed of the basic wage worth Php481 and the Cost of Living
Allowance (COLA) worth Php10. Regularly, he works during
weekdays (Monday-Friday). Even if it is All Saints day, he still
worked on Tuesday -November 1, 2016 because the company required
him to do so. How much is his earning for that day?

Basic Wage = Php481.00

Additional Compensation (Php481)(30%) = 144.30
TOTAL Php625.30

John is entitled for a total earning worth Php625.30 for that day.
Because he worked during a special non-working day, he is entitled of
the basic wage plus 30% additional compensation or simply 130%
premium computed based on the basic wage. Note: Similar
computation can be made in cases where a person works during a
regular rest day which is neither considered as a holiday nor special
non-working day.

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B. If it is a Rest Day

If Unworked

John is a minimum wage earner in an NCR –based Company. The

minimum wage rate set by the government is Php491 per day. This is
composed of the basic wage worth Php481 and the Cost of Living
Allowance (COLA) worth Php10. Regularly, he works during
weekdays (Monday-Friday). He did not render his services on
Saturday-December 31, 2016 because it’s his rest day at the same time
it was declared as a special non-working day. How much is his
earning for that day?

John has no earning for that day because it is just a special non-
working day. Only regular non-working holidays are paid. There will
be no pay, unless there is a favorable company policy, practice or
Collective Bargaining Agreement (CBA) granting payment of wages
on special days even if unworked.

If Worked

John is a minimum wage earner in an NCR –based Company. The

minimum wage rate set by the government is Php491 per day. This is
composed of the basic wage worth Php481 and the Cost of Living
Allowance (COLA) worth Php10. Regularly, he works during
weekdays (Monday-Friday). The company needs to finish something
at this date so it required John to work on Saturday-December 31,
2016 even it was declared as a special non-working day. How much is
his earning for that day?

Basic Wage = Php481.00

Additional Compensation (Php481)(50%) = 240.50
TOTAL Php721.50

For work performed on a rest day which is also a special day, the
worker is entitled of the daily basic wage plus 50% additional
compensation based on the daily basic wage. This premium may be
simply computed by getting 150% of the basic wage.

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6.3 Overtime Pay

Overtime pay refers to the additional compensation for work
performed beyond eight (8) hours a day.

The COLA shall not be included in the computation of overtime pay.

The minimum overtime pay rates vary according to the day the
overtime work is performed. Note that overtime pay on a holiday is
being added to the holiday pay.

Example 1

For work in excess of eight (8) hours performed on ordinary working

days: additional 25% of the hourly rate.

Grace regularly works from Monday to Friday and earns a rate of

Php460 in a day. This wage include of Php450 basic wage and Php10
Cost of Living Allowance (COLA). On November 7, 2016- an
ordinary working day, Grace worked overtime for about 3 hours. How
much is her overtime pay?

Overtime Pay = (3)(450/8)(1.25)= Php210.94

The computation is influenced by the 3 hours of work, the basic pay

hourly rate and the additional 25% for the overtime.

Example 2

For work in excess of eight (8) hours performed on a scheduled rest

day or a special day: Additional 30% of the hourly rate on said days

Grace regularly works from Monday to Friday and earns a rate of

Php460 in a day. This wage includes Php450 basic wage and Php10
Cost of Living Allowance (COLA). On Tuesday- November 1, 2016,
a special non-working day, Grace worked overtime for about 2 hours.
How much is her overtime pay?

Overtime Pay= (2)(450/8)(1.3)(1.3)=Php190.13

The computation is influenced by the 2 hours of work, the basic pay

hourly rate, the additional 30% for working during a special day, and
the additional 30% for the overtime.

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Example 3

For work in excess of eight (8) hours performed on a special day

which falls on a scheduled rest day: Plus 30% of the hourly rate on
said days.

Grace regularly works from Monday to Friday and earns a rate of

Php460 in a day. This wage includes Php450 basic wage and Php10
Cost of Living Allowance (COLA). For the whole day of December
31, 2017, Grace worked for a total of 11 hours. How much is her
overtime pay?

Overtime pay= (11-8)(450/8)(1.5)(1.3)=Php329.06

The computation is influenced by the 1 hour of work, the basic pay

hourly rate, the additional 50% for working during a special day which
falls on a scheduled rest day, and the additional 30% for overtime.

Example 4

For work in excess of eight (8) hours performed on a regular holiday

which falls on a working day: Plus 30% of the hourly rate on said
days.

Grace regularly works from Monday to Friday and earns a rate of

Php460 in a day. This wage includes Php450 basic wage and Php10
Cost of Living Allowance (COLA). For the whole Friday -January 1,
2016, Grace worked for a total of 9 hours. How much is her overtime
pay?

Overtime pay=(9-8)(450/8)(2)(1.3)=Php146.25

The computation is influenced by the 1 hour of work, the basic pay

hourly rate, the additional 200% for working during a regular holiday
and the additional 30% for the overtime.

Example 5

For work in excess of eight (8) hours performed on a regular holiday

which falls on a scheduled rest day: Plus 30% of the hourly rate on
said days.

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Grace regularly works from Monday to Friday and earns a rate of

Php460 in a day. This wage includes Php450 basic wage and Php10
Cost of Living Allowance (COLA). For the whole Sunday -January 1,
2017, Grace worked for a total of 9 hours. How much is her overtime
pay?

Overtime pay=(9-8)(450/8)(2)(1.3)(1.3)=Php190.13

The computation is influenced by the 1 hour of work, the basic pay

hourly rate, the additional 200% for working during a regular holiday,
the additional 30% for the rest day, and the additional 30% for the
overtime.

6.4 Night Shift Differential

Night Shift Differential (NSD) refers to the additional compensation of
at least 10% of an employee’s regular wage for each hour of work
performed between 10 p.m. and 6 a.m.

Minimum NSD

So for employers that are very thrifty when it comes to giving night
shift differential, the minimum NDS compensation formula is
NDS = (Basic Hourly Wage - COLA)(Hours Worked from 10:00 pm
to 6:00am)(0.10)

The auditor conducted an inventory count. In order to ensure that the

inventories are not being moved elsewhere while he is supervising the
count he decided that this activity will be conducted after the normal
operating time of the business. He started working from 10 pm up to 6
am. How much will he receive as nightshift differential if his daily
salary rate exclusive of COLA is Php600?

Hourly Salary Rate= Php600/8hrs= Php75 per hour

Nightshift differential = (8)(Php75 per hour)(0.10)=Php60

The auditor has worked 8 hours from 10pm up to 6am. The night shift
differential pay of the auditor is Php60 only.

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Usual NSD

The usual practice of computing night shift differential is 10% of the

hourly pay rate excluding COLA but including increases caused by
working on holidays, special days, rest days and overtime.

Grace regularly works from Monday to Friday and earns a rate of

Php460 in a day. This wage includes Php450 basic wage and Php10
Cost of Living Allowance (COLA). For the whole Sunday -January 1,
2017, Grace worked overtime the following is her Log details

7:30am-11:30am
1:00pm-12:00am

How much is her night shift differential pay?

Hourly pay rate = (2)(Php450/8)(2)(1.3)(1.3)(0.1) = Php38.03

Grace will receive nightshift differential pay worth Php8.03. The

computation is influenced by the night shift differential hours worked
from 10:00 pm and ended 12:00am; the basic wage hourly rate, the
200% for the holiday; the additional 30% for the rest day (Sunday); the
additional 30% for the overtime; and the 10% night shift differential
rate.

6.5 Hazard Pay

This is usually fixed by the employer. For the purpose of regulation,
hazard pay shall mean the amount paid to a worker who was actually
assigned to danger or isolated stations and camps, which expose them
to great danger of contagion or peril to life.

Example 1

Mr. Lex is a police officer. He receives Php390 pesos per month as

hazard pay.

According to Executive Order No. 201, s. 2016, the Hazard Pay of all
military and uniformed personnel shall be increased from the current
rate of Two Hundred Forty Pesos (P240) per month to the following
rates:
a) Starting January 1,2016, Three Hundred Ninety Pesos (P390) per
month;
b) By January 1, 2017, Five Hundred Forty Pesos (P540) per month;

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c) By January 1, 2018, Six Hundred Ninety Pesos (P690) per month;

an
d) By January 1, 2019, Eight Hundred Forty Pesos (P840) per month.

Example 2

Dr. Ben is a scientist working on a cure for an extremely deadly virus.

He risks his life in the remote areas declared under a state of calamity
because of high rate of infected people. His laboratory is also full of
pathogenic samples, dangerous chamicals and oftenly exposed to
radiation. His basic monthly pay is Php40,000 and he receives a
hazard pay worth Php12,000.

The Republic Act No. 8439 – An Act Providing a Magna Carta for
Scientists Engineers, Researchers and other Science and Technology
Personnel in Government states that Science and Technology
personnel involved in hazardous undertakings or assigned in hazardous
workplaces, shall be paid hazard allowances ranging from ten (10%) to
thirty (30%) percent of their monthly basic salary depending on the
nature and extent of the hazard involved. The following shall be
considered hazardous workplaces: Radiation-exposed laboratories and
service workshops; Remote/depressed areas; Areas declared under a
state of calamity or emergency; Strife-torn or embattled areas;
Laboratories and other disease-infested areas.

6.6 Thirteenth Month Pay

All employers are required to pay their rank and file employees
thirteenth-month pay, regardless of the nature of their employment and
irrespective of the methods by which their wages are paid, provided
they worked for at least one (1) month during a calendar year. The
thirteenth - month pay should be given to the employees not later than
December 24 of every year

The thirteenth-month pay shall not be less than one-twelfth (1/12) of

the total basic salary earned by an employee in a calendar year. The
"basic salary" of an employee for the purpose of computing the
thirteenth-month pay shall include all remunerations or earnings paid
by his or her employer for services rendered. It does not include
allowances.

Minimum Formula = (Total Basic Salary Earned during the Year)/12

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Example

Ma’am Myrna is a teacher, She earned Php20,000 from January up to

May of 2016. Her salary rate was increased to Php30,000 per month
effective June 1, 2016. She is entitled for 13th month pay considering
her whole year of service. How much will she receive as 13th month
pay?

13th Month pay = [(Php20,000)(5)+(Php30,000)(7)] / 12 =

Php320,000/12 = Php25,833.33

Php25,833 is the minimum 13th month pay that must be given by the
employer to Ma’am Myrna.

Example
The following is the basic pay of Mr. John for the year 2016
January Php11,199
February 11,199
March 11,199
April 11,199
May 11,527
June 11,527
July 11,527
August 11,527
September 11,527
October 11,527
November 11,527
December 11,527

13th Month pay = [(Php11,199)(4)+(Php11,527)(8)] / 12 =

Php137,012/12 = Php11,417.67

Php11,417.67 is the minimum amount that must be given to Mr. John

as his 13th month pay.

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6.7 De Minimis Benefits

De minimis benefits are privileges in a relatively of small value and
are given to employees to promote their health, goodwill, contentment,
and efficiency. This includes monetized unused vacation leave credits,
medical allowance, rice subsidy, uniform and clothing allowance
medical benefits, employee achievement awards, gifts given during
Christmas, Flowers, fruits, books or similar items and daily meal
allowance.

6.8 SSS, GSIS, Pag-ibig Contribution and Union Dues

These contributions are shared by the employee and the employer.
Note that the employee benefit considered here is the one contributed
by the employer for its employees. The employee’s share for these
contributions is being deducted from their pay.

SSS and GSIS

By law, private sector employees must be covered under the Social

Security System (SSS). On the other hand, GSIS covers government
employees. Based on each employee’s gross monthly pay, both the
employer and employee remit monthly contributions. In turn, the
benefits cover maternity, retirement, sickness, disability, death and
pension benefits. For the purpose of knowing the computations
involved, we will only discuss the SSS Contribution Computation
since this is widely used.

The total amount of an employee’s SSS contribution is computed as

11% of the monthly salary (not more than Php16,000), but this is
actually shared between the employee and the employer - the
employee shoulders 3.633% while the employer pays for the
remaining 7.367%. The SSS uses a table to determine the amount that
should be deducted from an employee based on his monthly income.
Note that the 7.367% is the benefit granted by the employer for the
employee. The 3.633% contributed by the employee is not a benefit
from the employer; instead this is deducted to the money that they are
supposed to receive.

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Source: https://www.sss.gov.ph/sss/appmanager/pages.jsp?page=scheduleofcontribution

Example

Ms. Faith Earns Php10,000 in a month. Based on the salary, we can

compute the 3.633% which is shouldered by the employee; this is
equal to Php363.30 while the 7.367% shouldered by the employer is
equal to Php736.70. An additional Php10 for Employee
Compensation Fee is also charged to the employer. In our exams, we
will not manually compute it because we might have problems in
rounding off. We will just use the table in order to have uniform
answers.

Pag-IBIG

Pag-IBIG Fund, is mandatory to all employees who are compulsorily

covered by the Government Service Insurance System (GSIS, for
Filipino Government employees) or the SSS. Through the Republic
Act No. 9679, the HDMF answers two important needs for Filipino
workers by establishing a national savings program and an affordable
house financing system. HDMF members benefit of 1. savings, 2.
short term loans and 3. access to low cost housing programs. Both the
employee and the employer contribute to the fund.

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For a monthly compensation of Php1,500 and less the employee

contributes 1% and above Php1500 monthly compensation it is 2%.
The employer’s contribution always remains at 2%. Contributions are
deducted from gross income before computation of the income tax.
Note that the maximum employee contribution is set at Php5,000.
Hence the minimum contribution for employees and employers is now
set at Php100.

The following table lets you know your Pagibig Fund contributions.
The maximum monthly compensation used in computing the employee
contributions is currently set at Php5,000.00. This means that the
maximum member contribution and employee counterpart per month
are both currently Php100.00.

Example 1

Jerry has a monthly basic pay worth Php1,000. The contribution will
be computed as follows

Employer’s Share Php10.00

Employee’s Share 20.00
Total Contribution Php30.00

Example 2

Jerry has a monthly basic pay worth Php4,000. With the simple
computation for the contribution, the employer as well as the
employee will contribute Php100 each for a total of Php200.

Employer’s Share Php 80.00

Employee’s Share 80.00
Total Contribution Php160.00

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Example 3

Merry has a monthly basic pay worth Php15,000.

Employer’s Share Php 100.00

Employee’s Share 100.00
Total Contribution Php160.00

Note that the maximum amount subject to Pag-IBIG is only Php5,000.

In case that the income is above Php5,000. Php5,000 is the amount to
be used in the calculation. For short, if your income is Php5,000 and
above, each of the employer and employee will contribute Php100
resulting to a total contribution worth Php200.

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PhilHealth

These contributions are for comprehensive package of services,

including inpatient care, catastrophic coverage, ambulatory surgeries,
deliveries, and outpatient treatment for malaria and tuberculosis.

Source: https://www.philhealth.gov.ph/partners/employers/contri_tbl.html

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Both the employer and employee contribute equal monthly amounts to

the PhilHealth Insurance Corporation.

Example

Johnson earns a basic monthly pay of Php10,000. Using the table

above, we can see that his income is under bracket 3. This means that
bother the employer and employee will pay Php125 each for a total of
Php250.

Employer’s contribution Php125

Employee’s contribution Php 125
Total Contribution Php 250

6.9 Representation Allowance

A representation allowance is a fixed monthly expense allowance
given by employers to employees for organization related activity
representation. These are usually given to management-level
employees each month to cover small, incidental expenses.

Example

John is the manager of a small business firm. His position sometimes

obliges him to travel and serve as a representative of the business firm
whenever there are external activities which require the involvement
of the firm. He receives Php3,000 as a fixed monthly representation
allowance.

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6.10 Transportation Allowance

Transportation Allowance is a type of allowance offered to employees
of a company to compensate for their travel from residence to and
from respective workplace location.

Example

Jen and Ken are rank and file employees of ABCD Company. Jen’s
house is nearby the company office so she just walks toward the office
every day. On the other hand, Ken’s house is several kilometers
away from their work place so he always commutes every day. The
company laws states that rank and file employees are entitled to
receive Php1,000 as fixed monthly transportation allowance. Because
it is stipulated in their company law and is also stipulated in their
contract that they will receive such amount, both Jen and Ken receive
Php1,000 as transportation allowance regardless of where their home
is located.

6.11 Cost of Living Allowance

This is an increase in basic wages or salaries, to compensate for loss in
purchasing power of money due to inflation. COLA is intended to help
the employee cope with the rising cost of living.

Example

For the month of January, Mr. Pen worked for 22 days of work, 8
hours per day. He is a minimum wage earner from NCR and receives
a minimum wage of Php491. The minimum wage is composed of
Php481 basic wage and Php10 Cost of Living Allowance (COLA).
With this data given, Mr. Pen he is entitled for Php10 for 22 days so in
total, he will receive Php220 as COLA for this month.

For the month of January, Ms. Shen a high position worker has been
on duty for 8 hours a day for 22 days. His Cost of living allowance
was set by his employer at Php50 per day. With this data give, Ms.
Shen will receive Php1,100 as COLA.

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6.12 Fixed Housing Allowance

This is a fixed monthly allowance granted to employees to help them
in their housing and rentals fees.

Example

Chick and Ken are rank and file employees of ABCD Company. Jen
has a house is nearby the company office so she just walks toward the
office every day. On the other hand, Ken is just renting a room in a
small boarding house. The company laws states that rank and file
employees are entitled to receive Php2,000 as fixed housing
allowance. Because it is stipulated in their company law and is also
stipulated in their contract that they will receive such amount, both Jen
and Ken receive Php2,000 as housing allowance.

6.13 Commissions
Commission are additional compensation the employee receives for
exceeding expectations. Employers pay employees a sales
commission to incentivize the employees to produce more sales and to
reward and recognize people who perform most productively. The
employer is the one to set if commissions will be given to employee
and how commissions will be computed.

Example 1

Aside from John’s salary, he also earns a commission on products

sold. He gets Php5 per item sold by him. Supposing that he sold 10
items per day for 21 days, how much is his commission?

He will be earning Php1,050 as commission.

Commission = (10)(21)(Php5) = Php1,050

Example 2

ABCD Company sets that monthly commission will be given to Mr.

Ray based on the total sales generated by his team
Total Sales Commission (% of Total Sales)
Php100,000 – Php 300,000 5%
Php300,001 - Php500,000 7%
Php500,001 and above 10%

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For the month of January, it had a Total sales of Php400,000. How

much commission will he get?

Mr. Ray will get a commission worth Php28,000/

Commission = Php400,000 x 7% = Php28,000

6.14 Profit Sharing

Profit sharing is a system in which the people who work for a
company receive a direct share from the profits generated by the
company. This would also depend on company laws.

Example

ABCD Company laws states that 10% of its monthly profits will be
distributed and equally divided to its employees. ABCD has 30
employees and has earned a profit worth Php3,000,000. How much
will each employee get?

Each employee will get Php1,000 each as profit share.

Profit Share = (Php3,000,000)(10%)/(30) = Php10,000

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Glossary
Benefits – these are other compensation given by the employer to the
employee aside form the salaries aand wages

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