4.

1 Gross and Net Earnings

The chart shows the expenses being made once we receive our income. In the graph shown, the largest expense would
be housing because of the rising price in house rent. The smallest expense would that be of household needs because
there are certain items needed in the household.

Sales

HOUSING (40%) SAVINGS (13%) TRANSPORTATION & OTHERS(18%)

FOOD (22%) HOUSEHOLD NEEDS (7%)

Consider the problem.

For his salary in the previous month, Mr. Fabella received the payslip below

Figure 4.1.1 Total Earnings

EARNINGS
Basic: 14,850.43 PREV. OL/EL:
Absences_BSC: 8,909.57 RLE-ALW:
LA/SFA: OTH-ALW/HON:
Other Earn: Prev. RLE:
ABS_Allows: Prev. Basic:
TTL: 2,887.50 Prev. LA/SFA:
Holiday Pay: 4,400.00 :
OL/EL: 9,900.01 :
Total Earnings 40,947.51
Figure 4.1.2 Total Deductions

DEDUCTIONS
Tax Whld: 9,865.38 Retloan:
SSS Prem: 581.30 :
PhilHealth: 437.50 :
Pag-Ibig: 100.00 :
SSS Ln: 692.17 :

Cash Adv: :
Pag-ibig Ln: :

Ret_Cont: :

Total Deductions: 11,676.35

Figure 4.1.3 Net Pay

NET PAY
Monthly Net: 29,271
1st Half Net: 14,635.58
2nd Half Net: 14,635.58
In the figures shown above, it can be seen that in the payslip there are three parts, namely Total Earnings, Total
Deductions, and Net Pay. Let us summarize the given values.

TOTAL EARNINGS P40,947.51

TOTAL DEDUCTIONS P11,676.35
MONTHLY NET P29,271.16
1ST HALF NET P14,635.58
2ND HALF NET P14,635.58

By looking closer into the figures, one can notice that

29,271.16
P40,947.51 – P11,676.35 = P29,271.16 =P14,635.58
2
With this, we get

Gross – Deduction = Net

In Mr. Fabella’s payslip, it can be noticed that the words “total earnings”, “deduction”, and “net” appeared. “Total
earnings” is also known as “Gross or gross earning”. It is the amount gained by the worker without any deductions.
When we say “net”, it is the payment received less deductions of any employee.
  Gross earning is the amount earned by any person before subtracting the taxes, benefits, loans, and other
possible deductions.
 Net earning is the amount earned by any person less the total deductions.
 Deduction is the amount held by any authority as a form payment for some necessary dues like taxes, loans, etc.
 Salary is a fixed regular payment, typically paid on a monthly or biweekly basis but other expressed as an annual
sum, made by an employer to an employee.

Let E be the total earnings, D be the total deduction and N be the monthly net. The equation

E=D+N

holds for all nonnegative numbers E, N, and D.

The algebra suggests the following formula:

N=E–D

D=E-N

Example 4.1.1

If E = P21,230.21 and D = P4,871.15, what is the value of N?

SOLUTION

Recall the formula:

N = E – D,

So we have,

N = P21,230.21 – P4,871.15 = P16,359.06

Therefore, P16,359.06 is the net earning.

If E = P22,271.16 and N = P11,721.30, what is the value of D?

SOLUTION

Recall the formula:

D = E – N,

So we have,

D = P22,271.16 – P11,721.30 = P10,549.86

Therefore, P10,549.86 is the total deduction.

Example 4.1.3

If D = P15,622.40 and N = P8,236.68, what would be the value for E?

SOLUTION

Recall the formula:

E=D+N

So we have,

E = 15,622.40 + 8, 236.68 = 23,859.08

Therefore, P23,859.08 would be the total earning.

Example 4.1.4

Jonathan has a total earnings amounting to P20,524.17. If he receives a total deduction of P3,826.21, then how much
will he receive as his net earning?

SOLUTION

Recall the formula:

N=E-D

So we have,

N = 20,524.17 – 3,826.21 = P16,697.96

Therefore, P16,697.96 is the net earning.

Example 4.1.5

Linda has a monthly net amounting to P10,568.23. If she receives a total deduction of P4,235.18, then how much will
she receive as her total earning?

SOLUTION

Recall the formula:

E=D+N

So we have

E = 4,235.18 + 10,568.23 = P14,803.41

Therefore, P14,803.41 is the total deduction.

A. Identify each statement is True or False.
1. Gross earning is sometimes greater than net income.
2. Net earning can be greater than the gross earning.
3. The total deduction is always equal to the net earning.
4. Gross + Net earning is equal to Deduction plus twice the Net Earning.
5. If the Deduction is 0, then Gross Earnings = Net Earnings.
6. Overtime pay is the part of the deduction.
7. Taxes are added in the deduction.
8. Other benefits and Payment of Loans are deducted from the Gross.
9. If the deduction is 0, then it follows that gross earning is non taxable.
10. If the deduction is more than the net earning, then the net earning is more than half of the gross earning.
11. If the total earning is thrice that of the deduction, then the net pay is twice that of the deduction.
12. The sum of the deduction and the net pay is sometimes equal to the total earning.
13. If the total earning is equal to that of the deduction, then the net pay is twice as much as the deduction.

B. Solve for the value in the following problems.

14. If D = P2,122.00 and N = P17,517.29, what is the value of E?
15. If E = P72,130.22 and D = P28,875.21, what is the value of N?
16. If E = P28,091.16 and N = P11,213.00, what is the value of D?
17. If D = P17,122.05 and N = P21,318.29, what is the value of E?
18. Suppose that for all gross annual income G is greater than P250,000, the tax T is 0.25G, where T = 0.2G. Answer
the following questions:
a. If your gross annual income is P250,000, what is your tax?
b. Suppose the total deduction D = T + B where B = P4,721.61 monthly, what will be your average monthly net
pay given that your annual gross income is P237,000?
c. What particular amount G1 < P250,000 where T1 = T2 and where T1 is for the tax?
19. Prove or disprove the statement below:
If the deduction D is the sum of the tax T and other benefits B, then an increase in D will automatically imply an
increase in T.
20. Find the value of E given that the value of D is P1,423.16 and N is P18,211.12.

C. Read and analyze each word problem then solve for the answer.
21. Steven bought a new laptop on credit. The laptop costs P15,430.00. With a minimum down payment of P1,500,
Steven must pay P350 per month for 12 months. How much more is Steven paying for the laptop by buying it on
a payment plan?
22. Lucy works fifteen hours a week and earns P52.50 per hour. How much does she earn in a week?
23. Ruben put a new furniture in his home. The cost of the furniture and the labor was P3,000. Ruben gave the
company a down payment P450. He will pay the remaining amount off in a monthly installment of P100 per
month for 24 months. How much more than the original cost will Ruben pay?
24. Sarah receives a net earning amounting to P17,827.43. If she receives a total earning of P21,924.13, then how
much will she receive as her total deduction?
25. Tom has a monthly net amounting to P12,614.62. If he receives a total deduction of P5,438.15, then how much
will he receive as his total earning?
26. Kenneth works as a shopping mall security guard and is paid P50 an hour. Find his gross pay when he works 53
hours a week.
27. Tina is paid weekly salary of P7,000. How much would Tina earn in 5 weeks of work?
28. Rommel earned P6,500 last week at his regular job. Last week he also worked 15 hours at his part-time job that
pays him P45 an hour. What total pay did he earn from both jobs last week?
29. Albert earns a P7,500 a week. Albert is paid every two weeks. What gross pay does he receive each payday?
 30. Robert worked in the following schedule for one week. Monday, 7 hours; Tuesday, 5 hours; Wednesday, 8
hours; Thursday, 9 hours; Friday, 4 hours. He was paid P52.25 an hour. How many hours did Robert work that
week and what was his gross pay?

4.2 Benefits of Wage Earners

Consider the problem below.

Mrs. Ledie, an employee of LSPD Insurance company, is pregnant. She is a member of SSS and wants to avail the
maternity leave. She earns an average monthly net income of P21,371.12. How long can she have the maternity leave?
And how much will her income be in the entire period of the leave?

Since she is employed in a private company, it is mandatory for her to be a member of Social Security System (SSS)
which is the institution that will provide her the so called “maternity benefit” for women. Of course, there is also a
corresponding benefit for men, which we call “Paternity Benefit”. As for her first question, the answer is simply
stipulated in terms of Philippine Social Security System in connection with Maternity Benefits. Assuming all the
requirements to avail the said benefit are met, then she will receive the amount twice or 2.6 times her average monthly
net income, if her delivery is normal, then it is 2 times; otherwise (that is, caesarean), it is 2.6 times. More specifically,
we assume further that her delivery is caesarean, then she received the maternity benefit for two months and 18 days
amounting to

P21,371.12 x 2.6 = P55,564.912

 Wage – a fixed regular payment, typically paid on a daily or weekly basis, made by an employer to an employee,
especially to a manual or unskilled worker, it is the part of total production that is the return to labor as earned
income, as distinct from the remuneration received by capital as unearned income.
 Income – money received, especially on a regular basis, for work or through investments.
 Benefit – a payment or gift made by an employer, the state, or an insurance company.

Therefore, Mrs. Ledie received the amount P55,564.912 good for 78 days. In the previous problems, Mrs. Ledie avails
the so-called “maternity leave”.

The Benefits of the Wage Earner

1. Long-term benefits: retirement, death, disability, dependent’s allowance

2. Minimum wage earner tax exemption
3. Bonuses and allowances (e.g. travel, rice, meal, clothing, and laundry)
4. 13th month pay, holiday pay, special pay, overtime pay, night shift differential, and hazard pay
5. Leave incentives: sick, maternity, paternity, solo parent, and others
6. Health-related benefits and insurances

Let us consider some computations for some benefits:

1. Retirement Benefit
The minimum retirement pay is given by R is the retirement pay, R = 22.5 x P x T where P is the daily rate, and T
is the number of years served.
2. 13th-Month pay
1
Let x be the annual basic salary of any employee. The 13 th month pay of any employee must be at least
2
of x.
3. Maternity benefit
Let x be the average monthly salary of the employee. Then 2.6x and 2x for caesarean and normal delivery,
respectively.
 4. Holiday pay
Holiday pay refers to the payment of the regular daily wage for any unworked regular holiday. Note that if the
employee worked on the holiday, then he will receive twice his daily wage.

Example 4.2.1

Mr. Larry served Company A for 22 years with an average daily rate of P467.35. He plans to retire and avail his
retirement benefit. How much is the minimum retirement pay that he will receive?

SOLUTION

We consider the formula below:

The minimum retirement pay is given by

R = 22.5 x P x T,

Where R is the retirement pay, P is the daily rate, and T is the number of years served. Given the formula above, we get:

P = 22.5 x P467.35 x 22 = 231,338.25

Therefore, Mr. Larry will receive the retirement pay of P231,338.25 for 22 years of service in Company A.

Example 4.2.2

Mr. Buenaventura received an annual salary of P240,000. At the end of the year, what would be his 13 th monthly pay?

1
Definition. The 13th month pay is given by x where x is the annual basic salary of the employee.
2
Given the formula, we get:

1
13th month = (240,000) = 20,000
2
Therefore, Mr. Buenaventura will receive P20,000 as his 13 th month pay

Example 4.2.3

Mr. Torres plans to retire and utilize his retirement benefit. How much is the minimum retirement pay that he will
receive serving the company for 15 years with an average daily rate of P481.23?

SOLUTION

We consider the formula below:

The minimum retirement pay is given by

R = 22.5 x P x T

where P is the retirement pay, R is the daily rate, and T is the number of years served.

Given the formula, we get:

R = 22.5 x 481.23 x 15 = 162,415.13

Therefore, Mr. Torres will receive the retirement pay of P162,415.13 for 15 years of service in the company.

EXERCISES

A. Identify if the statement is True or False:

 1. All wage earner can avail all benefits of any wage earner.
1
2. 13th Month Pay is equivalent to annual salary of any employee.
13
3. Total Earning of any employee is not always equal to the basic pay.
4. An employer can give 14th month pay to all of his employees that is equivalent to the 13 th month pay.
5. Living allowance is a must benefit given to all employees.
6. A pregnant employee may not have a maternity leave benefit.
7. Holiday and Special pay are synonymous.
8. Retirement Benefit can only be availed if the age of the employee is more than or equal to 60 years old.
9. Tax exemption benefit to minimum wage earners are only limited to the basic salary allowances are excluded.

B. State whether the following is a benefit of a wage earner or not. Write ‘Y’ for yes and ‘N’ for no.
10. Special Day Pay
11. Travel Allowance
12. Tax
13. Paternity Leave
14. Health Insurance
15. Motor Car Insurance
16. Leave without Pay
17. SSS Premium Pay
18. Holiday Pay
19. 13th Month Pay
20. Rice Incentive
21. 5-year Service Pay
22. Living Allowance
23. Maternity Benefit for all fathers

C. Solve the following problem.

24. Mr. Adrian’s 30-yearas annual basic income is given by the formula:
y = 130,000 + 20,000(x – 1980)
where x is the year and y is the basic income. He started working in 1981 and ended in 2010. How much is his
retirement pay after 30 years of service in the company? (Hint: To find the daily rate, find the average annual
basic income and divide it to 24 x 12.)

25. Mr. Samson received an annual salary of P300,000. At the end of the year, what would be his 13 th month pay?

4.3 Taxable and Non-taxable Benefits

Consider the problem below.

Mr. Kiel has been working in Company A for four years, and then he transferred to Company B. He noticed that when he
compared the payslip he got, there are some differences. In his previous employer, he sees the word “De Minimis” while
in his new employer, he sees the word “allowance” instead. So he asked himself, what could be the difference between
the two? And how does it affect the withholding tax? Here is a sample of his payslips (old and new).

We pick some information from both payslips, and summarize them below.

COMPANY A COMPANY B
WITHHOLDING TAX P4,530.68 P9,865.38
DE MINIMIS P1,925.00
LIVING ALLOWANCE P8,909.57
(from left to right) Figure 4.3.1 Total Earning (Old) & Figure 4.3.2 Total Deduction (Old)

Earnings Deductions
Regular Pay 18,382.35 Withholding tax 4,530.00
De Minimis 1,925.00 SSS Premium 500.00
Perf Bonus 560.00 PhilHealth 250.00
BASIC PAY 20,867.95 Pag-Ibig Cont 100.00
Overload-Coll 1,769.50 PAG-IBIG LOAN 220.00
ADJUSTMENTS 6,748.88 RETIREMENT FUND 626.00
College Faculty Club 30.00
Charges/Misc. 360.00

Figure 4.3.3 Total Earnings (New)

EARNINGS
Basic 14,850.43 PREV. OL/EL
Absences_BSC RLE-ALW
LA/SFA 8,909.57 OTH-ALW/HON
Other Earn Prev. Basic
ABS_Allows Prev. LA/SFA
TTL 2,887.50
Holiday Pay 4,400.00
OL/EL 9,900.01
Total Earnings: 40,947.51

Figure 4.3.4 Total Deductions (New)

DEDUCTIONS
Tax Whld 9,865.38 Retloan
SSS Prem 581.30
PhilHlth 437.50
Pag-Ibig 100.00
SSS Ln 692.17

Cash Adv:
Pagibig Ln

Ret_Cont
Total Deductions 11,676.35

Mr. Kiel knows that the computation for withholding tax does not require some table provided by the BIR (Bureau of
Internal Revenue). So, the increase of withholding tax may be due to the increase of total earnings. The total earnings
are composed of two different details, the old one with the Performance Bonus and the De Minimis, while the New
Living Allowance (LA)/Special Financial Assistance. Mr. Kiel’s problem wants to understand if the additional earnings has
substantial contribution on the increase of tax.
To explain such dilemma, we consult Revenue Regulation No. 5-2011. It is stipulated in the said amendment, that the de
minimis benefit should not be taxed with some constraints. For example, uniform and clothing allowance not exceeding
P4,000 shall not be taxed. It is clear that in the old company, Mr. Kiel had worked for, the de minimis amounting to
P1,925 is not taxed, while the living allowance in his new company contributed to the tax since the term “living
allowance” is not mentioned in the said amendment. Though we can consider living allowance as a daily meal allowance,
still it is said that exemption to tax for daily meal allowance is only possible if the total sum of top-up earnings is less
than 25%

Mr. Kiel’s problem is a bit more complex.

As stated in the Revenue Regulation No. 5-2011, the following benefits are not taxable (De Minimis Benefits).

1. Monetized unused vacation leave credits of private employees not exceeding ten (10) days during the year.
2. Monetized value of vacation and sick leave credits paid to government official and employees.
3. Medical cash allowance to dependents of employees, not exceeding P750 per employee per semester or P125
per month.
4. Rice subsidy of P1,500 or one (1) sack of 50 kg rice per month amounting to not more than P1,500.
5. Uniform and clothing allowance not exceeding P4,000 per annum.
6. Actual Medical Assistance, e.g. medical allowance to cover medical and healthcare needs, annual
medical/executive check-up, maternity assistance, and routine consultations, not exceeding P10,000 per annum.
7. Laundry allowance not exceeding P30,000 per month.
8. Employees achievement awards, e.g. for length of service or safety achievement, which must be in the form of
tangible personal property other than cash or gift certificate, with an annual monetary value not exceeding
P10,000 received by the employee under an established written plan which does not discriminate on favor of
highly paid employees.
9. Gifts given during Christmas and major anniversary celebration not exceeding P5,000 per employee per annum.
10. Daily meal allowance for overtime work and night/graveyard shift not exceeding twenty-five percent (25%) of
the basic minimum wage on a per region basis.

After identifying taxable benefits from not and knowing that tax is one of the standard deductions, we now proceed on
enumerating deductions in the payslips provided above. It can be noticed in the following:

1. Withholding Tax
2. SSS Premium
3. PhilHealth
4. PAG-IBIG
5. PAG-IBIG/SSS Loan
6. Retirement Fund
7. Charges/Miscellaneous

These are some standard deductions for a wage earner. Withholding tax is the amount contributed by any wage earner
to the government. The SSS (Social Security System) or GSIS (Gov’t Services Insurance System, the equivalent
government agency for SSS) collects annual/quarterly/monthly contributions from its members to ensure that they will
receive their benefits. PhilHealth and Pag-Ibig are almost the same with SSS/GSIS only that PhilHealth focuses more on
providing loans for lands or mortgages. Charges/Miscellaneous can be best interpreted as deductions made by the
employer for some other reasons. (e.g. tardiness/absences).

Mr. Faham is a government employee and has ten (10) days sick leave credits and seven (7) days vacation leave credits.
His daily rate is P525 and did not avail the sick and vacation leave credits, so the agency monetized it. How much will be
his additional earning and how much of it will be taxed?

SOLUTION
For this problem, we have (10 + 7) x 525 = 8925

Therefore, Mr. Faham will receive an additional earning of P8,925 and will not be taxed since he is a government
employee.

Example 4.3.2

Ms. Emotins’s employer provides her employees an amount of P8,000.00 Christmas Bonus. How much of the bonus is
taxable? Considering that Ms. Emotin’s tax percentage is 25%, how much is her tax payable for the said bonus, and how
much will be her net income from the bonus?

SOLUTION

Since any amount exceeding P5,000 is taxable, then P8,000 – P5,000 = P3,000. And since her tax percentage is 0.25, then
her tax is P3,000 x 0.25 = P750 and so, her additional income is P8,000 – P750 = P7,250.

Example 4.3.3

An employer provides a living allowance to his employees monthly. Considering that the living allowance is defined as
follows:

Living allowance = clothing + laundry + daily meal + transportation

How much of the additional earning will be taxed if an employee’s living allowance is P5,000 and each part in the
definition is 0.25 of the living allowance?

SOLUTION

Allowances or benefits that are not included in the de minimis benefit are considered taxable, therefore we can have the
following computations. In every part of the living allowance, we have:

0.25x where x is the amount of the living allowance. Then 0.25x = 0.25(5000) = 1250 Note that the only exemption for
clothing is P4,000 per annum, for laundry is P300 per month, daily meal allowance for overtime, and transportation is
not stated for de minimis benefit. We let T be the taxable portion of the allowance. Thus, we get

4000
T = 1250 - + (1250 – 300) + 1250 +1250 = 4366.67.
12
Therefore, the portion of the living allowance which is P4,366.67 is taxable.

Example 4.3.4

Catherine’s daily rate was P484.00. She works regularly from 8:00 A.M. to 6:30 P.M. How much did she earn that day?

SOLUTION

Using the formula, we have R = 484 and H = 10.5

1.25 H −2
T=
8
1.25 ( 10.5 ) −2
T= x 484
8
13.125−2
T= x 484
8
 11.125
T= x 484 = 673.0625
8
Therefore, Cathrine earned P673.06 that day.

Example 4.3.5

Marcus works as a night shift at a warehouse. He starts at 7:00 P.M. and ends at 5:00 A.M. If his hourly rate is P100.00,
then how much will he earn monthly if he works 20 days every month?

SOLUTION

According to the definition, night shift differential can be earned from 10:00 P.M. to 6:00 A.M. Therefore, his earnings
will be 1.1x. We let T be the total earning. To solve for the monthly earning, we have

T = 20 x [3 + 7(1.1)](100)

= 20 x [10.7] x 100

= 21,400

Therefore, Marcus will earn P21,400 monthly.

Example 4.3.6

Mr. Santiago is one of the government employees who did not avail the sick and vacation leave credits. He is earnings a
daily rate of P515 and has ten (10) days sick leave credit and (6) days vacation leave credits in which the agency will
monetized his unused credits. How much of it will be taxed?

SOLUTION

We can solve the given problem by getting first the sum of the unused credits and multiply it to the daily rate. Thus, we
have

(10 + 6) x P515 = P8,240.

Therefore, Mr. Santiago will receive an additional earning P8,240.00 and will not be taxed since he is a government
employee.

A. Identify if the statement is True or False:

1. All allowances are nontaxable.
2. If the monthly clothing allowance is P400.00, then the taxable amount for clothing allowance is P1,200.
3. Allowances are considered part of earnings.
4. Nontaxable benefits includes all monetized leave credits.
5. Some bonuses or allowances are nontaxable.
6. All benefits of government officials and employees are nontaxable.
7. Taxes are added in the deduction.
8. 13th month pay may or may not be taxed.
9. If the deduction is 0, then it follows that gross earning is nontaxable.
10. There is a possibility that a certain employee will exempted from tax even if he/she receives some benefits .
B. Solve the following problems below.
11. The CAN (Collective Negotiation Agreement) is considered as a benefit for public employees.
Given the formula below:
 CNA + 13th Month Pay + other benefits > P30,000 are taxable.
Suppose a certain government employee earns a CNA = P12,764.12, 13 th Month Pay = P24,291.78, and he has no
other benefits. How much of his additional earning will be taxed?
12. In connection with the previous problem, suppose a certain government employee earns a CNA =
P2,214.12/month, 13th Month Pay = P12,119.72, and he has other benefits amounting to P4,000.00. How much
of the additional earning will be taxed?
13. Suppose in the previous problem the other benefits is the clothing allowance. Will there be a change in the
amount taxable? If yes, how much? If no, why?
14. If an employee X has CNA = P18,291.09, 13th Month Pay = P27,891.00, Other benefits = P10,000, and the P3,000
of the other benefits is the clothing allowance. How much of his benefits is taxable? How much is nontaxable?
15. Based on the previous problem, if his rate is 0.08, how much is tax and what is his net amount for his benefits?
C. Prove or disprove the statement below:
16. Taxable and nontaxable benefits are definitely not easy to compute for reasons that answers depends on
situation and the implementing rules definition is not that perfectly defined and clarified due to variety of
differences and preference. With this idea in mind, what do you think is the best way to solve such problem?
Please provide a concrete solution to this problem.

4.4 Overtime Pay

Consider the problem below:

Ms. Ledie is working at Company A for 10 hours yesterday, a regular day and her hourly rate is P53.00. How much did
she earn in that particular day supposing that there will be 25% increase for every hour exceeding the standard of 8
hours? Since she work for 10 hours. Then the first 8 hours have an hourly rate of P53.00 while the remaining 2 hours will
have an extra 25% of the rate. We let z be the total amount she earns that day and then we have

z = 8 x 53 + 2 x 53(1.25)

= 424 + 132.50

= 556.50

Therefore, Ms. Ledie earns P556.50 on that particular day.

From the previous problem, if an employee works more than the standard number of hours (8 hours), they will be paid
for the excess number of hours with additional compensation.

Her standard daily rate is P424.00 and the additional income she earns that day for 2 hours is P132.50, so we have the
following definition.

In a day A, if A is a regular day, then the overtime rate r of an employee E with a regular hourly rate of h is at least 1.25h,
otherwise, if A is not a regular day, say special day/holiday, then r = 1.3h.

A night shift differential refers to an additional amount n added to the hourly rate h. The amount n is only added if an
employee works at anytime from 10:00 P.M. to 6:00 A.M. The amount n is equal to 1.1h.

We derive now a formula for the previous problem. We let T be the total daily earning and R be the daily rate
(equivalent to 8 hours), and H be the number of worked hours.

1.25(H−8)
T=R+Rx
8
8+1.25 H−8(1.25)
= xR
8
 1.25 H −2
= xR
8
R
Since R is the daily rate, then is the hourly rate.
8
Recall the previous problem. We can find T as

1.25 H −2
T= xR
8
R
(1.25H – 2)
8
= 53 x (1.25 x 10 -2)

= 556.50.

And thus we get the same result. Let us have more examples.

Example 4.4.1

Mr. Lorenzo’s daily rate is P675.00. He works on a regular day from 8:00 A.M. to 8:00 P.M. How much did he earn that
day?

SOLUTION

Mr. Lorenzo worked for 12 hours in that particular day.

So using the formula, we have R = 675 and H = 12

1.25−2
T= xR
8
1.25 ( 12 ) −2
= x 675
8
13
= (675)
8
= 1069.875

Therefore, Mr. Lorenzo earn P1,069.88 on that day.

Example 4.4.2

Mr. Solomon earns P560.00 when he works for 9 hours. How much is his regular daily rate?

SOLUTION

In this problem we find for R. Solving for R in the equation

1.25 H −2
T= xR
8
we have

8T
R=
1.25 H −2
Using the formula above,

8T
R=
1.25 H −2
8(560)
=
1.25 ( 10 )−2
4480
=
10.5
= 426.67

Therefore, Mr. Solomon’s daily rate is P426.67.

Example 4.4.3

Owel’s work as a call center agent starts at 8:00 P.M. and ends at 6:00 P.M. in the morning. If his hourly rate is P80, then
how much is his total earning for a month if he works 20 days every month?

According to the definition, the night shift differential can only be earned from 10:00 P.M. to 6:00 A.M., therefore, the
total eight hours of Mr. Owel’s work will earn 1.1x instead of x, where x is the hourly rate. We let T be the total earning
for a month.

SOLUTION

T = 20 x [2 + 8(1.1)](80)

= 20 x 10.8 x 80

= 17,280

Therefore, Mr. Owel earns a monthly earning of P17,280.00

EXERCISES

A. Identify if the statement is True or False.

1. Night Shift Differential percent rate can be greater than overtime pay percent rate.
2. Overtime pay rates for holidays and regular days are always different.
3. If an employee works for 12 hours, then he surely have an overtime pay.
4. It is possible that overtime pay can be given to an employee even if the employee works less than 8 hours.
5. Overtime Pay are only given to those who works at night.
6. All employees are required to work overtime.
7. Daily rate is sometimes equal to hourly rate.
8. If the hourly rate of employee A is equal to the daily rate of employee B, then employee A earns more than the
employee B on a daily basis.
9. If an employee worked for 6 hours yesterday and work 10 hours today, then he will receive an equivalent to 2-
day daily rate.
10. If an employee works on his rest day, then he will automatically earn an overtime pay.
B. Solve the following problems.
11. Myrna works on a holiday for 11.5 hours. How much is her additional income on that day? (Additional income is
the difference of the total daily income and the regular daily income)
12. If Ms. Abigail wants to earn thrice of her daily income. How many hours should she be working? (Considering no
night shift differential pay, only overtime pay)
13. Mr. Cruz’s work starts from 3:00 P.M. until 12:00 midnight. If his hourly rate is P567.50, how much is his daily
income?
14. An employee A works for 8 hours in a company. He works from 9:00 A.M. to 6:00 P.M with one hour of lunch
break. If his daily rate is P456.76, how much is his monthly earning if he works for 24 days a month and 2
holidays in every month and he incurred a total overtime hour of 12 hours?
15. Sarah works for 9 hours and earns P3,890 on a regular day. How much is her overtime pay?
16. Larry’s annual gross earning is P678.452.00. If he works for 300 days in that year and have an average of one
hour overtime pay per day. How much is his daily rate?
17. An employee X earning is the same with employee Y. Employee X doesn’t have any overtime hour unlike
employee Y. If the ratio of work of X and Y is 2:3 respectively, then how much is the daily rate of employee X if
the daily rate of employee Y is P567.73?
18. Miguel works for 10 hours and earns P4,816 on a regular day. How much is his overtime pay?