Accounting for Payroll

6 November 2018
 DEFINITION OF TERMS
• EMPLOYEE
- refer to any individual who is recipient of salaries and wages
- it includes an officer , employee or elected official of the Philippines or
any government instrumentality.

SALARIES – usually applied to managerial, supervisory or administrative services.

- expressed in months

WAGES – remuneration for unskilled or skilled labor

- expressed in hourly or piecemeal basis

GROSS PAY – total earnings of an employee for a payroll period before taxes and other
deductions.

NET PAY – also coined as take home pay. Gross pay less all applicable deductions including tax
 DEFINITION OF TERMS
• EMPLOYER
- a person or an entity for whom an individual performs or performed any
service, of whatever nature.
- an individual (sole), partnership, corporation or even a government office.

• PAYROLL
- refers to the total amount paid to employees for services provided during a
person.

• PAYROLL PERIOD
- means a period for which an employer ordinarily makes payment of salaries
or wages to the employees.
- can be on the 15th or end of month (3oth or 31st), 12th or 25th , daily, weekly or
even monthly
 SALARY AND WAGES
Salary and wages are determined, in general, by agreement between the
employer and the employee but subject to compliance with

MINIUM WAGE LAW AND THE LABOR CODE

UPDATE AS OF NOV 5, 2018 MINIMUM WAGE INCREASED
FROM P512 TO p537.

THE AGREEEMENT BETWEEN EMPLOYEE AND EMPLOYER WHERE SALARY

AND WAGES ARE AGREED IS INDICATED IN AN OFFER LATER

REGULAR WORKING HOURS SHOULS NOT BE MORE THAN 8 HRS/DAY OR 40

HRS/WK. ANY WORKED HOURS IN EXCESS OF 8 HRS/DAY OR 40 HRS/WK
SHOULD BE PAID ADDITIONAL COMPENSATION AS OVERTIME PAY
EQUIVALENT TO ADDITIONAL ATLEAST 25%.
 HOLIDAYS
• REGULAR HOLIDAYS – CHRISTMAS, NEW YEAR AND INDEPENDENCE DAY
- ADDITIONAL 100% OF DAILY RATE

• SPECIAL HOLIDAYS – ALL SOULS DAY AND CHINESE NEW YEAR

- ADDITIONAL 30% OF DAILY RATE

NIGHT DIFFERENTIAL
-ADDITOINAL 10% OF HIS REGULAR PAY
 EMPLOYEE BENEFITS
• COMPULSARY BENEFITS
- SOCIAL SECURITY SYSTEM (SSS)
- HDMF (PAGIBIG FUNDS)
- PHILHEALTH
- 13 TH MONTH PAY

• COMPANY BENEFITS
- RICE ALLOWANCE
- COST OF LIVING ALLOWANCE (COLA0
- TRANSPORTATION ALLOWANCE
- CLOTHING ALLOWANCES
 PAYROLL DEDUCTION
1. MONTHLY CONTRIBUTIONS
A. SSS
B. PAGIBIG
C. PHILHEALTH
*BASED ON MONTHLY COMPENSATION = MONTHLY SALARY PLUS COLA

2. WITHHOLDING TAXES
- BASED ON BIR TAX TABLE
- COMPUTED BASED ON GROSS PAY AFTER DEDUCTING MANDATORY
EMPLOYEE CONTRIBUTIONS AND OTHER NON-TAXABLE ITEMS.

3. LOANS AND OTHER COMPANY RELATED DEDUCTIONS

 EMPLOYEE BENEFITS
• COMPULSARY BENEFITS
- SOCIAL SECURITY SYSTEM (SSS)
- HDMF (PAGIBIG FUNDS)
- PHILHEALTH
- 13 TH MONTH PAY

• COMPANY BENEFITS
- RICE ALLOWANCE
- COST OF LIVING ALLOWANCE (COLA0
- TRANSPORTATION ALLOWANCE
- CLOTHING ALLOWANCES
Only used the table if salary is below P5,000.00.
If salary is above P5,000.00, P100 for EE and
P100 for ER.
 PAYROLL SYSTEM
• PAYROLL IS SIGNIFICANT FOR BUSINESSES FOR THE FF REASON:
- EMPLOYEES ARE SENSITIVE TO PAYROLL ERRORS AND
IRREGULARITIES
- PAYROLL IS SUBJECT TO VARIOUS REGULATIONS
- PAYROLL HAS SIGNIFICANT EFFECT ON NET INCOME

• PAYROLL REGISTER
- TIME CARDS
- PAYROLL REGISTER
- EMPLOYEE EARNINGS RECORD
- PAYSLIP, CHECK OR ATM
 PAYROLL ENTRIES
1. TO RECORD PAYROLL FOR THE PERIOD
SALARIES EXPENSE
SSS & EC contribution payable
PAG-IBIG & EC contribution payable
PHILHEALTH & EC contribution payable
Withholding taxes payable
Salaries Payable

2. To record payment of salaries

Salaries Payable
Cash

3. To record employers payroll expenses

SSS & EC contribution expense
PAG-IBIG & EC contribution expense
PHILHEALTH & EC contribution expense
SSS & EC contribution payable
PAG-IBIG & EC contribution payable
PHILHEALTH & EC contribution payable
 INTERNAL CONTROL OVER PAYROLL
• SEGREGATION OF DUTIES
-PERSONNEL RECORDS MAINTENANCE
- PAYROLL PREPARATION
- ACCOUNTING
- PAYCHECK DISTRIBUTION/ CASHIER OR TREASURY