Gross and Net Income Lecture Notes

Vocabulary-style flashcards covering the concepts, formulas, and common deductions associated with Gross and Net Income in the Philippines.

Gross Income

The total earnings before any deductions are made, calculated as $\text{Gross Income} = \text{Salary} + \text{Allowances}$.

Net Pay

Also known as "take-home pay," this is the amount left after deductions are subtracted from gross pay, calculated as $\text{Net Pay} = \text{Gross Income} - \text{Total Deductions}$.

Deductions

The amounts subtracted from gross pay by the law or agreement.

Social Security System (SSS)

A deduction applicable to private sector employees for retirement, disability, maternity, sickness, and death benefits at a rate of $5\%$ of monthly salary (employee share), max $\text{P1350}$.

Government Service Insurance System (GSIS)

A deduction applicable to government employees only for life insurance, retirement, disability, and survivorship benefits at a rate of $9\%$ of monthly salary rounded to the nearest peso (employee share).

Pag-IBIG Fund (HDMF)

A fund applicable to all employees for housing loans, savings, and calamity loans, with a rate of $2\%$ of monthly salary capped at $\text{P200}$.

PhilHealth

Healthcare benefits and hospitalization coverage for all employees with a rate of $5\%$ of monthly salary, shared between the employee and employer.

Withholding Tax (BIR)

Income tax collected in advance by the employer based on monthly salary brackets and exemptions; incomes of $\text{P250,000}$ and below are exempt.

Other Deductions (Optional or Conditional)

Deductions resulting from agreements between employee and employer, including items such as Loans, Cash Advances, Insurance Premiums, Union Dues, or Absences/Tardiness.

Overtime (OT) Pay Rate

The compensation rate typically used for extra hours worked, which in the provided examples is calculated at $125\%$ of the regular hourly rate.