Salary, Wages, Taxes, and Price-Related Calculations

These flashcards cover core definitions, formulas, and examples related to salary and wages, taxes, inflation, mark-ups, discounts, employee deductions, and special pay rates in the Philippines.

What is compensation in employment?

The monetary value provided to employees in exchange for their work, usually represented in payroll.

How is payroll defined?

The total amount required to pay workers during a given period; the sum of money to be paid to employees at a specific time.

What is gross pay?

The total of an employee’s earnings before any deductions are made.

What is the Value-Added Tax (VAT) rate in the Philippines?

12 %.

Who collects VAT and how?

Businesses add 12 % to the price of goods or services, collect it from customers, and remit it to the government.

Formula: Convert VAT-inclusive price to VAT-exclusive price.

Price without VAT = (VAT-inclusive price) ÷ 1.12.

How do you find the VAT amount from a VAT-inclusive price?

VAT = VAT-inclusive price − VAT-exclusive price.

Define inflation.

A general increase in prices of goods and services over time, reducing purchasing power.

How does inflation affect everyday goods?

Items such as rice, bread, and gasoline become more expensive, so money buys less.

What must happen to wages during inflation to keep the same standard of living?

Wages need to increase at a rate similar to inflation.

Formula for the rate of inflation.

Rate = (Current price − Previous price) ÷ Previous price × 100.

Distinguish cost price (CP) from selling price (SP).

CP is the original price paid to acquire or produce a product; SP is the price at which the product is sold to customers.

Formula for mark-up percentage.

Mark-up % = (Selling price − Cost price) ÷ Cost price × 100.

Formula to compute a discounted price.

Discounted price = Original price × (1 − Discount rate).

Give three examples of optional employee deductions.

Loans, cash advances, insurance premiums, union dues, or deductions for absences/tardiness.

What does a positive percentage change indicate?

A percentage increase.

What does a negative percentage change indicate?

A percentage decrease.

How is pay computed for work on a regular holiday?

Daily rate × 2.00.

How is pay computed for work on a regular holiday that falls on a rest day?

Daily rate × 2.60.

Multiplier for a night-shift differential in the Philippines.

Applicable rate × 1.10 for work between 10 p.m. and 6 a.m.

What is commission income?

Earnings calculated as a percentage of sales, sometimes in addition to a base salary.

On what are piece-work earnings based?

The number of items or products completed.

Purpose of the Social Security System (SSS).

Provides retirement, disability, maternity, sickness, and death benefits to private-sector employees.

How is the employee contribution to SSS determined?

By a scheduled rate tied to the employee’s monthly salary.

Purpose of the Government Service Insurance System (GSIS).

Life insurance, retirement, disability, and survivorship benefits for government employees.

Employee share rate for GSIS.

9 % of the monthly salary, rounded to the nearest peso.

Purpose of the Pag-IBIG Fund.

Provides housing loans, savings programs, and calamity loans.

Employee contribution rate to Pag-IBIG.

2 % of monthly salary, capped at ₱100–200 for the employee share.

Purpose of PhilHealth.

Health-care benefits and hospitalization coverage for employees.

Standard PhilHealth contribution rate.

5 % of monthly salary, shared by employee and employer according to income bracket.

What is withholding tax (BIR) in payroll?

Income tax collected in advance by the employer based on the employee’s salary bracket.

Define a salary.

A fixed pay computed on a weekly, monthly, or annual time basis.

Define a wage.

Monetary remuneration expressed on an hourly, daily, weekly, or per-piece basis.

What is time-basis pay?

Earnings calculated according to time worked at a stated rate per hour, day, week, month, or year.

What is piece-rate pay?

Payment determined by the number of pieces produced, with a guaranteed wage for meeting the quota plus the same rate for extra units.

How is overtime pay calculated in the Philippines?

Regular wage plus an additional 25 % for hours worked beyond 8 in a day.

Multiplier for work on a rest day or special holiday.

Daily rate × 1.30.

Formula for gross income.

Gross income = Salary + Overtime + Commission + Piece-work pay + Allowances.

What is net pay?

The take-home pay—gross income minus all deductions.

Formula for net pay.

Net pay = Gross income − Total deductions.

List common mandatory payroll deductions in the Philippines.

SSS, PhilHealth, Pag-IBIG, and withholding tax.