Salary Deductions

Night Shift Differential (NSD)

  • Definition: Additional pay given to employees who work during nighttime hours (10:00 PM – 6:00 AM).

  • Purpose: Compensates for the difficulty and disruption of working at night.

  • Philippine Labor Code Rule: At least 10% additional pay per hour.

NSD Multipliers

Work On

Multiplier Formula

Equivalent Multiplier

Ordinary Day, Night Shift

1 × 1.1

1.10

Rest Day, Night Shift

1.3 × 1.1

1.43

Special Day, Night Shift

1.3 × 1.1

1.43

Special Day + Rest Day, Night Shift

1.5 × 1.1

1.65

Regular Holiday, Night Shift

2.0 × 1.1

2.20

Regular Holiday + Rest Day, Night Shift

2 × 1.3 × 1.1

2.86

Example:

  • Employee: Mark Uy (Security Guard)

  • Daily Rate: ₱500.00

  • Work Schedule: 10:00 PM – 6:00 AM (8 hours)

  • Type of Day: Rest Day (with Night Shift)

  • Multiplier: 1.43

Solution:

  • Hourly Rate = ₱500 ÷ 8 = ₱62.50

  • Adjusted Hourly Rate = ₱62.50 × 1.43 = ₱89.38

  • Total Pay = ₱89.38 × 8 = ₱715.00

Mark will receive ₱715.00 for the 8-hour night shift on his rest day.

Gross Pay and Net Pay

  • Gross Pay: Total earnings before deductions.

  • Net Pay: Earnings after deductions (take-home pay).

  • Deductions: SSS, Pag-IBIG, PhilHealth, withholding tax, loans, penalties.

Example:

  • Employee: Ana Dela Cruz (Sales Associate)

  • Monthly Rate: ₱30,000.00

Earnings

  • Basic Pay = ₱30,000.00

Deductions

  • SSS = ₱1,500.00

  • PhilHealth = ₱750.00

  • Pag-IBIG = ₱200.00

  • Withholding Tax = ₱1,007.55

  • Total Deductions = ₱3,457.55

Net Pay

  • ₱30,000 – ₱3,457.55 = ₱26,542.45

Types of Payroll Deductions (Philippines)

  • SSS: Retirement, disability, maternity benefits

    • Employee share: 5% of salary

    • Employer share: 10% of salary

    • Example: ₱30,000 salary → ₱1,500 employee share

  • PhilHealth: Health insurance

    • Premium: 5% of salary (shared equally)

    • Example: ₱30,000 salary → ₱750 employee share

  • Pag-IBIG (HDMF): Housing savings and loan benefits

    • 2% of salary, capped at ₱200 for employee share

    • Example: ₱30,000 salary → ₱200 employee share

  • Tax (Withholding Tax): Based on taxable income after government contributions.

Withholding Tax Computation

  • Formula:
    Taxable Income = Gross Salary – (SSS + PhilHealth + Pag-IBIG)

  • Apply the BIR Monthly Tax Table (TRAIN Law).

Example (Ana Dela Cruz)

  • Gross Salary = ₱30,000

  • Total Deductions = ₱2,450

  • Taxable Income = ₱27,550

  • Tax = 15% of (₱27,550 – ₱20,833) = ₱1,007.55

Overtime Pay (OT)

  • Definition: Additional pay for hours worked beyond 8 per day.

  • Rate: At least 25% higher on ordinary days; higher on holidays and rest days.

  • Formula:
    OT Rate = Hourly Rate × OT Multiplier

Example (Bella Santos)

  • Monthly Salary = ₱42,000

  • Workdays = 26, Hours/day = 8

  • OT = 10 hours, OT Multiplier = 1.25

Solution:

  • Daily Rate = ₱42,000 ÷ 26 = ₱1,615.38

  • Hourly Rate = ₱1,615.38 ÷ 8 = ₱201.92

  • OT Rate = ₱201.92 × 1.25 = ₱252.40

  • OT Pay (10 hrs) = ₱252.40 × 10 = ₱2,524.00

Final Net Pay

  • Gross = ₱44,524.40 (₱42,000 + OT)

  • Less Deductions (₱3,000 SSS + PhilHealth + Pag-IBIG, plus tax ₱3,513.28)

  • Net = ₱38,011.12