SG

Salary, Wages, Taxes, and Price-Related Calculations

Compensation Fundamentals

  • Compensation: Monetary value provided to employees in exchange for work services. Represented and recorded in payroll.
    • Forms include salary (fixed) or wages (time-rate, piece-rate, commissions, etc.).
    • Significance: Aligns employee motivation with organizational goals, complies with labor law, and reflects market conditions.

Payroll and Gross Pay

  • Payroll (definition)
    • Total amount required to pay workers for a given period (weekly, semimonthly, monthly, etc.).
    • Also refers to the list or register of employees and the computation of their salaries, deductions, and net pay at a specific cut-off.
  • Gross Pay / Gross Income
    • Total earnings before any deductions.
    • May include base salary or wage, overtime, night-shift differential, holiday premiums, commissions, piece-rate earnings, and allowances.
    • Formula: \text{Gross Income}=\text{Salary}+\text{Allowances}+\text{Other Earnings}

Salary vs. Wage & Pay Structures

  • Salary
    • Fixed compensation quoted on a weekly, semimonthly, or monthly basis; often annualized and prorated across pay periods.
    • Example: A ₱480,000 annual salary paid semimonthly → \frac{480\,000}{24}=₱20\,000 per pay.
  • Wage
    • Monetary remuneration expressed hourly, daily, or weekly; may also be piece-work.
  • Time-Basis Pay: Earnings depend on hours/days worked; rate stated per hour/day/week/month.
  • Piece-Rate Pay
    • Paid according to number of units produced.
    • Guarantee: Worker must at least receive the legal minimum equivalent of time wage for standard quota; extra units earn at piece rate.
  • Commission Income
    • Percentage of sales generated; may be “pure commission” or “base salary + commission.”

Overtime, Holiday, Night Differential & Rest-Day Pay

  • Regular workday overtime (>8 hrs): add 25 % of hourly rate.
    • Formula: \text{OT Pay}=\text{Hourly Rate}\times1.25\times\text{OT Hours}
  • Work on a regular holiday: multiply daily rate by 2.00 (200 %).
  • Work on a regular holiday that falls on rest day: daily rate × 2.60 (260 %).
  • Work on a special holiday/rest day: daily rate × 1.30 (130 %).
  • Night-shift differential: work between 10 PM and 6 AM → hourly rate × 1.10 (additional 10 %).

Deductions and Statutory Contributions

  • Mandatory (Philippines)
    1. Social Security System (SSS) – private sector; retirement, disability, sickness, maternity; schedule-based % of salary.
    2. Government Service Insurance System (GSIS) – government employees; life, retirement; 9 % employee share.
    3. Pag-IBIG Fund (HDMF) – all sectors; housing & calamity loans; 2 % of monthly salary (capped at ₱200).
    4. PhilHealth – health care; 5 % of monthly salary shared by employer & employee (bracketed schedule).
    5. Withholding Tax (BIR) – advance income tax based on monthly salary and exemptions.
  • Optional / Conditional
    • Employee loans, cash advances, insurance premiums, union dues, deductions for absences or tardiness.
  • Net Pay / “Take-home Pay”
    • Formula: \text{Net Pay}=\text{Gross Income}-\text{Total Deductions}

Taxation & Value Added Tax (VAT)

  • VAT in the Philippines: 12 % indirect tax on sale of goods & services; businesses collect from customers and remit to BIR.
  • Conversions
    • VAT-inclusive → VAT-exclusive price: \text{Price}{\text{excl}}=\frac{\text{Price}{\text{incl}}}{1.12}
    • VAT amount: \text{VAT}=\text{Price}{\text{incl}}-\text{Price}{\text{excl}}
  • Real-world relevance: Quoting prices, preparing invoices, determining input vs. output VAT for compliance.

Inflation and Wage Adjustment

  • Inflation: General rise in price level over time, reducing purchasing power.
  • Everyday impact: Staples like rice, bread, gasoline become costlier → same nominal wage buys fewer goods.
  • Rate of Inflation
    • Formula: \text{Rate}=\frac{\text{Current Price}-\text{Previous Price}}{\text{Previous Price}}\times100\%
  • Wage Adjustment
    • To preserve living standards, wages need periodic increases matching (or exceeding) inflation rate.
  • Ethical & practical implication: Failure to adjust wages erodes real income and may lead to labor disputes.

Business Pricing: Mark-Ups, Discounts & Percentage Change

  • Cost Price (CP) vs. Selling Price (SP)
    • CP: Original cost to acquire/produce.
    • SP: Price offered to customers.
  • Mark-Up Percentage
    • \text{Mark-up \%}=\frac{\text{SP}-\text{CP}}{\text{CP}}\times100
  • Discounting
    • Discounted / Final Price: \text{Final Price}=\text{Original Price}\times(1-\text{Discount Rate})
  • Percentage Change (general)
    • Positive result → increase; negative → decrease.
    • Widely used in finance, budgeting, sales analysis, and data interpretation.

Key Formulas Summary

  • Gross Income: \sum \text{All Earnings}
  • Net Pay: \text{Gross}-\text{Deductions}
  • VAT Conversions: see VAT section.
  • Inflation Rate: \frac{P{t}-P{t-1}}{P_{t-1}}\times100
  • Mark-Up %: \frac{SP-CP}{CP}\times100
  • Discounted Price: P\times(1-d)
  • Overtime: \text{HR}\times1.25\times h_{OT}

These notes consolidate salary computation, payroll taxation, inflation impact, and fundamental business math, providing a stand-alone reference for exams or practical workplace application.