Comprehensive Notes on Salaries, Wages, and Overtime Pay

Salaries and Wages

Terms and Concepts

• Employee compensation: Remuneration given to an employee in exchange for services.
  • Forms: Wage, salary, employee benefits, incentive pay.
• Basic Pay: Wages or salaries received by employees.
• Wages: Earnings received on a piece rate, hourly rate, or daily rate.
• Salary: Earnings paid on a monthly or annual basis.
• Income: A broader term than wages or salary.
  • Active Income: Wages and Salaries
  • Passive Income: Dividend income, royalty, rent income.
• Employee benefits: Remuneration other than basic pay.
  • Examples: Vacation and sick leaves, medical benefits, allowances, incentive pay.
• Commission: Additional payment based on a percentage of sales.
• Override: Extra commission paid to managers based on their team's sales performance.
• Bonus: Amount added to wages, often seasonally, as a reward.

Computations/Calculations

I. Wages

Wages may be earned on a piece rate, hourly rate, or daily rate basis.

a. Piece Rate

Paid in proportion to the quantity of work finished.

1. Fixed piece-rate plan: Rate is fixed irrespective of quantity produced.
   • Example: Tammy is paid P1.20 per piece. If she finishes 360 pieces a week, her total earnings are calculated as follows:
     • Given: Rate = P1.20 per piece, Quantity produced = 360 pieces
     • Find: total earnings
     • Solution:
       $Total\ earnings = Quantity \times Rate$
       $= 360 \times P1.20$
       $= P432.00$
2. Differential piece-work plan: Rate increases as quantity produced increases.
   • Example: Linda is paid based on the following differential pay plan schedule:
     • Less than 100 packs: P100.00 per 100 packs
     • 100-149 packs: P105.00 per 100 packs
     • 150-199 packs: P107.50 per 100 packs
     • 200 or more packs: P110.00 per 100 packs
   • Linda's weekly repacking quantities:
     • Monday: 95
     • Tuesday: 102
     • Wednesday: 130
     • Thursday: 152
     • Friday: 201
   • Compute her total wage for the week.
     • Solution:
       • Monday: $95 \times (P100.00/100) = 95 \times P1.00 = P95.00$
       • Tuesday: $102 \times (P105.00/100) = 102 \times P1.05 = P107.10$
       • Wednesday: $130 \times (P105.00/100) = 130 \times P1.05 = P136.50$
       • Thursday: $152 \times (P107.50/100) = 152 \times P1.075 = P163.40$
       • Friday: $201 \times (P110.00/100) = 201 \times P1.10 = P221.10$
       • Total: $P95.00 + P107.10 + P136.50 + P163.40 + P221.10 = P723.10$

b. Hourly Rate

Multiply the number of hours worked by the hourly rate.

• Example: An employee worked 40 hours at P50.00 per hour.
  • Wage Calculation:
    $40 \ hours \times P50.00/hour = P2,000.00$

c. Daily Rate

Employee is paid on a daily basis.

• Example: An employee receives P480.00 daily wage.

  • Hourly rate calculation:

  $P480.00 / 8 \ hours = P60.00$

II. Salary

Usually paid monthly or annually. Conversion between annual, monthly, weekly, and semi-monthly bases is sometimes necessary.

• Key relationships:

  • 1 year = 12 months = 24 semi-monthly = 6 bi-monthly
  • 1 year = 52 weeks = 26 bi-weekly
  • 1 month = 2 semi-monthly

• Prefixes: