Working as an HR in our company, I am amazed by how many employees don’t understand how their net salary is computed. I receive a lot of questions, sometimes angry complaints why they are not receiving their actual salary that was promised to them when they were hired. I saw a need to educate most employees so they know if they are really receiving what they have worked for. This inspired me to write an article to at least give some ideas on salary computation.
When offered a position in a company, you will be given your daily or monthly salary rate. But this figure is not the same as what you will receive every payday. Below is a list of allowable deductions that you might see in your payslip:
- Mandatory contributions
- Withholding Tax
- Loan payments
- Absences and late
- Other deductions based on company policy
Mandatory Contributions
Employers and employees both pay a monthly contribution to government agencies (SSS, Philhealth, and Pag-ibig). Remember, only the employee’s share should be deducted from your salary.
The amount of deduction is based on your basic monthly salary. The higher your salary is, the higher the deduction will be. Don’t complain just yet though. These contributions will be put to good use. When you get sick, Philhealth will be able to shoulder a portion of the expenses. SSS and Pag-ibig will also provide pension once you retire.
1. SSS
The amount deducted every month is 3.63% of your monthly salary while the employer contributes 7.37%. The table below shows your actual deduction base on your salary.
2. Philhealth
Philhealth requires employers to remit 2.75% from your monthly salary credit, half of which will be deducted to your salary. For more details, see table below.
3. Pag-ibig
Each month, you will be deducted a total of 2% from your monthly salary for your Pag-ibig contribution. Your employer will also remit the same amount to Pag-ibig.
Withholding Tax
For employees earning P20,833 per month is not required to pay taxes. However, if you are earning more, you are mandated to pay taxes. Taxes have a different computation than the mandatory contributions. For easier reference, you can use the online calculator provided by the Bureau of Internal Revenue (BIR).
Loan Payments
If you have availed of salary loan from SSS, Pag-ibig or your company, they are allowed to deduct your amortization every month until the loan is fully paid. SSS and Pag-ibig takes about 24 months before it is fully paid.
Absences and Late
Tardiness and absences can be deducted in your monthly salary income. You should be able to know how to properly compute your deduction for this one to know if the deductions are correct.
For absences, you should be deducted to an equivalent of your daily rate multiplied by the number of days you were absent. If your rate is monthly, you can determine your daily rate by dividing your monthly salary by 24 if you are working from Monday-Friday. If you are working until Saturday, it should be divided by 26.
To compute for your tardiness deduction, you should know first your hourly rate. Your hourly rate is your daily rate divided by 8 hours. Your deduction for late is your hourly rate multiplied by the number of hours you are late.
Other Deductions base on Company Policy
Each company has a set of different rules when it comes to deductions. If you are in a position that regularly receives budget for expenses, you will be required to liquidate them as proof that you have disbursed the amount according to the specified items. Failure to do so will result in the budget to be deducted in your salary. Tellers and cashiers are also deducted if their collection does not coincide with the company’s monitoring.
Please bear in mind that as per the Department of Labor and Employment (DOLE), under number seven of Labor Advisory 11 series of 2014, employers are not allowed to deduct the cost of company uniforms from their workers’ pay. These practices are unauthorized and should be reported to DOLE.
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