Both Daily-Paid and Monthly-Paid employees are only paid on days worked and thus they are not paid on unworked days, including Rest Days and Special Non-Working days, with one single exception on Regular Holidays when both are entitled to Holiday Pay even if no work was rendered or performed.
Monthly-paid employees may be paid for unworked days such as Rest Days and Special Non-Working Days only if there is a favorable stipulation or agreement between employee and employer.
- Daily-Paid employees refer to those whose wages or salaries are computed on a daily basis.
- Monthly-Paid employees refer to those whose wages or salaries are computed annually then divided by certain divisors.
What is Payroll Divisor or Factor Days and why is it important?
This is typically applicable for monthly-paid employees where salaries are fixed and you just deduct absences and add overtime pays. There are several reasons why this is important:
- Payroll divisor determines how to get the correct daily rate of employees. This is needed when you are deducting absences for your employees and you want to make sure you are not under-deducting or over-deducting. This applies in deducting tardy or undertime.
- Daily rates have an impact on tax computations as Minimum Wage Earners have additional tax benefits in the Philippines. You may want to make sure that you are getting the correct daily rate amounts so you can properly check if employees are minimum wage earners or not.
- It’s crucial in computing overtime and premium pays, if daily rates are incorrectly computed, it is likely that hourly rate is also not right, which will result in incorrect payment of additional wages.
Here is how to get the daily rate of employees.
Daily Rate = Monthly Rate x 12 months / Total working days in a year
Now you asked, how to get the total working days in a year (or the payroll divisor)?
Each year, we have 52 weeks. If an employee is required to work 5 days a week (Monday to Friday), you just need to divide the 5 days by 52 which equals 260, but since we have an odd day of 1, we just add this which gives us a total of 261.
If an employee has a monthly rate of P 13,000 and is required to work 5 days per week then his daily rate would be:
P 13,000 * 12 / 261 = P 597.70
That P 597.70 will be your basis to determine if the employee is a minimum wage earner or not. If we look at NPWC, the P 597.70 is above minimum wage in NCR, which taxes should be withheld assuming that there is no other applicable tax exemption.
To get the hourly rate, you may just want to divide the daily rate to 8 hours (expected working hours per day).
A. Factor To Use (Total Number of Paid Days in a Year)
- Daily-Paid - The applicable factor varies based on the number of days worked each week.
- If required to work 6 working days per week - 313 (365 - 52)
- If required to work 5 working days per week - 261 (365 -(52*2))
- If required to work 5 ½ working days per week - 187 (365 - (52+(52/2))
- Monthly-Paid - The applicable factor to be used is 365 to determine the annual and monthly salary of a monthly-paid employee.
B. Regular Holiday
- Daily-Paid - An employee must be present prior to a regular holiday in order to be compensated; if the employee is absent prior to the holiday, he or she will not be paid.
- Monthly-Paid - Since the employee is compensated every single day of the year, he or she will be paid regardless of whether they were present or absent prior to the holiday.
C. Special Holiday
- Daily-Paid - The employee is not compensated on Special Holidays.
- Monthly-Paid - The employee will receive compensation for Special Holidays.