Salary and Wages Parameters in Philippine Payroll Process

by | Nov 26, 2021


Some factors influence salary structures and wages in the Philippines. These are the nature of work, workplace location, working hours, type of industry or sector, and more.

The salaries of those working in major cities and business districts are relatively higher compared to those employed in second-tier cities and provincial areas. However, Philippine laws grant fair compensations and benefits to all types of employees regardless of different factors such as those previously mentioned. Among these compensations and benefits are minimum wages, which includes the 13th-month pay, health and insurance benefits, and holiday pays.

Salary and Wages Parameters in Philippine

The Department of Labor and Employment (DOLE) and its affiliate agency, the National Wages and Productivity Commission (NWPC), are mandated to enforce the provisions of the Labor Code of the Philippines. Thus, they prescribe employment regulations and labor laws for companies operating in the Philippines.

Salary and Wages Computation in the Philippines

Below are the computation guides for employers, which they are legally required to follow.

  • A regular day: Basic Daily Rate = Monthly Rate x Number of Months in a Year (12) / Total Working Days in a Year
  • A special day: 130% x basic daily rate
  • A special day, which is also a scheduled rest day: 150% x basic daily rate
  • A regular holiday: 200% x basic daily rate
  • A regular holiday, which is also a scheduled rest day: 260% x basic daily rate

Computation for Overtime Pay

Overtime Pay refers to the additional compensation for work performed beyond eight (8) hours a day.

  • For overtime on regular days: Number of Excess Hours Worked x 125% x Hourly Rates
  • For overtime on rest days and special days: Number of Excess Hours Worked x 130% x Hourly Rates

Computation for Night Shift Wages

  • On regular nights for night shifts: 110% x Basic Hourly Rate
  • For night shifts that fall on rest day and special day: 143% x Basic Hourly Rate
  • For night shifts that fall on regular holiday: 220% x Basic Hourly Rate

Computation for 13th Month Pay

  • Add the basic salary for the entire year. Do not include overtime pay, holiday pay, and night shift pay. Then divide the amount by 12 months.
  • The 13th-month pay is calculated as one-twelfth (1/12) of the employee’s basic salary within one calendar year. If the employee is paid on a monthly basis, this is the equation that is followed:
Computing for the 13th month pay
Computing for the 13th month pay

Employment Conditions for Employees

Employers and employees alike need to be aware of all these conditions.

  • Normal working hours shall not exceed eight (8) hours a day.
  • Payment of overtime work shall consist of an addition of at least 25% of the regular wage per hour worked or 30% thereof during holidays or rest days.
  • Minimum wage rates for Agricultural and Non-Agricultural lines of work vary in every region and should be properly observed.
  • Minimum age of employment is 18 years old. Those aged 15 to 18 may be employed given that they work in non-hazardous environments.
  • In the event of a bankruptcy or liquidation, such workers shall be paid their full salaries before other creditors may establish any claim to a share in the employer’s assets.

Mandatory Benefits and Contributions

Employees are entitled to benefits while they work for a business or company. Regular contributions are also compulsory.

  • The Labor Code mandated the companies to give each regular employee a 13th-month pay. This is equivalent to one (1) month of their annual salary.
  • Service incentive leave of at least 5 days with pay for every year of service
  • Employees have a right to a weekly rest period of not less than 24 consecutive hours after every 6 consecutive normal work days
  • Withholding a portion of an employee’s monthly salary to remit as contributions to government agencies is a requisite for employers. Thus, these agencies are as follows:
  • Provision of holiday pay
  • Paternity and maternity leave benefits

When it comes to salaries and compensations, it’s important that both employer and employees are on the same page. It is better to discuss with your finance officer for more clarifications.

Come back to this post anytime you want to solve your salary and wages if you are living and working in the Philippines, or to be more updated with regulations if you are an employer or planning to be one.

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