A Guide to Preparing the Payroll

You have found the ideal location for the coffee shop you have always wanted to put up. You have already registered the business and completed the renovation of the place. You are ready to open your business. The next thing you need to figure out now is how many people you need to hire and then come up with a payroll for them.

Aside from professional experience and academic credentials, salary structures and wages are determined by factors that include, among others, the nature of work, location, working hours and type of industry/sector. 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 in the Philippines.

Philippine laws, however, grant fair compensations and benefits to all types of employees. Among these compensations are minimum wages, the 13th-month pay, health and insurance benefits and holiday pay.

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 which prescribes employment regulations and labor laws for companies operating in the Philippines.

Minimum wage rates vary in every region of the Philippines with a Regional Tripartite Wages and Productivity Board (RTWPB) in each region to monitor economic activities and adjust minimum wages based on the region’s growth rate, unemployment rate and other factors. For the National Capital Region, the minimum daily wage ranges from P475 to P512 in the non-agriculture sector. The daily wage in the agriculture sector is P475. Employees are entitled to additional pay when they work overnight, work the night shift and during special and regular holidays.

The government mandates that normal working hours shall not exceed eight hours a day. Overtime work payment shall consist of an addition of at least 25% of the regular wage per hour worked or 30% thereof during holidays or rest days. The minimum age of employment is 18 years old but those aged 15 to 19 can be employed given that they work in non-hazardous environments. In the event of bankruptcy or liquidation, workers shall be paid their full salary before other creditors establish any claim to a share in the employer’s assets.

Employees are entitled to the following mandatory benefits and contributions:

• 13th-month pay equivalent to one month of the employees’ annual salary
• Service incentive leave of at least 5 days with pay for every year of service
• A weekly rest period of not less than 24 consecutive hours after every six consecutive normal work days
• Withholding a portion of an employee’s monthly salary to remit as contributions to government agencies like Social Security System, Home Development Mutual Fund or Pagibig and Philhealth
• Provision of holiday pay
• Paternity and maternity leave benefits

The amount to be deducted for the employee’s SSS contributions depend on his monthly basic salary. If the employee is earning P15,000 monthly, based on the SSS table of contributions, his monthly SSS deduction is P500. For Philhealth, the monthly contribution based on P15,000 is P206.25. For Pagibig, on the other hand, the monthly contribution is equivalent to 2% of the monthly salary or P300 if the monthly salary is P15,000.

To compute for your employees’ income tax, you will need to know how much is their SSS, Philhealth and Pagibig contributions, allowances and other benefits if any and a copy of the Bureau of Internal Revenue tax table. The taxable income is the monthly basic pay plus overtime pay, holiday pay and night differential minus tardiness, absences and SSS, Philhealth and Pagibig Deductions. The amount of taxes to be deducted will be based on the net pay for the month and this can be computed based on the BIR Tax Table.

Your payroll, among other things, will help determine how much revenues you will need to keep your business afloat. So be very sure that you are ready to take on this responsibility before you start your business.

About the Author:

Anne Ruth Dela Cruz is a seasoned writer who has interests in health, wellness and business start-ups. She has also dabbled in corporate communications and public relations. A mother of four, Anne also loves videoke sessions and reading a good book. My posts appear on: Negosentro, World Executives Digest, Executive Chronicles, Get Health Access, and Trade & Travel Journal.