Computation of the Daily Rate for Monthly-Paid Employees in the Philippines (A practitioner-oriented legal article, updated to 2025)
1. Why the “daily rate” matters even for monthly-paid staff
Although monthly-paid employees receive a fixed amount every payday, payroll and HR officers still need a daily equivalent because Philippine labor statutes express many monetary benefits in daily terms—e.g., overtime (Art. 87), premium pay for work on rest days or holidays (Arts. 93–95), service-incentive leave conversion (Art. 95), separation or retirement pay (Arts. 298–299 & R.A. 7641), and money claims in litigation. Getting the divisor wrong can expose the employer to wage differentials, 13th-month pay deficiencies, or adverse judgments.
2. Legal framework and authoritative sources
| Instrument | Key provisions relevant to monthly-paid computation |
|---|---|
| Labor Code of the Philippines (PD 442, as renumbered) | Defines regular holiday pay, rest-day pay, overtime, Service Incentive Leave (SIL), separation and retirement pay—all of which reference the “employee’s daily wage.” |
| Wage Rationalization Act (R.A. 6727) & regional wage orders | Set the statutory daily minimum wage; DOLE issuances then provide an Equivalent Monthly Rate (EEMR) table that uses the standard factors discussed below. |
| DOLE Handbook on Workers’ Statutory Monetary Benefits (latest edition 2024) | Gives official formulas for converting daily ↔ monthly rates and distinguishes monthly-paid from daily-paid employees. |
| DOLE Labor Advisory No. 1-04 (2004) & successor advisories | Reaffirm the 365-day divisor for monthly-paid staff when deriving the daily rate. |
| Supreme Court jurisprudence—Auto Bus Transport Systems, Inc. v. Bautista, G.R. No. 156367 (16 May 2005); Metrobank v. NLRC, G.R. No. 203187 (3 Mar 2020); Claudia’s Kitchen v. Balinas, G.R. No. 219603 (1 Dec 2021)* | Holds that, absent a contrary company practice or CBA, the correct divisor in computing daily wage from a monthly salary is 30 or 30.4167 (i.e., 365 ÷ 12); the Court will not adopt the 26-day divisor applicable to daily-paid workers. |
Definition (DOLE): Monthly-paid employee – one who is paid a fixed amount every payday for all days of the month, including unworked rest days, special days, and regular holidays. Daily-paid employee – paid only for days actually worked (plus unworked regular holidays if entitled).
3. The standard divisor: 365 ÷ 12 = 30.4167 days
DOLE treats monthly-paid employees as being paid for 365 days a year, broken down as:
- 297 ordinary working days
- 52 rest days
- 12 regular holidays
- 4 special non-working days (average; varies by law)
Total: 365
Dividing the annual days by 12 months yields 30.4167 average days per month. Hence the official formulas are:
| Objective | Formula |
|---|---|
| Daily rate from a monthly salary | Daily Rate = (Monthly Salary × 12) ÷ 365 ≈ Monthly Salary ÷ 30.4167 |
| Equivalent Monthly Rate (EEMR) from a daily wage | EEMR = Daily Wage × (365 ÷ 12) ≈ Daily Wage × 30.4167 |
Practical notes
- Many payroll systems round the divisor to 30.44 or the result to two decimal places; this is acceptable if done consistently and without reducing statutory benefits.
- Some CBAs or long-standing employer practices use a 30-day divisor (as the Supreme Court did in Auto Bus). This is likewise valid because it does not diminish benefits—it actually yields a slightly higher daily rate than 30.4167.
- The oft-quoted “26-day” or “22-day” divisors apply only to daily-paid employees who are not paid on rest days and/or special days. They must not be used for monthly-paid staff.
4. Step-by-step examples
Deriving the daily rate
Monthly salary: ₱30,000
Daily Rate = (₱30,000 × 12) ÷ 365 = ₱360,000 ÷ 365 = ₱986.30
Computing overtime on a regular workday (125 % under Art. 87):
Overtime hourly rate = Daily Rate ÷ 8 × 125 % = ₱986.30 ÷ 8 × 1.25 ≈ ₱154.73 / hour
Salary deduction for 1 day leave without pay
Deduction = Daily Rate = ₱986.30
Conversion of unused Service Incentive Leave (5 days)
Conversion = Daily Rate × 5 = ₱4,931.50
Computation of separation pay for redundancy (1 month per year of service; Art. 298)
Employee with 3.5 years of service: Monthly Salary × Years = ₱30,000 × 3.5 = ₱105,000
(No need to convert to daily here; the law already uses monthly salary.)
5. Variations and special situations
| Scenario | Recommended treatment |
|---|---|
| Compressed Workweek (e.g., 4×10 or 4×11) | Still use 365 ÷ 12. The daily rate is conceptually tied to pay coverage, not actual workdays. For overtime, divide daily rate by actual hours in the compressed day (e.g., 10 or 11) before applying the 25 % premium. |
| Month with 28, 29, 30, or 31 days | Do not re-divide the monthly salary by the actual calendar days. Payroll should post the fixed monthly amount; daily equivalent is only for pro-rating absences or benefits. |
| Unpaid leaves spanning an entire month | Compute the deduction by multiplying the daily rate by the number of unpaid leave days in that month (typically 30 or 31). |
| Employees starting mid-month | Prorate first paycheck = (Daily Rate × days worked). Use the same divisor for partial final pay. |
| Holiday pay for monthly-paid staff | They are already deemed paid for all 12 regular holidays; no additional payout is required unless they actually work, in which case the 200 % or 300 % premium is based on the daily rate. |
| Piece-rate or results-based workers on a monthly guarantee | If a guaranteed monthly floor exists, convert it to a daily rate using 30.4167 for purposes of OT or SIL conversion. |
6. Tying the divisor to jurisprudence
- Auto Bus Transport v. Bautista (2005): used 30 days to convert monthly salary to daily wage for back-pay, reasoning that Art. 100 (non-diminution) would be preserved because the result favored the worker.
- Metrobank v. NLRC (2020): reaffirmed that either 30 or 30.4167 can be applied so long as it is the established company practice and does not undercut statutory minima.
- Claudia’s Kitchen v. Balinas (2021): struck down the use of a 26-day divisor for monthly-paid employees in computing separation pay, branding it contrary to DOLE doctrine.
Take-away: Employers should adopt a written, uniformly applied divisor (30 or 30.4167) and reflect it in policies, pay-slips, CBAs, and HRIS configurations.
7. Interaction with other payroll statutes
13th-Month Pay (PD 851):
- Still one-twelfth of the total basic salary actually received within the calendar year. The daily rate becomes relevant only if you must compute it for an employee who joined or resigned mid-year.
SSS, PhilHealth, and Pag-IBIG contributions:
- Monthly salary credit (MSC) tables are used; the daily rate formula does not affect statutory deductions directly, but a mis-computed daily rate can distort “days with pay” reports used in SSS sickness or maternity claims.
Income-tax withholding:
- The BIR’s Revised Withholding Tax Tables (RR 8-2018, as updated) are monthly. However, the basic daily rate becomes crucial for computing taxable fringe benefits like vacation leave conversions.
8. Compliance risks and best-practice checklist
| Risk area | Mitigation |
|---|---|
| Using the wrong divisor (26/22) | Issue written payroll guidelines adopting 30.4167 or 30; train payroll staff. |
| Inconsistent pro-rating for absences or tardiness | Configure HRIS to automate deductions strictly on Daily Rate × unpaid days. |
| Failure to reflect divisor in contracts/payslips | State “Daily equivalent = Monthly Salary ÷ 30.4167” in the Employment Agreement or Salary Information Sheet. |
| Differing divisors within the company | Harmonize policies; announce via a HR memo, citing DOLE Handbook & jurisprudence. |
9. Frequently asked practitioner questions
| Question | Short answer |
|---|---|
| Can we switch from 30 to 30.4167 to save on payroll? | Only prospectively and with employee consent; a unilateral change lowers the daily rate and may violate Art. 100 (non-diminution). |
| Is the 30.4167 divisor mandatory? | No; DOLE treats 30 as acceptable if it does not undermine statutory benefits. |
| How to handle February (28/29 days) salary deductions? | Still divide the monthly rate by 30.4167 for daily equivalent, then multiply by the actual unpaid days (e.g., 2 days LWOP × ₱986.30). |
| What about consultants on a fixed monthly retainer? | They are outside the Labor Code, but if you need a daily rate for withholding tax or project costing, the same divisor is industry-standard. |
10. Conclusion
The “simple” task of converting a Philippine employee’s monthly salary to a daily wage boils down to the 365-day coverage rule for monthly-paid personnel. Whether an employer uses 30 or 30.4167 as a divisor, the golden rules are consistency, non-diminution, and alignment with DOLE guidance and Supreme Court precedent. Mastery of this computation shields the company from wage-related disputes and ensures that employees receive every peso mandated by law.