Understanding how pay is structured—fixed salary (monthly-paid) versus daily wage (daily-paid)—affects everything from holiday pay and overtime to minimum wage compliance and payroll computations. This article explains the concepts, the legal standards they interact with, and practical computation frameworks used in the Philippines.

1) Core Definitions

Monthly-paid (fixed salary). An employee whose pay is quoted and paid by the month, typically intended to cover all days of the month, including unworked rest days, special days, and regular holidays—unless the contract, policy, or a collective bargaining agreement (CBA) says otherwise.

Daily-paid (daily wage). An employee paid only for days actually worked (and for certain unworked regular holidays if the statutory conditions are met). Absences and temporary suspensions of work generally reduce pay for daily-paid workers unless there is a paid-leave entitlement or company policy to the contrary.

Key idea: Monthly-paid is designed to be “all-in” for the calendar month; daily-paid is “pay-as-you-work,” with statutory add-ons when applicable.

2) Why the Distinction Matters

Holiday coverage.
- Monthly-paid: The monthly rate ordinarily already covers unworked regular holidays and rest days.
- Daily-paid: No work, no pay generally applies to rest days and special (non-working) days; unworked regular holidays are paid only if statutory eligibility conditions are met (e.g., being present or on paid leave on the workday immediately preceding the holiday, subject to lawful exceptions).
Minimum wage compliance.
- Regional daily minimum wages are set by the RTWPBs (Regional Tripartite Wages and Productivity Boards). Employers must ensure that:
  - Daily-paid workers receive at least the applicable daily minimum for each day worked (and applicable paid holidays).
  - Monthly-paid workers’ monthly equivalent meets or exceeds the daily minimum when converted using a lawful factor.
Overtime, premium pay, night shift differential (NSD).
- Overtime (OT): At least 25% premium of the hourly rate for work beyond 8 hours on ordinary working days; higher premiums apply if OT occurs on a rest day, special day, or regular holiday.
- Premium pay: For work on rest days and special (non-working) days, a premium (commonly 30% of the basic rate for the first 8 hours) is due; working on a regular holiday is paid at a higher statutory rate (commonly 200% of the basic rate for the first 8 hours), with additional rules if it also falls on a rest day.
- NSD: At least 10% of the regular wage for each hour worked between 10:00 p.m. and 6:00 a.m. These entitlements apply regardless of being monthly-paid or daily-paid; what changes is the base rate and the computation.
Leave and other benefits.
- Service Incentive Leave (SIL): As a rule, at least 5 days with pay after 1 year of service (subject to exemptions, e.g., those already enjoying equivalent benefits).
- 13th-Month Pay: At least 1/12 of the basic salary earned within the calendar year for all rank-and-file employees; applies whether monthly-paid or daily-paid.
- Social contributions & taxes (SSS, PhilHealth, Pag-IBIG, withholding tax): Apply to both; the basis is the actual compensation earned, not the pay scheme.

3) Practical Computations and Conversion Frameworks

Important: The Philippines uses factor-based conversions to translate between monthly, daily, and hourly rates. Exact factors can vary by policy, workweek schedule (5-day vs. 6-day), and whether unworked special days/regular holidays are deemed paid. Employers should pin down the factor in writing (policy/contract) and ensure it is consistent with DOLE guidance and wage orders.

A. Converting Monthly to Daily (and Hourly)

Two common approaches:

Monthly-paid approach (covers all 365 days):
- Daily rate ≈ (Monthly Rate × 12) / 365
- Hourly rate ≈ Daily rate / 8
Daily-paid approach using a “working-days” factor (e.g., 313 or 261):
- If the company uses a 6-day workweek with paid regular holidays but unpaid rest days and special days, a 313-days factor is commonly referenced.
- If the company uses a 5-day workweek, a 261-days factor is commonly referenced.
- Daily rate ≈ (Monthly Rate × 12) / working-days factor
- Hourly rate ≈ Daily rate / 8

Why multiple factors? They reflect different assumptions: whether the monthly rate already covers rest days/holidays and how many “paid days” exist in the year under the policy. Put the factor in your policy and apply it consistently.

Illustration (for concept only): Suppose ₱20,000/month.

Using 365 factor → Daily ≈ 20,000 × 12 / 365 ≈ ₱657.53; Hourly ≈ ₱82.19.
Using 313 factor → Daily ≈ ₱766.77; Hourly ≈ ₱95.85.
Using 261 factor → Daily ≈ ₱919.54; Hourly ≈ ₱114.94.

B. Converting Daily to Monthly (Equivalent Monthly Rate or “EMR”)

EMR ≈ (Applicable Daily Rate × factor) / 12.
Choose the factor consistent with your policy (e.g., 365 for monthly-paid that covers all days; 313 or 261 if daily-paid based on 6-day/5-day workweeks with specific holiday assumptions).
Always document the factor; use the same factor when checking minimum wage compliance.

C. Holiday Pay in Computations

Regular holidays (unworked):
- Monthly-paid: Typically already paid (no additional amount added on top of the monthly salary).
- Daily-paid: Paid 100% of the daily rate if eligibility conditions are met (e.g., present or on paid leave on the workday immediately prior).
Regular holidays (worked):
- Commonly 200% of the basic rate for the first 8 hours.
- If it also falls on a rest day or if there is overtime, additional premiums apply.
Special (non-working) days:
- No work, no pay (unless a favorable company policy/CBA exists).
- If worked, commonly 130% of the basic rate for the first 8 hours, with additional rules for rest day overlap and OT.

Tip: When you’re monthly-paid and your policy says the monthly rate “covers all days,” you generally don’t add another day’s pay for an unworked regular holiday; if the monthly-paid employee works on the holiday, holiday premiums still apply.

4) Overtime, Premium Pay, and NSD—How They Interact with Pay Schemes

Overtime (beyond 8 hours/day):
- Ordinary day: At least 25% of the hourly rate as premium on top of the basic hourly rate.
- Rest day/Special day/Regular holiday: Higher OT premiums apply (commonly +30% of the corresponding hourly rate for that day’s classification).
Premium Pay:
- Rest day or Special day work: Add the applicable premium (commonly 30% for first 8 hours).
- Regular holiday work: Use the holiday rate (commonly 200%) for first 8 hours, then apply OT rules if beyond 8 hours.
Night Shift Differential (NSD):
- At least 10% of the regular wage for each hour worked between 10:00 p.m. and 6:00 a.m.

These entitlements are status-agnostic: monthly-paid or daily-paid both get them. The difference is how the base hourly rate is derived.

5) Absences, Tardiness, Suspensions of Work

Monthly-paid: Absences or tardiness may be deducted from the monthly salary based on the policy/handbook (e.g., per-hour or per-day salary equivalence).
Daily-paid: Pay is simply not due for unworked days except when the law or policy provides otherwise (e.g., paid SIL, paid regular holidays if eligible).

Temporary suspension of work (e.g., due to calamity or lack of work) typically means no pay for daily-paid workers; monthly-paid handling depends on company policy and applicable rules on forced leave or temporary closure.

6) Minimum Wage, Wage Orders, and Wage Distortions

Minimum wages are regional and industry-specific in some cases, set by the RTWPB via Wage Orders.
For daily-paid workers, compare the daily wage directly against the current daily minimum.
For monthly-paid, convert the monthly rate to a daily equivalent using your documented factor to ensure it meets or exceeds the minimum.
If an increase to comply with a new Wage Order compresses wage differentials among pay grades, employers must address wage distortion in good faith—often through negotiation or internal realignment—consistent with the Labor Code and jurisprudence.

7) Special Pay Structures Often Confused with Daily vs. Monthly

Piece-rate: Paid per unit of output. Still subject to minimum standards when converted to time equivalents and to overtime/NSD/holiday rules if applicable.
Task- or results-based pay (e.g., field sales): Still protected by labor standards; employers must track time or apply reasonable equivalents to compute statutory benefits (overtime, holiday pay, etc.) when the employee is not exempt.
Commission and allowances: Generally not part of “basic wage” unless they are fixed and integrated by practice or agreement. They may, however, be considered in the 13th-month base if they qualify as part of “basic salary” under governing rules.

8) Contracting, Policy, and Documentation Essentials

State the pay scheme clearly in the employment contract and/or handbook: monthly-paid vs. daily-paid, the conversion factor used, and whether monthly pay covers rest days and holidays.
Define the workweek (5-day or 6-day), standard hours (typically 8/day), rest days, and rules on flexible work arrangements.
Document premiums (OT, rest day, special day, regular holiday, NSD) and specific rates to avoid disputes.
Observe non-diminution of benefits: Once a benefit has ripened into a company practice, it cannot be withdrawn unilaterally.
Keep wage orders and policy updates synced. When regional minimum wages change, update rates and notify employees.

9) Compliance Checklist (Quick Scan)

Pay scheme specified as monthly-paid or daily-paid in contract/policy.
Conversion factor documented and consistent across payroll processes.
Minimum wage checked (daily or converted monthly equivalent).
Holiday rules (regular vs. special) and eligibility criteria communicated.
OT, Premium, NSD rates and triggers specified.
Leave entitlements (SIL, etc.) implemented and accrued correctly.
13th-month computation aligned with rules on “basic salary.”
Timekeeping and approvals (OT/rest day work) are auditable.
Deductions (tardiness/absences) are lawful, transparent, and policy-based.
Wage order updates monitored; wage distortions addressed.

10) Frequently Asked Questions

Q1: Is a monthly-paid employee “automatically” paid for special (non-working) days? Not necessarily. Monthly pay typically covers all calendar days, but whether special days are considered paid when unworked must be clear in policy/contract. Many employers treat special days as no work, no pay unless the company grants pay.

Q2: Can an employer switch an employee from monthly-paid to daily-paid? Yes, but changing the pay scheme should be documented, prospective, and must not violate non-diminution or evade statutory obligations. Obtain clear employee acknowledgment and update payroll factors and policies.

Q3: Do monthly-paid employees still get holiday premiums when they work on a holiday? Yes. Monthly pay may cover unworked regular holidays, but work performed on a regular holiday is paid at the holiday rate (with OT premiums if applicable).

Q4: How do we check minimum wage compliance for monthly-paid staff? Convert the monthly salary into a daily equivalent using the documented factor and compare it with the regional daily minimum.

Q5: Are managers or field personnel exempt from OT and premiums? Some categories of employees (e.g., managerial employees) are exempt from certain labor-standards pay rules. Job titles alone are not conclusive; actual duties and responsibilities control.

11) Practical Policy Language (Model Clauses)

Pay Scheme & Factor. “Employee is monthly-paid. The monthly rate is intended to cover all days of the month, including unworked rest days and regular holidays. For conversions, the Company uses the 365-day factor unless otherwise required by law.”
Premiums & OT. “Authorized overtime is paid per law. Work on rest days, special days, and regular holidays is compensated at the applicable statutory rates. Night work between 10:00 p.m. and 6:00 a.m. earns at least 10% NSD.”
Minimum Wage Assurance. “The Company ensures compliance with applicable regional wage orders; monthly rates are reviewed using the Company’s documented conversion factor.”

Tailor these clauses to your actual workweek (5-day vs. 6-day), rest-day schedules, and any CBA.

12) Key Takeaways

Monthly-paid = fixed salary designed to cover the calendar month; daily-paid = pay is tied to days actually worked, with statutory add-ons.
The conversion factor (365/313/261 or similar) is crucial: write it down, apply it consistently, and use it for minimum wage checks.
Overtime, premiums, NSD, holiday pay, SIL, 13th-month apply according to law, regardless of pay scheme; differences lie in the base rate and eligibility.
Keep policies, wage orders, and payroll practices aligned and documented to avoid disputes.

Final Note

Labor standards evolve (e.g., changes in the number of regular holidays or regional wage orders). Ensure your internal policy specifies your factor and references current law/wage orders, and review them periodically with competent counsel or your HR/Payroll provider.