In the Philippine labor landscape, the distinction between "daily-paid" and "monthly-paid" employees is a frequent source of confusion during payroll processing. While daily-paid workers are compensated based on the actual days worked, monthly-paid employees are those whose monthly salary is deemed to cover all days in a month, including rest days and special days, regardless of the actual number of working days.
Calculating the daily wage for monthly-paid employees is essential for determining deductions for absences, tardiness, and undertime, as well as computing overtime pay, night shift differential, and holiday pay.
The Legal Basis: The Factor Rate
The Department of Labor and Employment (DOLE) provides the standard formulas through the "Handbook on Workers' Statutory Monetary Benefits." The core of the calculation lies in determining the Estimated Equivalent Monthly Rate (EEMR) or the Equivalent Annual Rate, depending on the employee's work schedule.
To find the daily rate, you must first identify the Factor (Total number of paid days in a year).
Commonly Used Factors
The factor depends on whether the employee is considered paid for rest days and holidays.
- Factor 365 days: Used when employees are considered paid every day of the year, including rest days, special days, and regular holidays.
- Calculation: (365 days = 297 ordinary working days + 52 rest days + 12 regular holidays + 4 special days)
- Factor 313 days: Used when employees do not work and are not paid on Sundays or rest days.
- Calculation: (313 days = 297 ordinary working days + 12 regular holidays + 4 special days)
- Factor 261 days: Used for those who do not work and are not paid on Saturdays and Sundays.
- Calculation: (261 days = 245 ordinary working days + 12 regular holidays + 4 special days)
The Standard Formula
To derive the Daily Rate (DR) from a Monthly Salary (MS), the following formula is applied:
Example Calculation
If an employee earns PHP 30,000 per month and works Monday to Friday (Factor 261):
- Annual Salary:
- Daily Rate:
Note: Once the daily rate is established, the hourly rate is typically derived by dividing the daily rate by 8 (the standard working hours).
Impact on Payroll Adjustments
Determining the correct daily rate is not merely an academic exercise; it dictates the legality of payroll movements:
- Deductions: If an employee is absent, the employer deducts the computed daily rate. Under the "No Work, No Pay" principle, if the factor used already accounts for paid unworked days (like Factor 365), the monthly salary is simply divided to find the per-day value of that month.
- Overtime (OT): OT is calculated as (on a regular day).
- Regular Holiday Pay: Monthly-paid employees are generally entitled to 100% of their daily rate even if they do not work on a regular holiday, as it is theoretically already factored into their monthly pay. If they work, they receive an additional 100% (total of 200%).
The 13th Month Pay Consideration
It is important to note that for the purpose of computing 13th Month Pay, the "basic salary" includes all remunerations or earnings paid by an employer for services rendered, but may exclude cost-of-living allowances (COLA) and profit-sharing payments. The daily rate derived from the monthly salary is used to determine the total basic salary earned during the calendar year, which is then divided by 12.
Key Compliance Reminders
- Employment Contract: The factor used (365, 313, or 261) should be consistent with the company policy or the individual employment contract.
- Non-Diminution of Benefits: If a company has traditionally used a lower factor (which results in a higher daily rate), they cannot suddenly switch to a higher factor (resulting in a lower daily rate) if it reduces the employee's take-home pay for the same amount of work.
- Regional Minimum Wage: Regardless of the formula used, the resulting daily rate must never fall below the prevailing Minimum Wage Rate set by the Regional Tripartite Wages and Productivity Board (RTWPB) for the specific region.
Summary Table of Factors
| Work Schedule | Days per Year (Factor) | Inclusion |
|---|---|---|
| Everyday | 365 | Includes Sundays/Rest Days and Holidays |
| Mon-Sat | 313 | Excludes Sundays/Rest Days |
| Mon-Fri | 261 | Excludes Saturdays and Sundays |
Properly calculating the daily wage ensures that the employer remains compliant with the Labor Code of the Philippines while maintaining transparency and fairness in employee compensation.