In Philippine labor law, the computation of a worker's daily wage is not merely a matter of accounting but a reflection of the employee's entitlement to rest days and special holidays. One of the most common methods used for employees who are considered paid for every day of the year—including Sundays and rest days—is the 365-day divisor.

Understanding when and how to apply this divisor is essential for both employers ensuring payroll compliance and employees verifying their correct compensation.

1. The Legal Basis

The primary authority for wage computation in the Philippines is the Implementing Rules and Regulations (IRR) of the Labor Code, supplemented by the annual Handbook on Workers' Statutory Monetary Benefits issued by the Department of Labor and Employment (DOLE).

Under DOLE guidelines, the 365-day divisor is used specifically for "monthly-paid employees." These are employees who are considered paid for all days of the month, including unworked rest days, special days, and regular holidays.

2. When to Use the 365-Day Divisor

The 365-day divisor is applicable when the employment contract or company policy stipulates that the monthly salary covers the entire year without deductions for rest days. The breakdown of the 365 days is as follows:

295 Ordinary working days
52 Rest days (Sundays/Saturdays)
12 Regular Holidays
6 Special Non-Working Days (standard estimate, subject to Executive Proclamations)
Total: 365 Days

Note: If an employee is not paid for their rest days (i.e., "no work, no pay" applies to those days), a different divisor (such as 313, 261, or 258) must be used depending on the number of working days per week.

3. The Formula for Daily Rate

To derive the Equivalent Daily Rate (EDR) using the 365-day divisor, the formula is:

Step-by-Step Calculation:

Determine the Annual Salary: Multiply the Gross Monthly Rate by 12.
Divide by the Divisor: Divide the total annual salary by 365.
Result: The resulting figure is the daily wage used to compute overtime, night shift differential, and deductions for absences.

Example: If an employee earns PhP 30,000 per month:

Annual Salary:
Daily Rate:

4. Computing Hourly and Overtime Rates

Once the daily rate is established using the 365 divisor, other statutory benefits are derived from it:

Benefit	Formula
Hourly Rate	Daily Rate 8 hours
Regular Overtime	Hourly Rate 125%
Night Shift Differential	Hourly Rate 110%
Holiday Pay (Regular)	Daily Rate 200%

5. Implications of Using the 365 Divisor

Using this divisor has specific legal and financial implications:

Absences: Since the employee is "paid for every day," an absence on a scheduled work day results in a deduction of the daily rate (computed via the 365 divisor).
Work on Rest Days: If an employee under this category is required to work on their rest day, they are entitled to an additional premium (usually 30% of their daily rate) because while the "base" pay for that day is already included in the monthly salary, the premium for actual labor is not.
Holiday Pay: For regular holidays, the employee is already technically paid for the day within the monthly salary. If they do not work, they receive their full salary. If they do work, they receive an additional 100% of their daily rate (totalling 200%).

6. Common Pitfalls and Jurisprudence

The Supreme Court has clarified in various cases (e.g., Odango vs. NLRC) that the choice of divisor is a matter of contract and company practice, provided it does not result in a daily wage that falls below the statutory minimum set by the Regional Tripartite Wages and Productivity Board (RTWPB).

If an employer uses a 365-day divisor but the resulting daily rate is lower than the prevailing Minimum Wage in the region, the employer is in violation of labor standards and must adjust the monthly salary upward to meet the legal floor.

Summary Table: Divisors at a Glance

Total Days/Year	Days Worked/Week	Description
365 Days	7 Days	Includes rest days, special days, and holidays in the pay.
313 Days	6 Days	Excludes 52 Sundays (Rest Days).
261 Days	5 Days	Excludes Saturdays and Sundays.