How to Compute Daily Wage from Monthly Salary in the Philippines

(A practical legal guide with formulas, examples, and edge-cases)

1) Why “daily rate” matters

Even when an employee is paid monthly, payroll must still translate that amount into a daily (and often hourly) figure to handle:

absences and tardiness deductions,
overtime, night shift differential, and premium pay computations,
salary proration for partial months (new hires, resignations),
comparisons to minimum wage (which is set daily by wage orders),
pay for holidays, rest days, and special non-working days.

2) Two systems you must distinguish

Philippine payroll practice recognizes two broad pay treatments. Your formulas depend on which one applies to the employee.

Monthly-paid employees
- The monthly salary already covers all days of the year—ordinary working days, rest days, special days, and regular holidays.
- Typical examples: office staff on fixed monthly pay where holidays are paid even if not worked.
Daily-paid (or “monthly-rated but working-days-only”) employees
- Pay covers working days actually worked; rest days and certain non-working days are unpaid unless worked or unless a statute/CB A says otherwise.
- Typical examples: employees on “no work, no pay” schemes.

Payroll policies, CBAs, or employment contracts can specify which treatment applies. This classification determines the correct divisor.

3) Core formulas

A. For monthly-paid employees (salary covers the full year)

Equivalent Daily Rate (EDR):

$$ \text{Daily Rate} = \frac{\text{Monthly Salary} \times 12}{365} $$

Equivalent Hourly Rate (EHR):

$$ \text{Hourly Rate} = \frac{\text{Daily Rate}}{8} $$

(Use the actual hours in the normal workday if not 8.)

Rationale: Since the monthly salary includes all 365 days (including rest days, special days, and regular holidays), the legally consistent conversion divides the annualized salary by 365.

Example (Monthly ₱30,000):

Annualized: ₱30,000 × 12 = ₱360,000
Daily Rate: ₱360,000 ÷ 365 ≈ ₱986.30
Hourly Rate (8 hours): ₱986.30 ÷ 8 ≈ ₱123.29

B. For daily-paid / working-days-only employees

Here, the monthly figure (if any) reflects only working days. Payroll commonly uses working-day divisors to back out the daily rate:

6-day workweek:

$$ \text{Daily Rate} = \frac{\text{Monthly Salary}}{26} $$
5-day workweek:

$$ \text{Daily Rate} = \frac{\text{Monthly Salary}}{22} $$

Why 26 or 22? They are the average working days per month under a 6-day or 5-day workweek, respectively. These are long-standing payroll conventions used where the monthly amount is intended to cover working days only.

Example (Monthly ₱30,000):

6-day workweek: ₱30,000 ÷ 26 ≈ ₱1,153.85
5-day workweek: ₱30,000 ÷ 22 ≈ ₱1,363.64
Hourly (8 hours): divide the daily rate by 8.

Important: Do not mix systems. If an employee is monthly-paid in the legal sense (salary includes all calendar days), use the 365 divisor—not 26/22.

4) Which divisor should you use? A quick decision tree

Does the monthly salary already pay for rest days and holidays whether worked or not?
- Yes → Use 365.
- No → Proceed to #2.
Is the employee on a 6-day or 5-day workweek?
- 6-day → Use 26.
- 5-day → Use 22.
- Rotating/atypical schedules → Use the contractually stipulated working-day average (document the basis).

5) Using the daily rate: common scenarios

A. Absences and tardiness (monthly-paid)

Absence deduction:

$$ \text{Deduction} = \text{Daily Rate} \times \text{Unpaid Days Absent} $$

(or hourly rate × hours absent if policy deducts by the hour).
Late/undertime: use hourly rate × hours/minutes late.

Check your leave policies: approved leaves with pay should not reduce pay.

B. Overtime (OT), Night Shift Differential (NSD), and Premium Pay

Base for OT/NSD/premiums is typically the hourly rate.
Common statutory add-ons (illustrative):
- OT on a regular working day: hourly × 125% × OT hours.
- Night shift differential (10:00 p.m.–6:00 a.m.): hourly × 110% × NSD hours.
- Rest day/holiday premiums follow statutory percentages.
If the employee is monthly-paid, do not double-count holidays already paid in the monthly; apply premiums only to work actually performed on such days.

C. Holidays and special non-working days

Regular holidays:
- Monthly-paid: holiday is already paid even if unworked (subject to eligibility/attendance rules in your policy).
- Daily-paid: “no work, no pay,” except statutory rules granting pay for unworked regular holidays to eligible employees; if worked, apply premium rates.
Special non-working days:
- Typically “no work, no pay” unless company grants pay; if worked, apply special-day premiums.

(Always align with the latest holiday proclamations and wage orders.)

D. Partial months (new hires/resignations)

Common methods:

Calendar-days method (for monthly-paid):
- Pro-rate using the 365-based daily rate × actual days payable in the period.
Working-days method (for daily-paid):
- Pay the daily rate × actual working days rendered.

Document the chosen method in the handbook/contract and apply consistently.

6) Minimum wage compliance

Minimum wage rates are set daily by Regional Tripartite Wages and Productivity Boards.
To verify compliance when paying monthly, convert the monthly to a daily rate using the correct divisor for the employee’s pay treatment (365 for monthly-paid; 26/22, etc., for working-days-only) and compare that figure to the applicable regional daily minimum for the employee’s sector/classification (non-agri, agri, etc.).
If the computed daily rate falls below the applicable minimum, adjust pay or allowances as required.

7) Allowances and benefits: are they part of the daily rate?

Statutory wage comparisons usually consider basic wage (and sometimes regular allowances if a wage order says so).
De minimis benefits and discretionary allowances are generally excluded from basic wage for premium/OT computations unless company policy or CBA states otherwise.
13th-month pay is computed on basic salary actually received within the calendar year; it is not folded into the daily rate except when annualizing for analytics.

8) Common pitfalls (and how to avoid them)

Mixing divisors
- Using 26/22 for someone who is truly monthly-paid results in over-deductions for absences and inflates OT rates.
Double-paying holidays
- Monthly-paid staff already receive unworked regular holidays. Add premiums only for hours actually worked, not a second basic day.
Ignoring schedule changes
- If a 6-day schedule shifts to 5-day, re-document the divisor (26 → 22) for daily-paid employees going forward.
Inconsistent rounding
- Adopt a written rounding policy (e.g., round to the nearest centavo at the final pay line, not at every intermediate step).
Failure to document classification
- Clearly tag employees as monthly-paid or daily-paid/working-days-only in contracts and HRIS. Consistency protects against wage claims.

9) Worked mini-cases

Case 1: Monthly-paid employee (₱30,000/month), 1 day absence

Daily Rate: ₱30,000 × 12 ÷ 365 ≈ ₱986.30
Deduction for 1 day: ₱986.30

Case 2: Daily-paid, 6-day workweek, “monthly” of ₱30,000, 2 absences

Daily Rate: ₱30,000 ÷ 26 ≈ ₱1,153.85
Deduction: 2 × ₱1,153.85 = ₱2,307.70

Case 3: OT on a regular day (monthly-paid), 2 OT hours

Hourly: ₱986.30 ÷ 8 ≈ ₱123.29
OT pay: ₱123.29 × 125% × 2 ≈ ₱308.22

(Figures rounded to centavos at the end.)

10) Documentation checklist for employers

□ Employment contract states whether the employee is monthly-paid or daily-paid.
□ Company handbook specifies the divisors (365 / 26 / 22 / other) and when each applies.
□ Clear rules on absences, tardiness, and proration.
□ Holiday and premium pay rules mapped to employee types.
□ Rounding policy (e.g., nearest centavo, rounding only at final computation).
□ Alignment with current regional minimum wage and any sector/classification distinctions.
□ Consistency across payroll periods; changes documented.

11) Frequently asked questions

Q1: Our company has a compressed workweek (4×10 hours). What divisor applies? Use the classification rule first: if pay covers all calendar days → 365. If it covers working days only → use the average working days per month actually adopted (document the divisor).

Q2: May we use 30 as the monthly divisor (i.e., monthly/30/8)? Some organizations use a 30-day month convention internally. That’s acceptable if it’s consistent and contractually clear and does not undercut statutory entitlements or minimum wage compliance. For monthly-paid staff, however, the 365-based annual method is the safest benchmark for legal parity across months with different day counts.

Q3: Do paid leaves affect the daily rate? No. They affect payable days, not the rate. The daily rate formula stays the same; you just count the days covered by paid leave.

12) Quick reference (put this on your payroll SOP)

Monthly-paid (covers all days):
- Daily = Monthly × 12 ÷ 365
- Hourly = Daily ÷ 8
Daily-paid / working-days-only:
- Daily = Monthly ÷ 26 (6-day week) or Monthly ÷ 22 (5-day week)
- Hourly = Daily ÷ 8
Always: keep written policies, apply one system consistently, and check regional daily minimum wage using the properly derived daily rate.

Final note

This guide explains the standard, legally aligned methods Philippine employers use to derive a daily wage from a monthly salary and to apply that rate correctly across payroll scenarios. Because wage orders, holiday proclamations, and workplace arrangements can change, ensure your handbook and contracts explicitly state the applicable classification and divisors, and apply them uniformly.