Employee Compensation

Employee compensation refers to the remuneration or
reward that an employee gets from his or her employer for the
services he or she gives the latter. Basic pay in an employee’s
compensation package refers to the wages or salaries they
get.
WAGES
•Basic pay in an employee's compensation package refers to
the wages or salaries they get. Wages refer to the earnings
received by a worker on a piece rate, hourly rate, or daily rate.
Earnings of employees paid on a monthly or annual basis

is generally referred to as “salary”. Example of salary earners
are teachers, professionals employed in an organization,
full-time or regular workers who are paid in a fixed amount.
What is Income?
Income is a broader term than the wages or salary. Wages
and salaries are income to
the persons receiving it. However, what is the term used to
the money being received by
people who are not employees. There are people prefer not to
be employed by earning their
income from commission on sales they make, rental income if
they have properties they rent
out, dividend income if they are stockholders, royalties if they
are authors, and other income
for whatever endeavor they are engaged in including
profit-making businesses.
Let us try to get the income of Ronalee who is a stockholder
of SUNSHINE Corporation,
owning a 1,500 shares of the company’s ₱10.00 par value
shares. For that year the company
declares a 10% cash dividend to stockholders. To compute for
Ronalee’s dividend income,
let us use the formula below:
Dividend income = no. of shares x par value x dividend rate
= 1,500 shares x ₱10.00 x 10%
= ₱1,500
Let us also try to solve the royalty income. Tina Echaluce is

an author and her book sold
15,000 copies for the year 2019. Her book sells at ₱250 per
copy. She receives a 28% royalty
from her publisher. Her royalty income would be:
Royalty Income = No. of Copies sold x Rate per book x
Percentage of royalty
= 15,000 x 250 x 25%
= ₱937,500
What is Piece Rate?

A worker employed on a “piecework” basis is paid in
proportion to the quantity of work
he or she finishes. The rate used can be fixed irrespective of
the quantity produced in which
case it is called a “fixed piece-rate plan”. For example, if the
tabak maker produced 10
pieces of tabak everyday, and the rate per tabak is 75,
therefore the wage of tabak maker is
750 per day.
Given: Produced tabak per day - 10 pieces
Rate per tabak - ₱75
Solution: Produced tabak x Rate per tabak = Wage of
tabak maker
10 x 75 = ₱750 (wage of tabak maker)
What is differential piece-work plan?
On the other hand, the rate per piece can be progressive
as the quantity produced
increases, in which case it is called “differential piece-work
plan”.
HOURLY RATE
•Employees who work more than the required number of
hours are entitled to overtime pay. Overtime premium refers to
the excess payment over the regular rate. The following are
the different articles of the Labor Code relevant to normal
hours and overtime work:
1. Article 83 of the Labor Code enunciates that the normal
hours of work of any employee shall not exceed eight (8)
hours a day. This is exclusive of the one (1) hour lunch break.
Article 85 provides that subject to such regulations as the
Secretary of Labor may prescribe, it shall be the the duty d of
f ev every employer to give his or her employees not less than
sixty (60) minutes time-off for their regular meals.
2. Article 87 provides that work may be performed beyond
eight (8) hours a day provided that the employee i is paid for
the overtime work an additional compensation equivalent to
his regular wage plus at least twenty-five percent (25%)
thereof. Work performed beyond eight hours on a holiday or
rest day shall be paid an additional compensation equivalent
to the rate of the first eight hours on a holiday or rest day plus
at least thirty percent (30%) thereof.
3. Article 93 provides that:
a. Where an employee is made or permitted to work on his
or her scheduled rest day, he or she shall be paid an
additional compensation of at least thirty percent (30%) of his
or her regular wage. An employee shall be entitled to such
additional compensation for work performed on Sunday only
when it is his or her established rest day.
b. When the nature of the work of the employee is such that
he or she has no regular work days and no regular rest days
can be scheduled, he or she shall be paid an additional
compensation of at least thirty percent (30%) of his or her
regular wage for work performed on Sundays and holidays.
c. Work performed on any special holiday shall be paid an
additional compensation of at least thirty percent (30%) of the
regular wage of the employee. Where such holiday work falls
on the employee's scheduled rest day, he or she shall be
entitled to an additional compensation of at least fifty percent
(50%) of his or her regular wage.
d.Where the collective bargaining agreement or other
applicable employment contract stipulates the payment of a
higher premium pay than that prescribed under this Article,
the employer shall pay such higher rate.
4. Article 94 provides that:
a. The employer may require an employee to work on any
holiday but such employee shall be paid a compensation
equivalent to twice his regular rate.
b. Work on a rest day which falls on a special day shall be
paid 150% of regular hourly rate.
c. Work on a regular holiday shall be paid 200% of regular
hourly rate.
d. Work on a rest day which falls on a regular holiday shall be
paid 260% of regular hourly rate.
EMPLOYEE BENEFITS
Aside from basic pay received by the employees, they are
also entitled of employee
benefits. These include vacation and sick leaves, medical and
hospitalization benefits, meal
allowance, transportation allowance, clothing allowance, etc.,
and incentive pay for
productivity such as commission, overrides, bonuses, and
profit sharing. The following are the
benefits given to the employees in the Philippines, as
mandated by the Department of Labor
and Employment:
1. Vacation Pay - Thirteen (13) vacation days, with additional
one vacation day every
year starting on second year of service and convertible to
cash at the end of each year.
Maximum total vacation leave is 18 days.
2. Sick-leave - Twelve (12) days per year for the first two
years of service. With
additional one sick leave every year starting on second year
of service. Maximum total sick
leave is 15 days. All unused leave days are convertible to
cash in December of each year.
3. Holiday Pay - payment of daily wage for any unworked
regular holiday.
if unworked -100% of the daily wage
if worked - 200% of the daily wage
- 200% + [30% of 200%] or a total of 260%
(regular holiday falling on a rest day)
Not all the employees are entitled for Holiday Pay. Let us
know the different conditions
for entitlement of Holiday Pay.
Condition for entitlement of Holiday Pay:
✓present or on leave with pay on the workday prior to the
holiday
✓On leave without pay on the workday prior to holiday
- not entitled to holiday pay unless they worked on regular
holiday.
✓Employers shall grant the same percentage of the holiday
pay as the benefit granted
by competent authority in the form of employee’s
compensation or social security
payment whichever is higher, if they are not reporting for work
while on such benefits.

Employee Compensation

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Employee Compensation

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Employee compensation refers to the remuneration or

Earnings of employees paid on a monthly or annual basis

Let us also try to solve the royalty income. Tina Echaluce is

What is Piece Rate?

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