• Philippine Payroll HR Matters

Philippine Payroll HR Matters

Anything and everything about payroll and HR matters in the Philippines

Philippine Payroll and HR Matters
 › Compensation and Benefits › Salaries and Wages › Daily Rate vs. Monthly Rate

Daily Rate vs. Monthly Rate

payrollhrguru

time-clock, hourly vs. monthly-rate employees

Introduction – It’s All About the Rate

When it comes to salary rates, there are 2 types: Monthly Rate and Daily Rate. Some companies do apply the Hourly Rate, but this follows the same principles applied to the Daily Rate.

In essence, daily-rate and monthly rate employees are the same. Both types of employees are paid for the amount of time they put in at work.

The main difference is that daily-rate employees are paid based on the actual # of days worked, while monthly-rate employees are paid a fixed amount per pay period, assuming that they had no absences.

If an employee’s daily-rate is P500.00 and the employee worked for 10 days, that equates to a pay of P5,000.00. Given this, the salary of a daily-rate employee may vary each pay period, depending on the actual # of working days included in that period.

Monthly-rate employees are paid a fixed amount per pay period, regardless of the # of actual working days included in the period.

So if an employee’s monthly rate is P15,000.00, the employee will be paid the same amount in February as well as in March, even if February is a much shorter month than March.

The monthly rate came about mainly for convenience’s sake, since it is easier to compute for and pay a fixed payroll amount per period.

 

Hourly-Rate Computation

For Daily-rate employees, the hourly rate is simply calculated as the daily rate divided by the standard # of working hours per day.

So if the daily rate is P500.00 and you have 8 working hours per day, the Hourly Rate is calculated as P500.00 / 8 = P62.50.

For monthly-rate employees, it gets a bit more complex, as the hourly-rate computation can be calculated 2 ways:

  1. Based on # of working days per month

In this method, the company will establish the average # of working days per month. This is typically a value from 22 to 26. This factor will then be divided by the standard # of working hours per day (8 hours).

So if the monthly rate is P15,000.00 and the average # of working days per month is set as 24, the hourly rate may be calculated as P15,000.00 / 24 / 8 = P78.12

  1. Based on # of working days per year

In this method, the company will establish the average # of working days per year. If the employee is considered paid for al ldays of the year, including holidays and restdays, this value can be 365. If restdays are not considered paid and there are 6 working days per week, this value can be 313 (365 – 52).  If there are only 5 working days per week, this value can be 261.

 

Differences in Payroll Computation

Daily-rate employees are paid for the days that they worked.

Daily-rate Example:

Daily rate = 500.00
# of days worked = 10
Total pay = P500.00 x 10 = P5, 000.00.

 

Monthly-rate employees are paid a fixed amount per month.
If the payroll frequency is semi-monthly, the employee will receive half his/her monthly-rate per pay period.
If the employee incurred any absences, late or undertime, his / her salary will be deducted accordingly, based on the total # of absences, lates and undertime.

Monthly-rate Example:

Monthly rate = P15, 000.00
Semi-monthly rate = P15, 000 / 2 = P7, 500.00 per pay period.
Hourly rate (based on 365 days per year factor) = P15, 000.00 x 12 / 365 / 8 = P61.64 per hour.
# of Absences = 16 hours
# of Undertime = 2 hours
# of Lates = 3 hours
Total deduction = (16hrs + 2hrs + 3hrs) x P61.64 = P1, 294.44
Payroll = P7, 500.00 – P1, 294.44 = P6, 205.56

 

A good Payroll System should be able to easily handle the differences between Daily-Rate and Monthly-Rate employees.

Compensation and Benefits Salaries and Wages
daily-ratehourly-ratemonthly-rate

 Previous Post

Regular Holiday on July 17, 2015 – EID’L FITR (Feast of Ramadhan)

Next Post 

The Benefits of using a Payroll System

Search

Employees’ Corner

1
Philippine Holiday Pay Rules and Computation

― July 8, 2015 | 1 Comment

2
Guide to Onboarding New Employees

― June 5, 2017 | Comment Closed

3
The Advantages of Having a Payroll System Software

― May 2, 2023 | Comment Closed

4
Benefits of a Payroll System Part 2

― August 10, 2015 | Comment Closed

5
Regular Holiday on September 25, 2015

― September 17, 2015 | Comment Closed

Subject Matters

Annualization Attendance Compensation and Benefits Employee Onboarding Employee Performance Appraisal Employee Productivity Employees' Corner Holiday Pay HRIS Labor Compliance Occupational Safety Standards Payroll Processing Performance Management Personnel Development Salaries and Wages Schedules Talent Acquisition Talent Retention Tax Computation Uncategorized

Archives

  • May 2025
  • June 2023
  • May 2023
  • April 2023
  • February 2023
  • December 2020
  • June 2020
  • May 2020
  • April 2020
  • October 2019
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • May 2015
  • January 2015
  • December 2014

Follow Us

Copyright © 2015 ALGAR Information Systems, Inc.