The Difference between Daily Rate and Monthly Rate Employees

 When it comes to salary rates, there are 2 types:

o Monthly Rate and
o Daily Rate. Some companies do apply the
o 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
o daily-rate employees are paid based on the actual # of days
worked, while
o 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:
  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
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 all days 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

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Calculating the Daily Rate Pay:
 To calculate the daily rate pay, we need to divide the monthly rate by
the number of working days in a month. The formula is as follows:
Daily Rate Pay = Monthly Rate / Number of Working Days
Example:
Let’s assume an employee’s monthly rate is PHP 30,000, and the
number of monthly working days is 22 (excluding weekends and
holidays). The calculation would be:
Daily Rate Pay = PHP 30,000 / 22 = PHP 1,363.64

Calculating Daily Rate Pay for Special and Regular Holidays:

In the Philippines, special holidays and regular holidays are treated
differently when calculating daily rate pay.
  Special holidays, such as National Heroes’ Day, are typically paid at
130% of the basic daily rate.
 regular holidays, like Christmas Day or New Year’s Day, are paid at
200% of the basic daily rate.

 To calculate the daily rate pay for Special Holidays, you can use the
following formula:
Daily Rate Pay for Special Holidays = Daily Rate Pay + (Daily
Rate Pay * 30%)
 For example, if an employee’s daily rate pay is PHP 1,363.64 and it is
a special holiday, the calculation would be:
Daily Rate Pay for Special Holidays = PHP 1,363.64 + (PHP
1,363.64 * 30%) = PHP 1,772.73

Calculating Daily Rate Pay for 13th Month Pay:

In the Philippines, the 13th-month pay is a mandatory benefit provided to
employees, which is equivalent to one-twelfth (1/12) of their total basic
salary earned within a calendar year. To calculate the 13th-month pay for a
daily worker, you need to consider their daily rate and the number of days
they have worked.

 To calculate the 13th-month pay for an employee working 5 days a

week, follow these steps:
Step 1: Determine the daily rate.
If the employee has a fixed monthly salary, divide their
monthly salary by 22 (the number of working
days in a month on average) to get the daily rate. If the
employee is paid on a daily basis, the daily rate is
already known.
Step 2: Calculate the basic salary earned within the given
period.
 Multiply the daily rate by the total number of days worked
in the given period. In this case, the employee worked for
7 months and 10 days.
Step 3: Calculate the 13th-month pay.
Divide the basic salary earned within the given period by
12 to get the 13th-month pay.
Now let’s calculate the 13th-month pay for an employee working 5 days a
week, assuming their daily rate is 500 PHP and they have worked for 7
months and 10 days:
Step 1: Daily Rate = 500 PHP
Step 2: Basic Salary Earned = Daily Rate x Number of Days
Worked
= 500 PHP x (7 months x 22 days/month + 10 days)
= 500 PHP x (154 days + 10 days)
= 500 PHP x 164 days
= 82,000 PHP
Step 3: 13th-Month Pay = Basic Salary Earned / 12
= 82,000 PHP / 12
= 6,833.33 PHP
 Therefore, the 13th-month pay for an employee working 5
days a week, who has worked for 7 months and 10 days
with a daily rate of 500 PHP, would be 6,833.33 PHP.
 For an employee working 6 days a week, the calculation is the same,
except the number of working days per month is 26, considering an
average of 4 weeks in a month.

 Let’s calculate the 13th-month pay for an employee working 6 days a

week, assuming their daily rate is 500 PHP and they have worked for
7 months and 10 days:
Step 1: Daily Rate = 500 PHP
 Step 2: Basic Salary Earned = Daily Rate x Number of Days
Worked
= 500 PHP x (7 months x 26 days/month + 10 days)
= 500 PHP x (182 days + 10 days)
= 500 PHP x 192 days
= 96,000 PHP
Step 3: 13th-Month Pay = Basic Salary Earned / 12
= 96,000 PHP / 12
= 8,000 PHP
Therefore, the 13th-month pay for an employee working 6
days a week, who has worked for 7 months and 10 days
with a daily rate of 500 PHP, would be 8,000 PHP.

Pay Rate Differences for 5-Day and 6-Day Workers:

There is a distinction between employees who work five days a week and
those who work six days a week. The daily rate pay for 5-day workers
remains the same as calculated previously. However, for 6-day workers,
the monthly rate is divided by 26 days (regardless of the actual number of
working days in a month).

Example:

Suppose an employee’s monthly rate is PHP 30,000, and they work 6 days
a week. The calculation would be as follows:

Daily Rate Pay (6-Day Worker) = PHP 30,000 / 26 = PHP 1,153.85

Withholding Tax and Daily Rate Pay:

Withholding tax is applicable when calculating the daily rate paid. It is
deducted from the employee’s salary based on the tax bracket they fall
into. The tax rates may vary depending on the employee’s annual income
and other factors. Employers are responsible for deducting and remitting
the appropriate withholding tax to the Bureau of Internal Revenue (BIR).
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Daily-paid v. monthly-paid
Summary
▪ The general rule of no work, no pay, applies to both daily-paid and
monthly paid-employees,
with only one exception during regular holidays when both are paid despite
no work.
▪ If there is a favorable stipulation or agreement, monthly-paid employees
may be paid for un-worked days such as rest days and special non-working
days.
1. Concepts
 Daily-paid employees – refer to those whose wages/salaries are
computed on a daily basis.
 Monthly-paid employees – refer to those whose wages/salaries are
computed annually then divided via certain divisors.
2. No work, no pay principle
 GENERAL RULE: The general rule of no work, no pay, applies to
both daily-paid and monthly paid-employees.
 Meaning, if an employee is absent and is not covered by any leave,
no wage/salary is due for that workday.
 EXCEPTION: … with only one exception during regular holidays
when both are paid despite no work.
a. No difference
o By default, there is no difference between daily-paid and
monthly paid employees.
 o Both are subject to the rule of no work, no pay. Hence, they are
paid on days when they rendered or performed work, with the
single exception of regular holidays even if no work was done.
However, due to a void regulation by the then Ministry of Labor and
Employment (now DOLE), confusion resulted when a regulation was
passed providing the definition of monthly-paid employees as those that
are paid by the month “irrespective of the number of working days therein”.
This rule was found in Section 2, Rule IV of Book III of the Omnibus Rules
Implementing the Labor Code, which again has been declared void by the
Supreme Court.
Case Law
o Insular Bank of Asia and America Employees’ Union v. Inciong, Insular
Bank of Asia and America G.R. No. L-52415, 23 October 1984
o “Sec. 2. Status of employees paid by the month. — Employees
who are uniformly paid by the month, irrespective of the number of
working days therein, with a salary of not less than the statutory or
established minimum wage shall be presumed to be paid for all
days in the month whether worked or not. x x x For this purpose,
the monthly minimum wage shall not be less than the statutory
minimum wage multiplied by 365 days divided by twelve.”
• HELD: Section 2, Rule IV, Book III of the implementing rules and Policy
Instruction No. 9 issued by the then Secretary of Labor are null and void.
Thus, in a separate case involving monthly-paid complainants seeking to
be paid for un-worked days, including rest days and special non-working
days, the Supreme Court denied the claim citing: (a) the rule on no work,
no pay; and (b) equal protection clause in the 1987 Constitution. The case
also reiterated its previous declaration that Section 2, Rule IV, Book III of
the implementing rules and Policy Instruction No. 9, were void.
Case Law
Odango v. NLRC, Antique Electric Cooperative, Inc.
G.R. No. 147420, 19 June 2004
• The basic rule in this jurisdiction is “no work, no pay.” The right to be paid
for un-worked days is generally limited to the (regular) legal holidays in a
year. (The complainants’) claim is based on a mistaken notion that Section
2, Rule IV of Book III gave rise to a right to be paid for un-worked days
beyond the (regular) legal holidays (such as unworked rest days and
unworked special non-working days). In effect, (the complainants) demand
that (the Company) should pay them on Sundays, the un-worked half of
Saturdays and other days that they do not work at all. (The complainants’)
line of reasoning is not only a violation of the ‘no work, no pay’ principle, it
also gives rise to an insidious classification, a violation of the equal
protection clause. Sustaining (the complainants’) argument will make
monthly-paid employees a privileged class who are paid even if they do not
work.

..

Summary
o Both daily-paid employees and monthly-paid employees are only paid
for days worked and thus they are not paid on un-worked days,
including rest days and special non-working days, with one single
exception on regular holidays when both are entitled to holiday pay
even if no work was rendered or performed.
o For monthly-paid employees, they may be paid for rest days and
special non-working days if and only if there is a favorable stipulation
or agreement as explained hereunder.