Compensation/Payroll

Learning Objectives:
• Calculate gross pay based on hourly rate and hours worked;

• Compare gross pay based on hourly rate and hours worked and fixed salary;

• Calculate overtime pay;

• Identify and compare the different commission, bonus, and piecework or

piecerate plans;

• Calculate gross earnings or gross pay using the different types of

compensation plans;

• Convert salaries and wages; and,

• Calculate net pay.

Topics:
• Payroll
Gross Pay
Hourly rate and hours worked
Overtime
Salary
• Commission plans
 Straight commission plan
 Salary plus commission plan
 Commission plus override plan
 Variable commission scale
• Bonus plan
• Piecework or piece rate plans
Straight piecework or piecerate plan
Differential piecework or piecerate plan
• Salary conversion
• Net pay
Compensation

- Payment received for the services rendered

Gross Pay
- the total amount of money – before any deductions – that
an employer will pay

- determined through negotiations between the employer

and the employee
Define/Explain:

- employee
- employer
- minimum wage
- 8 hour work requirement
- Classification of employees:
- regular (fixed rate (monthly basis)
- non-regular
* project (monthly basis)
* contract (monthly basis)
* wage-earners (hourly basis)
* piece-rate (# of units produced)
Gross pay for wage earners is generally computed by using an
individual time card.
Time Card
Name: _____________________ Pay Rate/Hour: P100.00
Week Ended: ________________
AM PM # of Hrs.
Time In Time Out Time In Time Out
Monday 8:15 12:00 12:30 6:00 3.75+5.5=9.25
Tuesday
Wednesday
Thursday
Friday
Saturday
Total # Of Hours
Total Regular Hours: 8 hrs Total Pay: P800
Total Overtime Hours: 1.25 hrs Total Pay: 1.25 x P100 x 1.25 = 156.25
Total Gross Pay: P956.25
Prepared by: ____________________________
Approved by: ___________________________
Formula:

Wage Earners:
Hourly rate = Gross Pay
hours worked

Hours worked = Gross Pay

hourly rate
 Exercises:
Total Rate/ Rate/ Gross
Position Mon. Tues. Wed. Thurs. Fri.
Hrs. Day Hr. Pay
Foreman 7 1/2 8 6 7 1/2 8 P400
Carpenter 7 1/2 7 1/2 7 1/2 7 1/2 7 1/2 P350
Engineer 8 8 8 8 8 P500
Plumber 8 4 3 1/2 7 1/2 8 P350
Electrician 7 3/4 7 3/4 7 1/2 4 4 P350
 Exercises:
Total Rate/
Position Mon. Tues. Wed. Thurs. Fri. Rate/Hr. Gross Pay
Hrs. Day
Foreman 7 1/2 8 6 7 1/2 8 37 P400 P50 P1,850.00
Carpenter 7 1/2 7 1/2 7 1/2 7 1/2 7 1/2 37.5 P350 P43.75 P1,640.63
Engineer 8 8 8 8 8 40 P500 P62.50 P2,500.00
Plumber 8 4 3 1/2 7 1/2 8 31 P350 P43.75 P1,356.25
Electrician 7 3/4 7 3/4 7 1/2 4 4 31 P350 P43.75 P1,356.25

Find the gross pay.

2. Find the gross pay of an employee who worked 28 ½
hours at an hourly rate of P32.50?

3. Denice’s gross pay is PhP3,750.00 for 36 hours of work.

What is her hourly rate?

4. Mark’s gross pay is PhP4,440.00 for the week July 14-

18. His hourly rate is PhP120.00. How many hours did
he worked?
2. Find the gross pay of an employee who worked 28 ½
hours at an hourly rate of P32.50? (P926.25)

3. Denice’s gross pay is PhP3,750.00 for 36 hours of work.

What is her hourly rate? (PhP104.17)

4. Mark’s gross pay is PhP4,440.00 for the week July 14-

18. His hourly rate is PhP120.00. How many hours did
he worked? (37 hrs.)
Overtime
• Generally refers to the hours worked in excess of 8 hours in 1 day or 40
hours in 1 week.
• Computing Overtime:
On Ordinary Days - Plus 25% of the hourly rate multiplied by the
number of hours.
On a rest day, special day - Plus 30% of the hourly
rate on said days multiplied by the number of hours.

Computing pay for work done on:

* A special day (a total of 130% x basic pay)
* A special day, which is also a scheduled rest day (a total of 150% x basic
pay)
* A regular holiday (a total of 200% x basic pay)
* A regular holiday, which is also a scheduled rest day (a total of 260% x
basic pay)
 Exercises:
1. Kimberly’s time card for the week shows the following:

Rate
Mon. Tues. Wed. Thurs. Fri. Ttl Hrs.
/Hr.
9 7 8 1/2 9 3/4 10 P40

Overtime were rendered on regular days in excess of 40 hrs.

per week. Compute the gross pay.
 Exercises:
1. Kimberly’s time card for the week shows the following:
Rate
Mon. Tues. Wed. Thurs. Fri. Ttl Hrs.
/Hr.
9 7 8 1/2 9 3/4 10 P40 44.25

Compute the gross pay.

Regular Pay: 40 hrs. x P40 = P1,600.00

Overtime Rate: P40.00 x 125% = P50/hr.
Overtime Pay: 4.25 hrs. x P50.00 = P212.50

Gross Pay: P1,600.00 + P212.50 = P1,812.50

2. On Monday and Friday, Marie worked 10 hrs. each day. On
Tuesday and Thursday, she worked 11 hours each day. On
Wednesday, she worked 8 hrs. Her hourly rate is PhP135.00.
Wednesday is a legal holiday. Overtime is given in excess of 40
hrs./week. Moreover, she worked 4 hours on Sunday. What is
her gross pay?
2. On Monday and Friday, Marie worked 10 hrs. each day. On Tuesday and
Thursday, she worked 11 hours each day. On Wednesday, she worked 8 hrs.
Her hourly rate is PhP135.00. Wednesday is a legal holiday. Moreover, she
worked 4 hours on Sunday. What is her gross pay?
OT
Regular OT (*125%) (*130%) OT (*200%)
Mon. 10 8 2
Tues. 11 8 3
Wed. 8 8
Thurs. 11 8 3
Fri. 10 8 2
Sat. -
Sun. 4 - - 4
56 32 10 4 8
Basic Pay: 32 hrs. x P135 = P4,320.00
Overtime Pay: Regular – 10 hrs. x P135 x 125% = P1,687.50
Sunday – 4 hrs. x P135 x 130% = 702.00
Hol. – 8 hrs. x P135 x 200% = P2,160.00
Gross Pay = P8,869.50
Seatwork:
1. For the week ending February 5, Jeff Mills worked 37 ¼ hours
at an hourly rate of PhP90.00. Determine his gross pay for
the week.

2. The time card of Anna Katrina shows the following: Compute

for: (a) total hours worked, (b) gross pay.
Name: Anna Katrina Rate/hr: PhP85.00
Time In Time Out Time In Time Out
Mon. 8:15 12:00 1:00 4:30
Tues. 8:00 11:45 1:30 5:15
Wed. 8:00 12:00 1:00 5:00
Thurs. 9:15 11:45 2:30 6:45
Fri. - - 1:00 8:45
 3. Dannika’s gross pay is PhP2,550 for the week. Her hourly
rate is PhP75.00. Determine her total hours worked.

4. An employee worked the following hours during the week:

Calculate the gross pay at an hourly rate of PhP125.00 plus
overtime in work hours over 40 per week.
Mon. Tues. Wed. Thurs. Fri.
8 hrs & 15 9 hrs 7 & 45 minutes 10 hrs 9 & 30
minutes minutes

5. On Monday, Wednesday, and Friday, Denzel Cadiz worked 9

hours each day. On Tuesday and Thursday he worked 6 hours
each day. His hourly rate is PhP70.00 plus overtime pay for
any hours in excess of 8 per day. What is his gross pay?
Seatwork:
1. For the week ending February 5, Jeff Mills worked 37 ¼ hours at an
hourly rate of PhP90.00. Determine his gross pay for the week.
(37.25 hrs. x PhP90 = P3,352.50)
2. The time card of Anna Katrina shows the following: Compute
for: (a) total hours worked, (b) gross pay.
Name: Anna Katrina Rate/hr:
PhP85.00
Time In Time Time In Time # of hrs worked
Out Out
Mon. 8:15 12:00 1:00 4:30 3.75+3.5=7.25
Tues. 8:00 11:45 1:30 5:15 3.75+3.75=7.5
Wed. 8:00 12:00 1:00 5:00 4+4 = 8
Thurs. 9:15 11:45 2:30 6:45 2.5+4.25=6.75
Fri. - - 1:00 8:45 7.75 37.25 hrs.

Gross pay = P3,166.25

 3. Dannika’s gross pay is PhP2,550 for the week. Her hourly rate is PhP75.00.
Determine her total hours worked. (P2,550/P75 = 34 hrs.)
4. An employee worked the following hours during the week: Calculate the
gross pay at an hourly rate of PhP125.00 plus overtime in work hours over
40 per week.

Mon. Tues. Wed. Thurs. Fri.

8 hrs & 15 9 hrs 7 & 45 minutes 10 hrs 9 & 30
minutes minutes
8.25 hrs. 9 hrs. 7.75 hrs. 10 hrs. 9.5 hrs

Total hrs. worked = 44.50 hrs.

Regular Pay = 40 hrs. x P125.00 = P5,000.00

Overtime Pay = 4.50 hrs. x P125.00 x 125% = P703.13
---------------
P5,703.13
========
5. On Monday, Wednesday, and Friday, Denzel Cadiz worked 9 hours each
day. On Tuesday and Thursday he worked 6 hours each day. His hourly
rate is PhP70.00 plus overtime pay for any hours in excess of 8 per day.
What is his gross pay?
Regular OT (*125%)
Mon. 9 8 1
Tues. 6 6
Wed. 9 8 1
Thurs. 6 6
Fri. 9 8 1
36 3

Basic Pay: 36 hrs. x P70 = P2,520.00

Overtime Pay: Regular – 3 hrs. x P70 x 125% = P 262.50
Gross Pay = P2,782.50
Salary
Salary
• Instead of being paid on an hourly basis, an employee is paid
by the week, the month, or the year

• Said to be “on salary”

Salary Conversion
• No. of period in a year
No. of period in a year
Annual 1
Semi – Annual 2
Monthly 12
Semi – Monthly 24
Weekly 52
Bi -weekly 26
Quarterly 4
Exercise:
If you are receiving P360,000 salary per year, convert
your salary to:

Semi – Annual 180,000

Monthly 30,000
Semi – Monthly 15,000
Weekly 6,923
Bi Weekly 13,846
Quarterly 90,000
Seatwork: Solve the following:
Annual Salary Pay Period Salary/Pay
Period
a. PhP336,000 monthly ?
b. ? Biweekly PhP12,500
c. ? Weekly PhP1,750
d. PhP221,520 ? PhP4,260
e. PhP169,000 Biweekly ?
f. PhP288,000 ? PhP24,000
Seatwork: Solve the following:
Annual Salary Pay Period Salary/Pay
Period
a. PhP336,000 monthly PhP28,000
b. PhP325,000 biweekly PhP12,500
c. PhP91,000 weekly PhP1,750
d. PhP221,520 weekly PhP4,260
e. PhP169,000 biweekly PhP6,500
f. PhP288,000 monthly PhP24,000
 Commission Plans

Bonus Plans

Piecework or Piece-rate plans

Commission - a fee paid for a service rendered (such
as selling) and is usually expressed as a % of the
money received by the business
• Commission Plans
a. Straight Commission Plan

b. Salary Plus commission Plan

c. Override Plan

d. Variable Commission
a. Straight Commission Plan

- If the commission is based on a single percent

Formula:

Commission = Total sales for the period x

commission rate
Exercise:

• Mr. Fernandez is an area sales manager of LMN

Co. He’s given 10% straight commission plan
based on sales. How much is his compensation if
the sales for the month of June is PhP200,000?

Commission = Total sales for the period x commission rate

= PhP200,000 x 10%
= PhP20,000
========
Additional Exercises:

Solve for the following using the straight commission

plan:

1. Sales for the period is P95,000 and the commision

rate is 12%

2. Commission rate is 45% and the sales is P120,000.

b. Salary plus Commission Plan

• Commission = Total Sales of the period x

Commission Rate

• Total Earnings = Salary of the period +

the commission
Exercise:
• Tyrus works as a sales representative of Sea Lion
Company. He is receiving P15,000 per month as his fixed
salary. Moreover, he is to receive 20% commission based
on his total sale for the month. If the total sales for the
month of March was P460,000, compute for the
following:

• A. Commission
• B. Total earnings
Additional Exercises:
Solve for the following using the salary plus the
commission plan:

1. Sales for the month is P95,000 and the commision

rate is 12%. The monthly salary is P25,000.

2. What is the total earnings for the month if the

commission rate is 15% of sales of P160,000 and
the annual salary is P120,000.
c. Commission plus override Plan (for supervisors)

Personal Commission > (based on the

supervisor’s own sales)
Commission = +
> (based on the sales of
override the representatives the
supervisor supervises)

Supervisor

Sales Rep 1 Sales Rep 2

Exercise:
• Sales of the supervisor for May : P300,000
• Sales of the Sales Representative: P250,000
• Commission Rate : 20%
• Override Rate: 5%

Determine:
a) Personal Commission
b) Override
c) Total Commission
Exercise:
Mr. Martinez is the supervisor of two sales representatives, Mr. Lu and
Mr. Lim. Mr. Martinez is receiving 7% personal commission and an
override of 10%, on top of his P30,000 fixed monthly salary. The
supervisor’s sales for the month of July is P300,000.

Mr. Lu and Mr. Lim receive 20% commission each. Their sales were
P240,000 and 350,000 respectively. Mr. Lu also receivesP15,000
monthly salary.

Determine total earnings of:

a) Mr. Martinez
b) Mr. Lu
c) Mr. Lim
d. Variable Commission

- Also called sliding scale commission

- 2 or more commission percentages is used

- The rate is usually based on gross sales revenue, with

different commission for certain sales level.
Exercise:
1. XYZ Co, give commission to its sales personnel using
variable commission scale as follow:
Sale’s Bracket Commission Rate
First P25,000 5%
Second P25,000 10%
Third P25,000 15%
The company’s record for the month of August shows the following sales
summary:
Sales person Gross Sale
Cyrus P15,000
Hannah P41,000
Hanz P63,000
Compute the commission of each sales personnel.
Answer:

Cyrus P15,000 x 5% PhP750.00

Hannah P25,000 x 5% P1,250

P16,000 x 10% P1,600
P41,000 PhP2,850.00

Hanz P25,000 x 5% P1,250

P25,000 x 10% P2,500
P13,000 x 15% P1,950
P63,000 P5,700.00
2. An employer pays 15% commission on sales up to P400,000 and 5%
on the amount of sales above P400,000. How much does a
salesperson earn on a sale of P560,000?

3. Clean Co gives commission to its sales personnel using

variable commission scale as follows:
Sale’s Bracket Commission Rate
20,000 and less 5%
The excess over 20,000 up to 45,000 8%
Over 45,000 12%

If Lionel has sale of P 33,000 how much is his total

commission?
Salary plus Fixed Bonus Plan

Excess Sales x Bonus Rate = Bonus

Total Sales
- Quota
Excess Sales
Exercises:
1. Solve for a) bonus and b) total earnings based on the following
information:
Sales in May P50,000
Quota P30,000
Salary per Month P15,000
Bonus Rate 10%

2. To motivate sales agents of Musical Instruments Co., the CFO

decided to give bonus of 15% to sales in excess of the given
quota. Mr. Lance’s sales for the month of June was P110,000,
with a monthly salary of P10,000. The quota set for each sales
agent was P60,000.

Compute total bonus and total earnings.

Piecework or Piece-rate Plans
• Based on performance and completion of a job or task.

Straight Plan Differential Plan

Straight Plan
Gross Pay = Rate/Unit x No. of units Completed

Differential Plan
Gross Pay = No. of Units Produced x Variable
Rate per Unit
Exercises:
1. Cindy produced 225 handy craft item. She is paid P60 per
item. Calculate her gross pay.

2.
No. of Units Rate / unit
1 -10 5
11- 20 10
21 -30 15
31 -40 20

Kim completed 25 units and John completed 35 units.

Calculate their gross pay.
Net Pay
• Deductions – anything that decreases gross pay.

• Types of Deductions:
▫ Mandatory/required – SSS, Philhealth, withholding taxes
▫ Non-mandatory – other deductions such as union dues,
insurances, cash advances, etc.

Net Pay – the amount of money that an employee takes home and
is equal to gross pay less any deductions
Exercise:
• If Rey’s gross pay is PhP30,000 per month and his employer
deducts the following from the total gross pay:
Employee Share: SSS Contributions – PhP370.00
Philhealth Contributions – PhP225.00
Employer Share: SSS Contribution – PhP740.00
Philhealth Contribution – PhP450.00
Withholding Taxes – 15% of the gross pay
Union dues – PhP100.00
Cash advance – PhP2,000

How much is Rey’s take home pay biweekly?

Exams
John is an employee of beverage company. He receives a monthly
salary of P20,000. Aside from that, he gets 25% of his sales that
exceeds his monthly quota of P100,000. His average sales per
month is estimated to be P175,000.
1. What is the compensation Scheme?
a) Straight Commission
b) Differential piecework
c) Commission plus override
d) Salary plus fixed bonus plan
2. How much is John’s annual fixed salary?
a) 240,000
b) 100,000
c) 175,000
d) 900,000
3. How much is the annual earnings of John?
a) 258,750
b) 765,000
c) 465,000
d) 38,750

4. R. Santos is paid P216,000.00 annually. His pay period is

biweekly. What is his gross earnings per pay period?
5. Find the unknown:
Annual Salary Pay Period Gross Earnings /
Pay Period
a. ? Monthly PhP13,500.00
b. PhP201,000 Weekly ?
c. PhP255,580 ? PhP9,830.00
d. ? Biweekly PhP7,900.00
e. PhP291,200 ? PhP5,600.00

6. Pastor receives biweekly salary of PhP13,000 plus a 7 ½ %

commission on his total sales for the month. What is his
gross monthly earnings, if his total sales for the month is
PhP150,000.00.
7. During a month’s time, an insurance salesperson receives 4%
commission on the first PhP50,000 sales, 6% commission on
the next PhP50,000, and 7% commission on anything over
PhP100,000. What is his commission on PhP140,000 in sales?

8. Tarah Jade is paid a 6% commission on the first PhP10,000,

6.5% on the next PhP10,000, and 7% on anything over
PhP20,000.00 in sales. She also receives a PhP1,000.00 per
week draw. Find the difference she receives at the end of the
week between the draw and the commission. Her net sales
for the week totaled PhP26,000.00.
End