Monthly-paid Employees are those considered paid everyday of the month, including unworked rest days, special days, and regular holidays. A factor of 365 days in a year is used when determining the equivalent monthly rate.
Daily-paid employees are those who are paid on the days they actually work and on unworked regular holidays. The factor used for determining the equivalent monthly rate depends on the work schedule.
- 395 days – if working everyday.
- 313 or 305 days – if working 6 days a week.
- 261 days – if working 5 days a week.
Why is this important?
It can be confusing sometimes for both employers and employees to determine if the compensation that they are giving or receiving is compliant with the labor code which mandates that all employees, regardless of their employment status, must receive at least the minimum wage for the hours they have worked.
For monthly-paid employees, determining the daily rate can clear the confusion as to whether or not the employee is receiving the minimum wage.
Example:
- Monthly Rate: Php 13,000.00
- Factor used: 365 days
- Yearly Total Compensation: Php 13,000.00 x 12 months = Php 156,000.00
- Daily Rate: Php 156,000.00 / 365 days = Php 427.39
if a daily rate is presented instead, then the monthly rate can be computed instead.
- Daily Rate: Php 513.00
- Factor used: 365 days
- Yearly Total Compensation: Php 513.00 x 365 days = Php 187,245.00
- Monthly Rate: Php 187,245.00 / 12 months = Php 15,603.75
For daily-paid employees, usually the daily rate is already presented to the employees in the contract, but if the presented rate is in the form of a monthly rate, determining the daily rate can clear the confusion as to whether or not the employee is receiving the minimum wage.
Example:
- Monthly Rate Presented: Php 12,800.00
- Factor used: 261 days, where the employee is only required to work for 5 days a week (Mon-Fri)
- Yearly Total Compensation: Php 12,800.00 x 12 months = Php 153,600.00
- Daily Rate: Php 153,600.00 / 261 days = Php 588.50
For both cases, if the daily rate is less than the minimum wage prescribed for the region where the employee is assigned, then they do not meet the minimum wage requirements and the employer is at risk of not meeting their legal obligations
Beyond minimum wage, knowing if an employee is monthly-paid or daily-paid is also important when determining other compensation like Premium Pay. For monthly-paid employees, working on a rest day will only give you an additional 30% since the rest day is considered paid. For daily-paid employees, working on a rest day will give you the whole 130% since the rest day is not considered paid. The same applies with special non-working days as well.
Employee compensation is a sensitive and complex topic, with many intricacies that employers must carefully navigate to ensure fairness and compliance. The Synergy Human Resource Information System (Synergy HRIS) simplifies these complexities—offering a worry-free solution for accurate, compliant, and efficient employee compensation management.