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Mathematics 3 Week 4: Unified Supplementary Learning Materials Abm-Business Mathematics

This document provides information about benefits available to wage earners in the Philippines. It defines several common benefits including retirement pay, 13th month pay, maternity leave, and holiday pay. Retirement pay is calculated as 22.5 times the daily wage times years of service. 13th month pay is equal to 1/12 of the annual salary. Maternity leave payment is typically equal to 105 days of the average monthly salary for a normal delivery or 105 days at 2.6 times the average monthly salary for a cesarean. The document also distinguishes between taxable fringe benefits provided to managerial employees and regular non-taxable benefits.

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0% found this document useful (0 votes)
197 views12 pages

Mathematics 3 Week 4: Unified Supplementary Learning Materials Abm-Business Mathematics

This document provides information about benefits available to wage earners in the Philippines. It defines several common benefits including retirement pay, 13th month pay, maternity leave, and holiday pay. Retirement pay is calculated as 22.5 times the daily wage times years of service. 13th month pay is equal to 1/12 of the annual salary. Maternity leave payment is typically equal to 105 days of the average monthly salary for a normal delivery or 105 days at 2.6 times the average monthly salary for a cesarean. The document also distinguishes between taxable fringe benefits provided to managerial employees and regular non-taxable benefits.

Uploaded by

Rex Magdaluyo
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© © All Rights Reserved
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UNIFIED SUPPLEMENTARY LEARNING MATERIALS

ABM-BUSINESS MATHEMATICS
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MATHEMATICS 3
WEEK 4

DEVELOPMENT & EDITORIAL TEAM:


LETICIA R. VALEZA , EVELYN C.
DESIERTO
ELEONOR Y. MENDIGUARIN
LESSON 4 – BENEFITS OF WAGE EARNERS
EXPECTATIONS
This Supplementary Learning Material will help you to

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1. Define each of the benefits given to wage earners.
2. Distinguish taxable from nontaxable benefits.
3. Enumerate the standard deductions with the corresponding computation.

PRETEST
A. Identify if the statement is True or False.
1. All wage earners can avail all benefits of any wage earner.
2. Thirteenth month pay is equivalent to 1/13 of the annual salary of any
employee.
3. The total earnings of any employee is not always equal to the basic pay.
4. An employer can give 14th month pay to all his employees that is equivalent
to the 13th month pay.
5. Living allowance is a must benefit given to all employees.
6. A pregnant employees may not be qualified for a maternity leave benefit.
7. Holiday and special pays are synonymous.
8. Retirement benefit can only be availed if the age of an employee is more
than or equal to 60 years old.
9. Tax exemption benefit to minimum wage earners are only limited to the
basic salary excluding allowances.

B. State whether the following is a benefit of a wage earner or not. Write “Y” for
yes and “N” for no.
10. Special day pay 17. SSS Premium Pay
11. Travel allowance 18. Holiday Pay
12. Tax 19. 13th month pay
13. Paternity Leave 20. Rice Incentive
14. Health Insurance 21. 5 Year Service Pay
15. Motor Car Insurance 22. Living Allowance
16. Leave without Pay 23. Maternity Benefit for
all fathers

C. Solve the following problems.


24. Mr. Adrian’s 30-year annual basic income is given by the formula:
Y=130,000 + 20,000 (x-1980),
Where x is the year and y is the basic income. He started working in 1981
and retired in 2010. How much is his retirement pay after 30 years of service
in the company? (Hint: To find the daily rate, find the average annual basic
income and divide it to 24 x 12.)
25. Mr. Samson received an annual salary of Php 300,000. At the end of
the year, what would be his 13th month pay?

LOOKING BACK TO YOUR LESSON BRIEF

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A.  Directions: Write the letter of the correct answer in a sheet of paper.
1. This are the fixed periodical payments made to persons doing or engaged in
manual work.
A. Wages B. salaries C. Honorarium D. pledges
2. These usually calculated by number of days the person has rendered
service.
A. Honorarium B. pledges C. Wages D. salaries
3. This given when a person works overtime, he is given a “time and a half”.
A. Straight time wages B. overtime wages C. wages D. Salaries
4. It is money that an individual receives in exchange for providing a
good/service or through investing capital.
A. Income B. benefit C. wages D. Salaries
5. What is the employee compensation given by an employer on top of the basic
salary/wage?
A. Income B. benefit C. wages D. Salaries

INTRODUCTION
I. BENEFITS OF THE WAGE EARNERS
Below is the list of possible benefits of a wage earner. Take note however that not
all benefits are obligatory. An example of this is when Company X gives hazard
pay while Company Y does not. This is only possible if Company X is a mining
company, and Company Y owns a Department store. The presidential Decree No.
442, also known as the Labor Code of the Philippines, provide a list of benefits for
a wage earner.

The Benefits of The Wage Earner


1. Long-term benefits: retirement, death, disability
2. Minimum wage earner tax exemption
3. Bonuses and allowances (e.g. travel, rice, meal, clothing, and laundry)
4. 13th month pay, holiday pay, special pay, special pay, overtime pay, night
shift differential, and hazard pay.
5. Leave incentives: sick, maternity, paternity, solo parent, and others.
6. Health-related benefits and insurances.
 Retirement – this benefit is like a savings account. The employee pays a
monthly retirement fee for the retirement pay which will be received after
the employee’s service.
 Minimum wage Earner Tax Exemption (RA 9504) – If the employee’s
salary is minimum set by the Department of Labor and Employment for
each particular region in the country, then the employee is entitled of the
exemption.

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 Maternity/Paternity Benefit – this benefit can only be available by a
female or male employee when the female employee will deliver a child
and for cases that the male is needed, the male can apply for a leave as
provided in the Paternity Act of 1996 (RA 8187).
 Bonuses/Allowances (travel, rice, meal, clothing, etc.) – these are some
amount given by the company to their employees for them to enjoy.

The computations of some benefits are as follows:


1. Retirement Benefit
The minimum retirement pay is given by R is the retirement pay, R = 22.5x
PxT
Where R is the retirement pay, P is the daily rate, and T is the number of
years served.
Example:
Mr. Larry served Company for 22 years with an average daily rate of Php
467.35. He plans to retire and avail of his retirement benefit. How much is
the minimum retirement pay that he will receive?
Solution: R = 22.5x P x T
= 22.5 x Php 467.35 x 22 = Php 231,338.25
Therefore, Mr. Larry will receive the retirement pay of Php 231, 338 for 22
years of service in the company.

2. 13th -Month pay


Let x be the annual basic pay of an employee. The 13th month pay of this
employee must be 1/12 of x.
Example:
Mr. Buenaventura receives an annual salary of Php 240,000. At the end of
the year, what would be his 13th monthly pay?
Solution: 13th month = 1/12 of x
= 1/12 (240,000) = Php 20,000
Therefore, Mr. Buenaventura will receive Php 20,000 as his 13th month pay.

3. Maternity Benefit
Let x be the average monthly salary of the employee. Then 2.6x and 2x for
caesarean and normal delivery, respectively.
But in some case this is an example of SSS Maternity Benefit Computation:
Contingency Month/Delivery Month: February 2020
Semester of Contingency: October 2019-March 2020
12 Month Period prior to Semester of Contingency: November 2018-
September 2019

From November 2018 – September 2019, the SSS Member should have at
least 3 months contribution to qualify for the SSS Maternity Benefit.

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Get the Monthly Salary Credit of the 6 highest posted
contribution during the 12 Month Period prior to semester of Contingency
Add the 6 highest monthly Salary Credit
13,000 + 14,000 + 15,500 + 15,500 + 15,500< + 16,500 = 89,500
Divide the sum into 180 days to get the daily maternity allowance
89,500/180 = 497.22 (Daily Maternity Allowance)
Multiply the daily maternity allowance depending on the following
criteria:
– For Normal Deliver – 105 days
– For Ceasarean Delivery – 105 days
– Abortion, Miscarriage – 60 days
– Solo Parent (either Normal or Ceasarean) – 120 days
If Normal or Ceasarean Delivery, multiply the daily maternity allowance
into 105
Days 497.22 x 105 = 52, 185 (Maternity Benefit)

4. Holiday Pay
Holiday pay refers to payment of the regular daily wage for any non-working
regular holiday. Note that if employee worked on a holiday, then he will
receive twice his daily wage.

II. TAXABLE AND NON-TAXABLE BENEFITS


Fringe benefits
Fringe benefits furnished to managerial and supervisory-level employees by the
employer are subject to FBT (see the Taxes on personal income section). Benefits
subjected to FBT are no longer included in the employees’ taxable income.
‘Fringe benefits’ are defined as any goods, services, or other benefits furnished or
granted in cash or in kind by an employer to an individual employee, except rank
and file employees, such as, but not limited to, the following:
Housing.
Expense account.
Vehicles of any kind.
Household personnel (e.g. maid, driver).
Interest on a loan at less than the market rate (currently set at 12%) to the extent
of the difference between the market rate and the actual rate granted.
Membership fees, dues, and other expenses borne by the employer for the
employee in social and athletic clubs and similar organizations.
Expenses for foreign travel.
Holiday and vacation expenses.
Educational assistance to the employee and dependants.
Premiums for life insurance, health and other non-life insurance, and similar
amounts in excess of what the law allows.
The monetary value of benefits in the form of housing and motor vehicles used for
both personal and business purposes is equal to 50% of the lease payment or the

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depreciation value of the property, whichever is applicable. However, if the housing
unit is situated in or adjacent (within 50 metres) to the business premises, the
benefit is not taxable. Likewise, a motor vehicle used normally for business
purposes is not taxable.
The following fringe benefits are not taxable:
Fringe benefits required by the nature of or necessary to the trade, business, or
profession or for the convenience or advantage of the employer.
Benefits authorized by and exempted from tax under special laws.
Employer contributions for the benefit of the employee to retirement, insurance,
and hospitalisation benefit plans.
Benefits given to rank and file employees, whether or not granted under a
collective bargaining agreement. However, these are subject to WHT on
compensation, unless otherwise tax exempt.
De minimis (small value) benefits as defined and enumerated in the rules and
regulations.
In general, if a fringe benefit is granted in money or directly paid for by the
employer, the value of the fringe benefit is the amount granted or paid for. If
furnished in property and ownership thereof is transferred to the employee, the
value of the fringe benefit is the fair market value of the property as determined by
the Commissioner of Internal Revenue, pursuant to the Commissioner’s power to
prescribe real property values. If the fringe benefit is granted or furnished by the
employer in the form of a property but ownership is not transferred to the
employee, the value of the fringe benefit is equal to the depreciation value of the
property.

Capital gains and investment income


Non-resident aliens are taxed on Philippine-source capital gains, irrespective of
their period of stay in the Philippines. The rates are 0.6% of the gross selling
price for shares of stocks listed and traded in the stock exchange; 15% of the net
capital gains for unlisted shares of stock, including shares of publicly listed
companies that failed to comply with the minimum public ownership (MPO)
requirement; and 6% of the higher of the gross sales price or fair market value of
real property sold, withheld at the time of sale.

Capital losses are deductible only from capital gains. In computing net capital
gains or losses from other capital assets, only 50% of the gain or loss is to be
taken into account if the capital asset has been held for more than 12 months;
otherwise, 100% of the gain or loss is to be considered.
A non-resident alien is also taxed on Philippine-source investment income, such
as interest, dividends, and royalties, at the rate of 20% (for those engaged in trade
or business in the Philippines) or 25% (for those not engaged in trade or business
in the Philippines) as a final tax (or a lower treaty rate). The tax is withheld at
source, and the income is not subject to the graduated rates.

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Resident aliens are taxed on their Philippine-source income at graduated rates.
However, Philippine-source interest and royalties are taxed at 20%. Interest on
residents’ deposits under the expanded foreign currency deposit system (FCDU)
accounts is taxed at 15%, while interest on long-term deposits or investment in
the form of savings, common or individual trust funds, and other investments
evidenced by certificates, and so on, is exempt from tax, subject to certain
conditions. Interest income on FCDU accounts of non-residents is exempt from
tax. Royalties on literary works and musical compositions are subject to a final tax
of 10%. Dividend income received from a domestic corporation is taxed at 10% for
resident aliens. Tax rates for capital gains from shares of stock and real property
are the same as those for non-resident aliens.

Non Taxable Employee Benefits – “DE MINIMIS” Benefits


As an employer, you might give benefits to your employees apart from their regular
salaries and wages. As we have previously discussed, these are called fringe
benefits. However, there are fringe benefits that are relatively small in value and
are not taxable. These are called “de minimis benefits”. According to BIR Revenue
Regulations No. 3-1998(C), the term “de minimis benefits” refers to facilities or
privileges furnished or offered by an employer to his employees that are of
relatively small value and are offered or furnished by the employer merely as a
means of promoting the health, goodwill, contentment, or efficiency of his
employees. “De minimis benefits”, like fringe benefits, are granted by the employer
on top of the employee’s basic compensation, but are not considered as taxable
compensation for income tax purposes nor subject to the fringe benefit tax.
Employers are not obliged to give this kind of benefits but they are encouraged to
do so since these benefits, no matter how small, are a big help to the workers. The
concept of “de minimis benefits” had been initially introduced in RR No.  3-1998
and underwent revisions and amendments which include BIR Revenue
Regulations No. 10-2000, Revenue Regulations No. 5-2008, Revenue Regulations
No.  5-2011, Revenue Regulations No. 8-2012 and the latest Revenue Regulations
No. 1-2015 dated January 5, 2015.
WHAT BENEFITS ARE CONSIDERED AS “DE MINIMIS” BENEFITS?
For tax purposes, only the benefits considered as “de minimis” are considered as
tax-exempt. All other benefits given by the employers which are not included in
the listing of “de minimis benefits” are not considered as “de minimis”, and hence,
subject to income tax as well as withholding tax on compensation income. Below
is the list of the latest “de minimis benefits” of both managerial and rank-and-file
employees for income tax purposes.  All allowances regularly received by the
employees are subject to income tax, except those that are enumerated below
within the stated ceiling amount.
Monetized unused vacation leave credits of employees not exceeding ten (10) days
during the year; (RR No. 5-2011)
Monetized value of vacation and sick leave credits paid to government officials and
employees; (RR No. 5-2011)

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3.) Medical cash allowance to dependents of employees, not exceeding P750 per
employee per semester or P125 per month; (RR No. 5-2011)
Rice subsidy of P1,500 or one (1) sack of 50 kg. rice per month amounting to not
more than P1,500; (RR No. 5-2011)
Uniform and Clothing allowance not exceeding P5,000 per annum; (RR No. 8-
2012)
Actual medical assistance, e.g. medical allowance to cover medical and healthcare
needs, annual medical/executive check-up, maternity assistance, and routine
consultations, not exceeding P10,000.00 per annum; (RR No. 5-2011)
Laundry allowance not exceeding P300 per month; (RR No. 5-2011)
Employees achievement awards, e.g., for length of service or safety achievement,
which must be in the form of a tangible personal property other than cash or gift
certificate, with an annual monetary value not exceeding P10,000 received by the
employee under an established written plan which does not discriminate in favor
of highly paid employees; (RR No. 5-2011)
Gifts given during Christmas and major anniversary celebrations not exceeding
P5,000 per employee per annum; (RR No. 5-2011)
Daily meal allowance for overtime work and night/graveyard shift not exceeding
twenty-five percent (25%) of the basic minimum wage on a per region basis; (RR
No. 5-2011)
Benefits received by an employee by virtue of a collective bargaining agreement
(CBA) and productivity incentive schemes provided that the total monetary value
received from both CBA and productivity incentive schemes combined do not
exceed P10,000.00 per employee per taxable year. (RR No 1-2015)
APPLICATION OF THE “DE MINIMIS” CONCEPT
An employer who give a monthly rice subsidy to its employees are allowed only
P1,500.00 monthly allowance per employee to be considered as “de minimis” as
listed above. If the employer granted more than this amount, the excess might be
included as taxable compensation income. The limitation stated in the above list
are very important. Any excess on the limit will be taxable and, therefore, be
subjected to the withholding tax. It is in the case when the employee is a rank-
and-file employee, that the benefits be subjected to the withholding tax and the
normal income tax rate. However, if the employee is a managerial or supervisory
employee, it will be subjected to the 32% fringe benefit tax.
But before you consider it being taxable under normal income tax rate or fringe
benefit  tax, you have to consider first the 13th month pay, bonuses plus the
“excess of the de minimis” benefits received by the employee and compare it to the
limit of P82,000 (RR No. 3-2015 dated March 9, 2015).  If the excess benefits,
bonuses, and the 13th month pay exceeds P82,000 limit, that’s the time it is
taxable as stated above.

To illustrate, the following tax rules may apply to all income received by an
employee:
Salaries & Wages (Basic Compensation) Income Tax Rate

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De Minimis Benefits Exempt
Excess of De Minimis (Add with 13thMonthPay
Exempt
and Bonuses = P82,000.00)
Benefits & Bonuses in Excess of P82,000.00
Income Tax Rate
Rank-And-File Employee
Fringe Benefit Tax Rate
Managerial and Supervisory
All Other Benefits Income Tax Rate
For the employer, the “de minimis benefits” granted to the employees are allowed
as inclusion in the deductions to gross income as deductible salaries/expense in
the computation of income tax.  On the other hand, for an employee, the benefits
are considered as additional salary but are exempt from income tax, therefore, no
tax will be withheld on the amount of the benefits.
SUMMARY OF THE RULES
To summarize, the following rules shall be observed in determining the taxable
amount after the “de minimis” and the P82,000.00 ceiling:
The amount included in the list of the “de minimis” shall not be considered as part
of the P82,000 ceiling of the 13th month pay, bonuses and other benefits that are
excluded from gross income in the computation of the taxable income.
The excess amount, however, of the “de minimis” benefits can be included as part
of the P82,000 ceiling and will be exempt as long as the total 13th month pay,
bonuses and other benefits do not exceed the P82,000 ceiling.
The excess amount of the “de minimis” not absorbed by the P82,000 ceiling shall
be subject to the income tax on compensation or the fringe benefit tax.
ILLUSTRATION
Mr. Alex Dumpa received the following compensation and benefits during the year
while working as a bookkeeper.
Annual Basic Salary P250,000
13th Month Pay and Bonuses 72,000
Rice Subsidy 30,000
Uniform Allowance 8,000
 
The following is the computation of the taxable and nontaxable compensation
income of Mr. Alex Dumpa:
Description Taxable Nontaxable
Annual Basic Salary 250,000
De Minimis Benefits:
   Rice Subsidy (1,500 x 12) 18,000

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   Uniform/Clothing (5,000 per
5,000
annum)
Other Benefits:
   13th Month Pay and Bonuses 72,000
   Excess Rice Subsidy 2,000 10,000
   Excess Uniform/Clothing 3,000
Total 255,000 105,000

ACTIVITIES – Answer the following questions:


1. Mrs. Pontemayor ,my cousin in law is pregnant. She is working as a Quality
Assurance Engineer in Taiyo Yuden Philippines in Mactan Export Processing
Zone in Pusok, Lapu-Lapu City. She is a member of SSS or Social Security
System and wants to avail the maternity leave. She earned an avearge
monthly income of 21,371.12. How long can she have the maternity leave?
And how much will her income be in the entire period of the leave?
2. Mr. Larry served company A for 22 years with an average daily rate of
Php 467.35. He plans to retire and avail of his retirement benefit. How
much is the minimum retirement pay he will receive? Given: 22.5 x P x T
3. Mr. Buentura receives an annual salary of Php 240,000. At the end of the
year, what would be his 13th month pay?

CHECKING YOUR UNDERSTANDING

A. Identify if the statement is True or False.


1. All wage earners can avail all benefits of any wage earners.
2. Thirteenth month pay is equivalent to 1/13 of the annual salary of
any employee.
3. An employer can give the 14th month pay to all his employees that is
equivalent to the 13th month.
4. Living allowance is a must benefit given to all employees.
5. The total earnings of any employee is not always equal to the basic
pay.
6. A pregnant employee may not qualified for a maternity benefit.
7. Holiday and special days are synonymous.
8. Retirement benefit can only be availed if the age of employee is more
than or equal to 60 years old.
9. Tax exemption benefit to minimum wage earners are only limited to
the basic salary.

POST TEST
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A. Identify if the statement is True or False.


1. All wage earners can avail all benefits of any wage earners.
2. Thirteenth month pay is equivalent to 1/13 of the annual salary of any
employee.
3. An employer can give the 14th month pay to all his employees that is
equivalent to the 13th month.
4. Living allowance is a must benefit given to all employees.
5. The total earnings of any employee is not always equal to the basic pay.
6. A pregnant employee may not qualified for a maternity benefit.
7. Holiday and special days are synonymous.
8. Retirement benefit can only be availed if the age of employee is more than
or equal to 60 years old.
9. Tax exemption benefit to minimum wage earners are only limited to the
basic salary.

B. State whether the following is a benefit of a wage earner or not.


Write “Y” for yes and “N” for no.
10. Special day pay 17. SSS premium pay
11. Travel Allowance 18. Holiday pay
12. Tax 19. 13th month pay
13. Paternity Leave 20. Rice incentive
14. Health insurance 21. 5-year-service pay
15. Motor car insurance 22. Living Allowance
16. Leave without pay 23. Maternity benefit for all fathers

C. Solve the following problems

24. Mr. Adrian’s 30-year annual basic income is given by the formula:
Y= 130,000 + 20,000 (x-1980),
Where x is the year and y is the basic income. He started working in
1981 and retired in 2010. How much is his retirement pay after 30 years
of service in the company? (Hint: to find the daily rate, find the average
annual basic income and divide it to 24 x 12).

25. Mr. Samson received an annual salary of Php 300,000. At the end of
the year, what would be his 13th month pay?

26. The CAN (Collective Negotiation Agreement) is considered as a benefit


fot public employees computed in one year. Given the formula below:
CNA = Php 2,214 + 13th month pay + other benefits > Php 30,000 are
taxable.
Suppose a certain government employee earn a CNA = Php 12,764.12,
13th month pay = Php 24,291.78 and he has no other benefits. How

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much of his additional earnings will be taxed?
27. In connection with the previous problem, suppose a certain
government employee earns a CNA = Php 2,214.12/month, 13th month
pay = Php 12,119.72 and he has another benefits amounting to Php
4,000. How much of the additional earnings will be taxed?
28. Suppose, in the previous problem, the other benefits include clothing
allowance. Will there be a change in the amount taxable? If yes, how
much? If no, why?
29. If an employee X has CNA = Php 18,291.09, 13th Month Pay = Php
27,891.00, other benefits = Php 10,000, and Php 3,000 of the other
benefits is the clothing allowance. How much of his benefits is taxable?
How much is non-taxable?
30. Based on the previous problem, if his tax rate is 0.08, how much is
his tax and what is his net amount from his benefits?

REFERENCES

Lopez,B.R, Lundag, L.C. and Dagal, K.A (2016)


Business Math: Q.C.
Vibal Group, Inc

Villanueva, T.T., Tesorio, M.V. and Male, F.G.(2017)


Business Mathematics: V.C.
Tru-Copy Publishing House, Inc.

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