Monthly Paid vs Daily Paid - I'm Confused!
Believe it or not, one of the most confusing part of payroll processing is determining the difference between monthly paid and daily paid employees. If it is your first time to process payroll, then the following might be useful to you.
What does "Monthly Paid" Mean?
First thing's first. Monthly paid is different from Monthly Rate. An employee can have a monthly rate of Php 15,000.00 but still be considered as daily paid. In the same manner, a person with a daily rate of Php 537.00 can be a monthly-paid employee.
According to the 2018 Edition of the Handbook on Workers' Statutory Monetary Benefits, Monthly-paid employees are those that use "365" as the factor for determining the daily rate or the monthly rate. This means that the person is paid for every single day of the year, including rest days and special non-working holidays regardless whether the latter two are worked or un-worked.
Let's say a monthly-paid employee is earning Php 25,000.00. In order to get his/ her equivalent daily rate, you multiply Php 25,000.00 by 12 and then divide it by the factor which is 365. This places the equivalent daily rate at Php 821.92. So, a monthly-paid employee earning Php 25,000.00 has a daily rate of Php 821.92.
Now, let's do it the other way around. The employee has a daily rate of Php 775.00. How do we compute for his monthly rate if he/ she is monthly-paid? You multiply Php 775.00 by 365 (the monthly factor), and then divide it by 12. You now have Php 23,572.92 as the monthly rate of a monthly-paid employee who has a daily rate of Php 775.00.
Then, what is a daily-paid employee?
If you are using any other factor for determining the daily or monthly rate, then you are considered as a daily-paid employee. Some of the most common factors used are 261 and 313. Factor 261 is typically used for companies that have a 5-day workweek, while factor 313 is used by organizations with a 6-day workweek.
Why is it important to know the difference?
One of the main differences between the two is in the application of no-work, no-pay policy. In the case of a monthly-paid employee, declarations of special non-working holidays have no impact on their monthly pay. At the same time, they do not have to concern themselves with the rule on being present the day before a regular non-working holiday.
The daily rate of a person earning Php 20,000.00 per month will differ between a daily paid and monthly paid employee. While the former will get a daily rate of Php 919.54 (5-day work week; Php (20,000.00 * 12)/261), the latter will have a daily rate of 657.54 (Php (20,000.00 * 12)/365). This means, deductions for absences and tardiness as well as overtime rate will differ.
A good reference for this topic is the 2018 Handbook on Workers' Statutory Monetary Benefits.
What does "Monthly Paid" Mean?
First thing's first. Monthly paid is different from Monthly Rate. An employee can have a monthly rate of Php 15,000.00 but still be considered as daily paid. In the same manner, a person with a daily rate of Php 537.00 can be a monthly-paid employee.
According to the 2018 Edition of the Handbook on Workers' Statutory Monetary Benefits, Monthly-paid employees are those that use "365" as the factor for determining the daily rate or the monthly rate. This means that the person is paid for every single day of the year, including rest days and special non-working holidays regardless whether the latter two are worked or un-worked.
Let's say a monthly-paid employee is earning Php 25,000.00. In order to get his/ her equivalent daily rate, you multiply Php 25,000.00 by 12 and then divide it by the factor which is 365. This places the equivalent daily rate at Php 821.92. So, a monthly-paid employee earning Php 25,000.00 has a daily rate of Php 821.92.
Now, let's do it the other way around. The employee has a daily rate of Php 775.00. How do we compute for his monthly rate if he/ she is monthly-paid? You multiply Php 775.00 by 365 (the monthly factor), and then divide it by 12. You now have Php 23,572.92 as the monthly rate of a monthly-paid employee who has a daily rate of Php 775.00.
Then, what is a daily-paid employee?
If you are using any other factor for determining the daily or monthly rate, then you are considered as a daily-paid employee. Some of the most common factors used are 261 and 313. Factor 261 is typically used for companies that have a 5-day workweek, while factor 313 is used by organizations with a 6-day workweek.
Why is it important to know the difference?
One of the main differences between the two is in the application of no-work, no-pay policy. In the case of a monthly-paid employee, declarations of special non-working holidays have no impact on their monthly pay. At the same time, they do not have to concern themselves with the rule on being present the day before a regular non-working holiday.
The daily rate of a person earning Php 20,000.00 per month will differ between a daily paid and monthly paid employee. While the former will get a daily rate of Php 919.54 (5-day work week; Php (20,000.00 * 12)/261), the latter will have a daily rate of 657.54 (Php (20,000.00 * 12)/365). This means, deductions for absences and tardiness as well as overtime rate will differ.
A good reference for this topic is the 2018 Handbook on Workers' Statutory Monetary Benefits.
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