There ain’t no such thing as a free lunch. The world is living in that mantra. We need money to bring food to the table, have a comfortable sleep on hot or cold nights, buy medicine and afford treatment at the hospital, purchase the shoes and dress of our dreams, and of course subscribe to Netflix. But to earn money, we must work.
Nothing is absolutely free in this world; hence, people find jobs that can pay them enough to subsidize their basic needs and cravings. The payment that laborers earn is called compensation. A laborer’s compensation represents the total monetary value of all their hard work, efforts, presence, dedication, and artistry.
The AIHR, an online HR academy, defines compensation as “any payment given by an employer to an employee during their period of employment. In return, the employee will provide their time, labor, and skill.” Moreover, Veremark, An HR support, noted that compensation is determined by the roles, level of experience, and market standards.
Different Types of Compensation
Hourly wages
This is a type of compensation given to entry-level employees, contractual, part-time workers, and temporary staff. An employee receives payments depending on the number of hours he/she spends at work. An employee can still receive overtime pay and incentive pay for extra hours they work, depending on what is written on the contract. This type of compensation is best for employees who want flexibility in their schedules because they are paid based on the number of hours. At the same time, the employers also reduced labor costs, because hourly wage workers don’t receive fixed salaries.
In the Philippines, most companies offer a daily wage rather than per hour. Currently, the minimum daily wage in the National Capital Region or NCR is 645 pesos for non-agriculture and 608 pesos for workers in agriculture, service/retail establishments with 15 or fewer employees, and manufacturing establishments with less than 10 workers.
Salary
A salary is a common type of compensation in the Philippines; it is an agreed amount of annual compensation, usually given to full-time or regular employees with high skill sets and heavy roles and responsibilities, such as leadership or managerial positions, highly educated staff, and technical positions.
However, this type of compensation creates a blurry line in terms of overtime pay and other benefits that a rank and file can enjoy, The Philippine Labor Code- Books Three, Title 1, states that Managerial employees are “exempted or excluded” from the coverage of the following benefits:
- normal hours of workdays
- compensable working time or any period an employee is required to be on duty
- night shift differential
- overtime work
- overtime pay
- premium pay
- weekly rest period
- Service Incentive Leave
- Service charges
Salary
For performance-based employees, their compensation is called commission. They need to achieve a specific quota or goals to receive a payment equivalent to the total sales revenue multiplied by the employee’s commission rate. There are various types of commission-base payment:
- Straight Commission: This is where your earnings are entirely dependent on your sales – the more you sell, the more you make!
- Base Plus Commission: You get a steady paycheck plus a bonus based on your sales performance, giving you a safety net and room to grow.
- Bonus Commission: Think of this as a pat on the back (and a boost to your bank account!) for hitting those targets.
- Residual Commission: Perfect for subscription services, you earn for every recurring payment from your clients.
- Gross Margin Commission: You’re rewarded for the actual profit you bring in, not just the raw sales numbers.
- Territory Volume Commission: Your earnings are based on the overall sales success of your designated area.
- Tiered Commission: The more you sell, the higher your commission rate – it’s all about rewarding those top performers.
- Milestone Commission: Get a special payout when you achieve those major, game-changing goals.
- Single Rate Commission: Simple and Straightforward! A consistent percentage on every sale, no matter what.
Bonuses
Aside from payment, some companies offer bonuses or rewards to their employees or departments with exceptional performance or who have reached the target or above performance metrics. A bonus can be in various forms not only monetary but can be a gift cheque, a voucher, a holiday, or incentive.
Different Types of Compensation Benefits in the Philippines
13th Month Pay
The most awaited month in the entire year of working is not the 12th month but the 13th month. The Presidential Decree No. 851 known as the 13th-Month Pay Law covers all rank-and-file employees in the private sector only. Regardless of position, designation, or employment status as long as the employee has worked for at least 1 month during the calendar year will receive a prorated 13th-month pay. The 13th month’s pay is equivalent to the one whole month’s pay of an employee.
Remember that the 13th month’s pay only covers the basic salary and excludes additional earnings such as overtime pay, night differential, holiday pay, commissions, and more. Moreover, the unauthorized absences of an employee can also affect the computation of the 13th month’s pay as it will be part of the deduction.
Overtime Pay
The Presidential Decree 442, Article 94 stated that any work performed beyond the regular 8 hours a day is considered overtime and covers an additional 25 percent per hour. On the other hand, Article 87 states that work performed beyond 8 hours during holidays or rest days will have an additional 30 percent called premium pay. Both daily and monthly pay are covered with overtime pay except for the following:
1) Government employees;
2) Managerial employees;
3) Officers or members of a managerial staff;
4) Kasambahay and persons in the personal service of another;
5) Workers who are paid by results; and
6) Field personnel.
Holiday Pay
Unlike overtime pay which is an additional pay per hour plus 25 percent or 30 percent, the holiday pay is when you work on the Legal holiday. Mostly, in the Philippines it is called double pay because it is mandated under PD 442 Article 94 that holiday pay is 100 percent plus 100 percent of daily salary. Both daily and monthly pay are covered with holiday pay.
Night Differential
All the work performed between 10 pm to 6 am onwards is called night differential with an additional 10 percent to the employee’s regular hourly rate, under Article 86 of the Labor Code of the Philippines. It is important to note that when overtime or work performed beyond 8 hours overlaps between 10 to 6 am, the employer needs to pay the employee both the overtime pay and night differential. Both daily and monthly pay are covered with overtime pay except for the following:
- Managerial employees and field personnel who don’t have definite working hours
- Flexible work arrangement
- Depending on what is written on the employer-employee agreement, some companies give higher night differential due to collective bargaining agreement or policy, but cannot cannot go lower than the statutory minimum.
How To Compute
Scenario: Let’s say an employee works beyond 8 hours from 8 am to 5 pm and clocks out at 3 am to finish all the documents he is preparing. To compute his night differential with overtime pay, please see below.
Let’s assume that his daily rate is 645 pesos.
Hourly rate=645 pesos/8 hours
=80.63 pesos
Total overtime (5 pm to 3 am)= 10 hours
Night differential (10 pm to 3 am)= 5 hours
Calculation:
Overtime pay- hourly rate*25%
80.63*0.25= 20.16 pesos
20.16+ 80.63= 100.79 pesos
100.79* 10 hours= 1007.9 pesos
Night Differential- hourly rate*10%
80.63*0.1= 8.06 pesos
8.06+80.63= 88.69
88.69*5= 443.5 pesos
Total payment– daily rate + overtime pay + night differential
645 +1007.9+443.5= 2096.4 pesos
Service Incentive Leave
SIL is a mandated benefit granting employees five days of paid leave after one year of service. It allows for personal, medical, or vacation use, and unused leave can be converted to cash. This Labor Code provision aims to provide employees with paid time off.
Employee Compensation Program
Philippine employee compensation includes mandatory benefits like SSS, PhilHealth, and Pag-IBIG, plus basic salary. Employers may offer additional perks like health insurance, bonuses, and leave credits, varying by company and industry, adhering to labor code regulations.
Understanding your compensation is more than just knowing your take-home pay—it’s about being informed of your rights, benefits, and what you’re truly worth in the workplace. Whether you’re a fresh graduate, a seasoned pro, or somewhere in between, being aware of the different types of pay and benefits in the Philippines empowers you to make smarter career decisions.
If you’re looking for jobs with transparent salary details and fair compensation, download the LAHAT Jobs app today. Find opportunities that value your time, effort, and skills—because your compensation matters.
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