QUARTER TWO- BUSINESS MATHEMATICS

CONTENT Salaries and Wages (Standard Deductions with Corresponding Computations)

CONTENT STANDARDS The fundamental operations of mathematics as applied in salaries and wages.
The learners are able to apply appropriate mathematical operation in computing salaries and
PERFORMANCE STANDARDS wages.

The learners enumerate standard deductions with corresponding computations.

ABM_BM11SW-11e-7
LEARNING COMPETENCIES

The learners should be able to

1. compute withholding tax;
SPECIFIC LEARNING OUTCOMES 2. compute GSIS contribution and;
3. use the tables for SSS and Philhealth contributions to determine how much will be deducted
from an employee's salary for the said contributions.
TIME ALLOTMENT 1 hour

MATERIALS
RESOURCES www.sss.gov.ph ; www.gsis.gov.ph; www.bir.gov.ph; www.philhealth.gov.ph
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PROCEDURE MEETING THE STUDENTS’ NEE

INTRODUCTION (5 minutes)

From the previous discussion on taxable and non-taxable benefits, a portion of the basic salary of
an employee is deducted as withholding tax. In this lesson, standard deductions will be discussed
in detail and will be illustrated using a sample pay slip.

Standard Deductions

The following are the standard deductions from the basic salary of an employee:

1. Income Tax – this deduction applies only to non-minimum wage earners. The income tax
bracket of an employee is determined by computing his net taxable income.
(Net Taxable Income = Gross Taxable Income – Tax Exemptions)

2. GSIS/SSS Contributions – GSIS deductions apply to government employees. 9% of the basic

salary of a government employee is the required GSIS premium. SSS contributions on the
other hand are deducted from the salary of non-government employees. The amount of the
contribution is based on a table released by SSS.

3. Pag-ibig Contributions – this is applicable to all employees. The amount is fixed at PHP100
per month.

4. Philhealth Contributions – this deduction is also applicable to all employees. The amount of
the premium is based on salary bracket and is given in a table of premiums released by
Philhealth.
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LESSON PROPER (30-45 MINUTES)
Here is a sample pay slip of a State University faculty member for the month of January, 2016.

Employee Employee Name

Amount Due Deductions Remarks
Number and Description
87654321 De Guia, Olene
Regular Salary PHP42,636.00
PERA PHP2,000.00
Withholding Tax PHP7,576.87
GSIS PHP3,837.24
Philhealth PHP437.50
Pag-ibig PHP100.00
Total PHP44,636.00 PHP11,951.61 PHP32,684.39(Net Pay)

Note that the deductions are found in column 4 in the above payslip. These are withholding tax,
GSIS contribution, Philhealth contribution and Pag-ibig contribution. These are the standard
deductions from the salary of an ordinary Filipino employee.
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As an illustration, details of how the deductions were computed are as follows: Remarks: For married couples who are
Let us assume that the employee has 2 dependents. both working and required to pay
income tax, it is usually the husband
1. How to compute withholding tax: who claims children as dependents.
However, the wife may claim the
Gross Annual Taxable Tax Exemptions dependents if the husband signs a
Description waiver giving the wife the right to
Amount (Annual)
declare their children as tax
Basic Salary (PHP42,636.00/mo) PHP511,632.00 dependents.
PERA (PHP2,000.00/mo) PHP24,000.00
13 month pay (PHP42,636.00)
th
PHP42,636.00 Based on the newly signed SSL2015,
government employees will now
14th month pay (PHP42,636.00) PHP42,636.00 receive 1-month salary as 13th month
Tax Exempt Cash Benefits PHP82,000.00 pay in May and another 1-month salary
as 14th month pay in November.
Basic Personal Exemption PHP50,000.00
GSIS Contributions (PHP3,837.24/mo) PHP46,046.88
Philhealth Contributions (PHP437.50/mo) PHP5,250.00
Pag-ibig Contributions (PHP100/mo) PHP1,200.00
2 Dependents (PHP25,000 each) PHP50,000.00
Total PHP620,904.00 PHP234,496.00

Net Taxable Income = Gross Taxable Income – Tax Exemptions

= 620,904.00 – 234,496
= PHP386,408.00
(Note that this value is between PHP250,000 and PHP500,000, so the 30% tax bracket is used to
compute annual withholding tax.)
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The income tax table below will be used to compute this employee's withholding tax.

Income Tax Table

Net Taxable Income: x Tax Due
x  10,000 0.05x
10,000 < x  30,000 500 + 0.10(x – 10,000)
30,000 < x  70,000 2,500 + 0.15(x – 30,000)
70,000 < x  140,000 8,500 + 0.20(x – 70,000)
140,000 < x  250,000 8,500 + 0.20(x – 70,000)
250,000 < x  500,000 8,500 + 0.20(x – 70,000)
x > 500,000 8,500 + 0.20(x – 70,000)

Tax Due = 50,000.00 + 0.3(386,408.00 – 250,000.00)

= PHP90,922.40

Monthly Withholding Tax = Tax Due  12 = 90,922.40  12 = PHP7,576.87

2. GSIS/SSS Premiums

GSIS Contributions are based on the following table:

Table of GSIS Premiums

Personal Personal Government Government

Share Share Share Share
Type of insurance coverage
Life Retirement Life Retirement
Regular 2% 7% 2% 10%
Employees Compensation 1% not to
none 0% none
Fund exceed P100

For this particular employee whose monthly salary is PHP42,636.00, the monthly contribution for
GSIS is 9% of his salary or PHP3,837.24.
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Employees in the private sector are covered by SSS and this is the table that is used to determine
how much the employees and their employers need to pay for social insurance contribution.

Table of SSS Premiums

An employee with a monthly salary of PHP20,000 would fall under the PHP16,000 monthly salary
credit and will have to pay PHP581.30 for Social Security contribution, while his employer will pay
a total of PHP1,208.70 for the employer's counterpart.
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3. Philhealth Contributions

Table of Philhealth Premiums

For this particular employee with a monthly salary of PHP42,636, the monthly contribution for
Philhealth is PHP437.50 while his employer will pay the same amount as employer's counterpart
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Sample Pay Slip

Employee Employee Name

Amount Due Deductions Remarks
Number and Description
12345678 Sabado, Domingo
Regular Salary PHP39,493.00
PERA PHP2,000.00
Withholding Tax PHP5,877.20
GSIS-SIC PHP3,554.37 (9% of regular salary)
Philhealth PHP437.50 (See table for Philhealth
contributions.)
HDMF (Pag-ibig) PHP100.00
Total PHP41,493.00 PHP9,969.07 PHP31,523.93 (Net Pay)

January 2016 Total Amount Due – Total Deductions = Net Pay

For the withholding tax deduction, more information is needed to be able to derive the amount.
For instance, the number of dependents is needed to determine the total amount of tax exemption
for dependents which is PHP25,000 per dependent.

Exercise. (This may be given as homework to the students or group work during class time if time
permits.)

The following are the compensation that a government employee receives in a year:

Description Amount
Basic Salary PHP44,560.00/mo
PERA PHP2,000.00/mo
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13th month pay PHP44,560.00/year
14th month pay PHP44,560.00/year

Assume that the employee has no dependents. Determine the following:

1. monthly GSIS contribution
2. monthly Philhealth contribution
3. monthly Pag-ibig contribution
4. withholding tax per month; and
5. net pay per month.

The teacher may also require students to submit pay slips of relatives, with names withheld for
their privacy and the class can compare deductions for different types of employees.

Solution:

1. monthly GSIS contribution = 9%  44,560.00

= PHP4,010.40

2. monthly Philhealth conribution= PHP 437.50

(See table of Philhealth Premium Contributions)

3. monthly Pag-ibig contribution = PHP100 (fixed amount for all employees)

4. monthly withholding tax:

Annual Basic Salary = 12  44,560 = PHP534,720

Other Compensations:
PERA 12 x 2,000 = PHP24,000
13 month pay
th
= PHP44,560
14th month pay = PHP44,560
TOTAL = PHP113,120

Tax Exemptions:
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Personal = PHP50,000
GSIS = PHP48,124.80
Philhealth = PHP5,250
Pag-ibig = PHP1,200
TOTAL = PHP104,574.80

Net Taxable Income:

534,720 + (113,120 – 82,000) – 104,574.80 = PHP461,265.20

The net taxable income is between PHP250,000 and PHP500,000 so using the income tax table, we
have:
Tax Due (Annual) = 50,000 + 0.3(461,265.20 – 250,000)
= PHP113,379.56

Monthly withholding tax = 113,379.56  12 = PHP9,438.30

5. Net Pay for January 2016:

44,560 – (4,010.40 + 437.50 + 100 + 9,448.30)
= PHP30,528.70