Summary
Highlights
Gross income is the total earnings before deductions, including allowances, overtime, and benefits. Net pay, also known as take-home pay, is calculated by subtracting all deductions from the gross income. Legally mandated deductions include SSS/GSIS, PhilHealth, Pag-IBIG, and withholding tax. Other deductions can include absences, insurance, and loan payments.
The SSS (Social Security System) contribution is based on a circular, which provides a table for different ranges of monthly gross income. As the gross monthly income increases, the SSS contribution also increases. The video demonstrates how to find the correct SSS deduction from the table based on an employee's salary.
The PhilHealth (Philippine Health Insurance Corporation) contribution is generally 5% of the monthly basic salary. For salaries less than or equal to ₱10,000, there's a standard contribution of ₱500. For salaries between ₱10,000 and ₱100,000, 5% is calculated and then divided equally between the employer and employee. For salaries of ₱1,000 or more, the contribution is ₱5,000.
The Pag-IBIG Fund (Home Development Mutual Fund) contribution is 2% of the monthly compensation. However, there's a maximum contribution of ₱200. If 2% of the salary exceeds ₱200, the employee only contributes ₱200.
Withholding tax, governed by the TRAIN Law (Tax Reform for Acceleration and Inclusion), is applied after deducting SSS, PhilHealth, and Pag-IBIG contributions. The income tax table is based on annual income. If the annual income is ₱250,000 or below, there is no tax. Different brackets apply increasing percentages and fixed amounts for higher annual incomes.
A pay slip clearly shows the employee's name, position, company, and period of coverage. It itemizes all components of gross income (basic wage, overtime, allowances, bonuses) and deductions (SSS, PhilHealth, Pag-IBIG, tax, etc.). Deductions are typically presented in parentheses. The net pay is the final amount after all deductions are subtracted from the gross income.
This example walks through calculating the net pay for Mia Valdes, a factory worker. Her gross monthly income is calculated from her daily rate and days worked. Then, SSS, PhilHealth, Pag-IBIG, and withholding tax are calculated based on her income and relevant tables. Finally, her net pay is determined, and a sample pay slip is prepared.
This example demonstrates calculating Jacob Gomez's gross and net pay, including regular and overtime wages. Deductions for SSS, PhilHealth, and Pag-IBIG are computed. His annual taxable income falls below the threshold, resulting in no withholding tax. A detailed pay slip is then created for Jacob, showing all income and deductions.
The video concludes by emphasizing the importance of understanding the step-by-step process of computing gross income, identifying deductions correctly, and calculating net pay. It highlights the need to present this information accurately and in an organized manner on a pay slip.