Payroll Management Quiz

Study Notes

Payroll is the process companies use to manage employee payments, including calculating earnings, and withholding taxes and deductions.
The finance and human resources departments are typically responsible for payroll.

Employees undergo a probation period of six months upon starting work.
During this time, performance is monitored to determine suitability for regular employment.
Probationary employees receive the same pay rate as regular employees, however their benefits may differ.
Probationary employees do not receive de minimis benefits.
If an employer chooses to not extend an employee's probation period, payroll needs to account for termination and severance pay.

The standard normal working hours are 40 hours per week, spread over five days.
Hours worked beyond eight hours per day are considered overtime and are compensated at a higher rate.

Employers must compensate employees who work on regular and special holidays at a higher rate.
Working on a regular holiday entitles an employee to 200% of their daily rate.

Employees cannot be terminated without just cause.
Severance pay is legally required in case of termination.
The required severance pay is the greater of one month's salary or one month of salary for every year of service.

Payroll cycles occur bi-weekly or twice a month, with a maximum interval of 16 days.
Companies are prohibited from paying employees only once a month.

Minimum Wage:
- The minimum daily wage for non-agriculture roles in Metro Manila is P610.
- The minimum daily wage for agriculture, service, and retail companies (with 15 employees or less) and manufacturing companies (with 10 employees or less) is P573.
Cost of Living Allowance (COLA): A fixed amount added to the minimum wage to help offset living expenses.
Overtime Pay:
- Calculated at 125% of the regular hourly wage for overtime hours worked beyond 8 hours on a regular day.
- Calculated at 130% of the regular hourly wage for overtime hours worked beyond 8 hours on a holiday or rest day.
Holiday Pay: Employees are paid 100% of their salary for holidays, even if they don't work.
13th Month Pay: Equivalent to one month's basic salary paid before December 24th. It's calculated by dividing the total basic salary earned by 12.
Non-Taxable Benefits:
- De minimis benefits like uniform allowances (up to P5,000 a year), unused leave credits converted to cash (up to 10 days per year), and gifts valued no more than P5,000 per year.

Calculated on an employee's taxable income, which includes basic salary, allowances, and taxable benefits minus deductions.
The income tax rate is calculated based on the annual taxable income using a progressive tax system.