De Minimis Benefits Utilization: Illustrating Salary Adjustments Based On NCR Wage Order No. 22 (Php537)
De Minimis benefits which are exempt from the fringe benefit tax and income tax shall, in general, be limited to facilities or privileges furnished or offered by an employer to his employees that are of relatively small value and are offered or furnished by the employer merely as a means of promoting the health, goodwill, contentment, or efficiency. It literally means small amount.
The list was amended and made exclusive by RR 5-2011. Additional P10,000 annual benefit was added by RR 1-2015. It was further amended by RR 11-2018 increasing the Medical cash allowance to dependents of employees, not exceeding P1,500 per employee per semester, of P250 per month, or P3,000 per annum. Also, rice subsidy of P2,000 or one sack of 50kg. rice per month amounting to not more than P2,000. Finally, uniform and clothing allowance not exceeding P6,000 per annum.
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With the issuance of Wage Order No. NCR 22 granting PhP537.00 daily minimum wage to NCR employees, companies may decide to adjust their salary scales considering that the equivalent monthly minimum is now P14,006.75 using the 313 factor. This is derived as follows:
Daily minimum wage x 313 / 12
Thus:
PhP537.00 x 313 / 12
PhP168,081.00 / 12
PhP14,006.75
Assuming Company X, based in NCR, wants to improve the take home pay of its employees with the issuance of Wage Order No. 22. The Management approved P5,000.00 increase of the following with a mandate to minimize impact on the basic pay:
Employee Current Adjusted Category Factor
A P14,006.75 P19,006.75 Daily 313
B P15,000.00 P20,000.00 Daily 313
C P16,000.00 P21,000.00 Daily 313
D P20,000.00 P25,000.00 Monthly 365
E P20,833.00 P20,833.00 Monthly 365
How should this be done addressing the following?
- Avoid wage distortion
- Improving net take home
- Minimize tax
- Utilizing 13th month pay and other benefits
- Addressing De Minimis excess
- Showing tax computation (if there is any taxable amount)
- Showing annual tax computation
Employee A
Basic P14,006.75
Add DMB:
- Monetized VL P537.00
- Rice Subsidy P2,000.00
- Laundry P300.00
- Uniform Allow. P1,000.00
- Prod. Incentive P1,163.00 P 5,000.00
Total P19,006.75
Annualized DMB Total Limit Excess
Monetized VL P537 x 12 = 6,444 P5,370 P1,074
Rice Subsidy P2,000 x 12 = P24,000 P24,000 P0
Laundry P300 x 12 = P3,600 P3,600 P0
Uniform Allow.P1,000 x 12 = P12,000 P6,000 P6,000
Prod. Incentive P1,163 x 12 = P13,956 P10,000 P3,956
Total Excess P11,030
13th Month Pay P14,006.75
Christmas Bonus P14,006.75
Total P28,013.50
Tax Computation
Monthly Withholding
Regular Compensation Income P14,006.75
Add: Supplementary Compensation
DMB
Monetized VL P537.00
Rice Subsidy P2,000.00
Laundry P300.00
Uniform Allow. P1,000.00
Prod. Incentive P1,163.00 P 5,000.00
Total Income Received P19,006.75
Tax on P20,833 P0.00
Tax on Excess
(P19,006.75 – P20,833) x 20% P0.00
Tax Due – Withholding Exempt (MWE)
Annual Tax
Regular Compensation Income P168,081.00
Add: Supplementary Compensation
Monetized VL P6,900.96
Rice Subsidy P24,000.00
Laundry P3,600.00
Uniform Allow. P12,000.00
Prod. Incentive P13,956.00 P 60,456.96
13th month pay P 14,006.75
Christmas Bonus P 14,006.75
Total Income Received P256,551.46
Total Income Received P256,551.46
Less: Non-Taxable Benefits
DMB P 60,456.96
13th Month Pay P 14,006.75
Xmas Bonus P 14,006.75 P 80,470.46
Taxable Income P176,081.00
Tax Due Year 2019:
On P250,000 P 0.00
On Excess (P176,081.00 – P250,000) x 20% P 0.00
Less:
Tax Withheld (Jan-Nov 2019) P 0.00
Amount to be Withheld Dec. 2019 P 0.00
13th Mo. Pay & OB Ceiling P90,000.00
Less:
13th Month Pay P14,006.75
Christmas Bonus P14,006.75
Excess DMB P11,030.00 P39,043.50
Unutilized Portion P50,956.50
In the next post, solutions on employees B, C, D, and E will be shown.
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