De Minimis Benefits Utilization: Illustrating Salary Adjustments Based On NCR Wage Order No. 22 (Php537)

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.

Grab a copy of the newly released title Tax Solutions on Employee Compensation and Benefits (under TRAIN Law), 2nd Edition 2019 by Atty. Villanueva

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


PhP537.00 x 313 / 12

PhP168,081.00 / 12


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?

  1. Avoid wage distortion
  2. Improving net take home
  3. Minimize tax
  4. Utilizing 13th month pay and other benefits
  5. Addressing De Minimis excess
  6. Showing tax computation (if there is any taxable amount)
  7. Showing annual tax computation

Employee A

Basic                                                              P14,006.75

Add DMB:

  1. Monetized VL P537.00
  2. Rice Subsidy P2,000.00
  3. Laundry P300.00
  4. Uniform Allow. P1,000.00
  5. 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


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


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


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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