LESSON 1.2.
Gross and Net Pay
Proponent:
MS. GERRY MAE T. SILVERO
Key Concepts and Formulas
COMPUTING NET INCOME
• Gross income is the total earnings before any deductions are made. Includes base
salary, overtime, commission, and piecework pay.
Gross income = Salary + Allowances
• Net Pay is also called "take-home pay." This is the amount left after deductions are
subtracted from gross pay.
Net Pay = Gross Income – Total Deductions
• Deductions are the amounts subtracted from gross pay by law or agreement.
WHAT’S IN A PAYSLIP?
1. Study the Sample Payslip 2. Answer the following
questions based on the payslip:
Description Amount (₱)
● How much is deducted in
Gross Income 20,000.00
total from the gross income?
Less: ● What percentage of the
Withholding Tax 1,500.00 salary is taken out as
SSS Contribution 800.00 deductions?
PhilHealth 300.00
● Why do you think these
PAG-IBIG 200.00
deductions are important?
Net Income
17,200.00
COMPUTING NET INCOME
• Gross income is the total earnings before any deductions are made. Includes base
salary, overtime, commission, and piecework pay.
Gross income = Salary + Allowances
• Net Pay is also called "take-home pay." This is the amount left after deductions are
subtracted from gross pay.
Net Pay = Gross Income – Total Deductions
• Deductions are the amounts subtracted from gross pay by law or agreement. In the
Philippines, common deductions include:
In the Philippines, common deductions include:
1. Social Security System (SSS)
Applicable to: Private sector employees
Purpose: Retirement, disability, maternity, sickness, and death benefits
Rate: Based on a schedule tied to the employee's monthly salary
https://www.sss.gov.ph/wp-content/uploads/2024/12/2025-SSS-Contribution-Table-rev.pdf
Note: the rate is 15%; 5% - Employee and 10% - Employer
2. Government Service Insurance System (GSIS)
Applicable to: Government employees only
Purpose: Life insurance, retirement, disability, and survivorship benefits
Rate: 9% of monthly salary rounded to the nearest peso (employee share)
3. Pag-IBIG Fund (HDMF)
Applicable to: All employees
Purpose: Housing loans, savings, and calamity loans
Rate: 2% of monthly salary rounded to the nearest peso (employee share)
In the Philippines, common deductions include:
4. PhilHealth
Applicable to: All employees
Purpose: Healthcare benefits and hospitalization coverage
Rate: 5% of monthly salary, shared between employee and employer
(Note: For employees earning above the threshold, the rate is applied based on income bracket.)
5. Withholding Tax (BIR)
Applicable to: All employees
Purpose: Income tax, collected in advance by the employer
Rate: Based on monthly salary bracket and applicable exemptions for tax rate refer to this link
https://www.bir.gov.ph/income-tax
6. Other Deductions (Optional or Conditional)
These deductions depend on agreements between the employee and
employer:
● Loans
● Cash Advances
● Insurance Premiums
● Union Dues
● Deductions for Absences or Tardiness
Examples:
Problem 1. Anna works in a factory and earns ₱550 per day. She
worked 22 days this month. What is Anna’s gross income for the
month? Considering her deductions for SSS, PhilHealth, PAG-IBIG,
and tax, compute her net income for the month.
Problem 2.
James earns ₱75/hour. He worked 160 regular hours and 10 OT
hours (125% rate). What is James’s total gross income, including OT?
Considering his deductions for SSS, PhilHealth, PAG-IBIG, and tax,
compute his net income for the month.
ACTIVITY 1.3: COMPUTING GROSS AND NET PAY
Mia is a factory worker earning ₱610 per day. She worked 20 days
this month. Compute Mia’s gross monthly income, estimate her
SSS, PhilHealth, Pag-IBIG, and withholding tax, and determine her
net pay.
Use the information below for computing the deductions.
• SSS: 4.5% of monthly salary (employee share), max ₱1,350
• PhilHealth: 2.5% of salary (employee share), capped based on ₱100,000 ceiling
• Pag-IBIG: 2% of monthly salary, capped at ₱100
• Withholding Tax: Based on TRAIN law tax table (simplified for classroom use)
ACTIVITY 1.3: COMPUTING GROSS AND NET PAY
