MODULE IN

PAYROLL, COMMISSIONS AND TAXES

PAYROLL

Payroll – is the total amount required to pay workers and employees during a week, month or other periods. It is
also defined as the total sum of money to be paid out to employees at given time.
Gross Pay - is the total amount of employee’s earnings before deductions have been made by the employer. It
may be in form of salary or wage, on either a time rate or a piece-rate and other forms of remuneration.
Wage – on the other hand is the monetary remuneration computed on hourly, daily, weekly, or piece work basis.
Salary – A fixed weekly or monthly wage. Salary can also be computed in a prorating salary or by piecework.

We need to take into consideration the computation of salaries such as

Weekly Salary = Annual Salary ÷ 52

Biweekly Salary = Annual Salary ÷ 26
Monthly Salary = Annual Salary ÷ 12
Semi-Monthly Salary = Annual Salary ÷ 24

Other ways of computation the remuneration of employees are shown below:

Gross Pay = Regular Pay + Overtime

Regular Pay = Number of Hours Worked x Hourly Rate
Overtime Pay = Number of Overtime Hours Worked x Overtime Rate
Total Earning – Total Number of Item Produced x Rate per Piece

Example 1: For an employee who earns an annual of Php 260,000, what is the

a. weekly salary?
b. bi-weekly salary?
c. monthly salary?
d. semi-monthly salary?

Solution:
Given: Annual Salary = Php 260,000
a. Weekly Salary = Annual Salary ÷ 24
= Php 260,000 ÷ 24
= Php 5000
b. Biweekly Salary = Annual ÷ 26
= Php 260,000 ÷ 26
= Php 10,000
c. Monthly Salary = Annual Salary ÷ 12
= Php 260,000 ÷ 12
= Php 21,666.67
d. Semi-monthly Salary = Annual Salary ÷ 24
= Php 260,000 ÷ 24
= Php 10,833.33
 Example 2: Rojen Mae Yap receives P82.50 an hour works for 34 hours this week. Find her gross pay.
Solution:
Given: Hourly Rate = P82.50 Number of Hours Worked = 37
Regular Pay = Number of Hours Worked x Hourly Rate
= 37 x P82.50
= P3,052.50
Thus, her total gross pay is P3,052.50.

Example 3: What amount is earned by a certain employee who works 10 hours on a given day if the regular rate for the
job is P60 and if overtime is paid 150% in excess of 8 hours?
Solution:
Given: Daily Rate = P60 Regular Hours = 8 hours Overtime = 2 hours
Regular Pay = Number of Hours Worked x Hourly Rate
= 8 x P60
= P480

Overtime Pay = Number of Overtime Hours Worked x Overtime Rate

= 2 x (150% of P60)
= 2 x (1.5 x P60)
= 2 x P90
= P180

Gross Pay = Regular Pay + Overtime

= P480 + P180
= P660
Thus, the total earnings of the employee is P660.

Example 4: Assume Rodel Morada is paid P14 for every small bag he makes, if he produced 250 small bags, what is
his total earnings?
Solution:
Given: Rate per Piece = P14 Number of Items Produced = 250
Total Earning = Total Number of Items Produced x Rate per Piece
= 250 x P14
= P3,500
Thus, Rodel’s total earnings is P3,500

Payroll Exercise
Solve the following on the space provided:
1. If an operations manager employee who earns P542,400 per year, what is the monthly salary?
Solution:
Given: Annual Salary = Php 542,400
Monthly Salary = Annual Salary ÷ 12
= Php 542,400 ÷ 12
=Php 45,200
Thus, the monthly salary is Php 45,200
2. What is the gross pay for an accounting staff who works a total of 52 hours during one week in a position that pays P480
per hour? Take note that the daily working is 8 hours and the overtime rate is 135%.
Solution:
Given: Hourly Rate = P480 Regular Hours = 8 hours Overtime = 5 hours
Gross Pay = Regular Pay + Overtime
=
3. Mr.RuelDayrit receives P82 an hour and worked for 39 hours. What was his gross pay?
Solution:
Given:

4. Mr. Jesus Semilla worked 7 hours beyond his 44 hours during the week. If he received P73 an hour and 140% for
overtime, what is his total wages during the week?
Solution:
Given:

5. Michael Nieva receives a daily wage of P615 in a paper company as a printer where he works 6 days a week. Find his
salary for the month of June 2015.
Solution:
Given:

6.EfrenMaranan is an electrical engineer and is paid monthly. His annual salary is P810,000. How much is his gross pay per
month?
Solution:
Given:

7. What amount is earned by a certain employee who works 10 hours on a given day if the regular rate for the job is P68
and if overtime is paid 150% in excess of 8 hours?
Solution:
Given:

8. Assume JeremieValbuena is paid P47 for every jean he makes, if he produced 123 jeans, what is his total earnings?
Solution:
Given:

9. Riana was paid P57.50 per hour. Find her gross pay for a day during which she works 10 hours and 20 minutes.
Solution:
Given:

10. Sofia employee of Achaiah was paid P82.75 per hour for a standard work week of 44 hours. Find her total pay for a
week in which she worked 53 hours?
Solution:
Given:

COMMISSIONS

Commission – is a way of compensation mainly used to pay employee who sell company’s commodities or
services.

A. Straight Commission

Straight Commission is a type of commission wherein the salesperson’s earning or wage is based on his/her
commission alone.

Commission = Commission Rate x Amount of Sales

Commission
Amount of Sales = Commission Rate

Commission
Commission Rate = Amount of Sales

Example 1: A real estate agent has a commission rate of 4%. If a piece of property sells for P740,000, what is his
commission?
Solution:
Given: Commission Rate = 4% = 0.04 Amount of Sales = P740,000
Commission = Commission Rate x Amount of Sales
= (0.04)(P740,000)
= P29,600
Thus, the commission is P29,600

Example 2: If the commission on the sale of P16,950 worth of clothes is P1,271.25, what is the commission rate?
Solution:
Given: Commission = P1,271.25 Amount of Sales = P16,950
P1,271.25
Commission Rate =
P16,950
= 0.075 or 7.5%
Thus, the commission rate is 7.5%.

Example 3: Melisa Parilla, owner of lending company; paid her collector P3,302 as a commission at 1.3%. What was
the amount of the collection?
Solution:
Given: Commission = P3,302 Commission Rate = 1.3% = 0.013
P3,302
Amount of Sales = 0.013
= P254,000
Thus, the collection amounted to P254,000
B. Incremental Commission or Graduated Commission
Incremental commission (or Graduated Commission) is a commission given to salespersons who do not
receive a regular salary and commission rate increases as the sale volume increases.

Example: Evelyn de Guzman sells OHP Projectors for WSS Tech Products. She is on incremental commission
schedule of 2.5% of sales up to P100,000, 3% for the next P150,000 and 4% on the sales greater than P250,000. What
is Evelyn’s total gross pay for the last month if her sales volume was P300,000?
Solution:
Given: Commission Rate (Level 1) = 2.5% = 0.025
Commission Rate (Level 2) = 3% = 0.03
Commission Rate (Level 3) = 4% = 0.04
Using an incremental commission schedule, we determine the pay for each level and then get the sum of all the levels.

Level Pay = Sales per Level x Commission Rate

Level 1 Pay = P100,000 x 0.025 = P2,500

Level 2 Pay = P150,000 x 0.03 = P4,500
Level 3 Pay = P250,000 x 0.04 = P10,000

Total Gross Pay = Level 1 + Level 2 + Level 3

= P2,500 + P4,500 + P10,000
= P17,000
Thus, her total gross pay is P17,000

C. Salary plus Commission

Salary plus Commission is when an employee is being paid a guaranteed salary plus a commission on total
sales made by the employee. To compute for the total gross pay, determine the amount of commission then add it to
salary.

Example: JayneydelaFuente works a pay schedule of P21,300 per month plus a 3% commission on all sales. If she
sold P104,900 last month, what is Jayney’s total gross pay?
Solution:
Given: Salary = P21,300 Commission Rate = 3% = 0.03 Amount of Sales P104,900
Commission = Commission Rate x Amount of Sales
= (0.03)(P104,900)
= P3,147
Thus, the commission is P3,147
Now that we already obtained the commission we can now determine the total gross pay.
Gross Pay = Salary + Commission
= P21,300 + P3,147
= P24,447
Thus, the total gross pay is P24,447

D. Commission and Bonus

Commission and Bonus is when a salesperson is given a bonus if he/she exceeds his/her sales quota.
 Example: Leonora Bautista receives a basic salary P13,750 a month. She also receives a bonus of 5% of the amount
by which she goes beyond her quota of P75,000. For the month of February, her sales amounted to P128,000. What
were her total earnings?
Solution:
Given: Commission Rate = 5% = 0.05 Salary = P13,750
Sales subject to commission = P128,000 – P75,000 = P53,000
Commission = Commission Rate x Amount of Sales
= (0.05)(P53,000)
= P2,650
Gross Pay = Salary + Commission
= P13,750 + P2650
= P16,400
Thus, her total earnings will amount to P16,400.

E. Commission with Override

Commission with Override is when a salesperson earns commission on his/her own sales and also earns
commission from the sales of his/her representatives.

Example: TeresitaCadauan receives a 6% commission on her sales. She supervises 12 sales representatives and
receives a 2.5% overrides on all their sales. The representatives made sales of P48,300 and she made sales of P9,400.
What were her earnings?
Solution:
Given: Commission Rate = 6% = 0.06
Amount of Sales (by Teresita) = P9,400
Commission Rate on Representatives = 2.5%
Amount of Sales (by Representatives) = P48,300

Computation of Teresita’s commission based on her own sales:

Commission 1 = Commission Rate x Amount of Sales
= (0.06)(P9,400)
= P564
Computation of Teresita’s commission based on her representatives sales:
Commission 2 = Commission Rate x Amount of Sales
= (0.025)(P48,300)
= P1,207.50
Total Commission= Commission 1 + Commission 2
= P564 + P1,207.50
= P1,771.50
Thus, Teresita’s total commission is P1,771.50

Commission Exercise

Solve the following on the space provided:

1. An appliance salespersons commission rate is 7.9%. If the commission of one of the washing machine is P410.80, what
is the purchase price of the washing machine?
2. Laarni Santiago earns a commission of 11.7% on all the sales she makes. She has a total of P90,000 in sales last month.
Find the amount she earned in a month.

3. An agent received a commission of P56,935 for selling a car worth P965,000. What was her rate of commission?

4. Geraldine Briones sold her house and lot through a real estate agent for P2.6 million. The agent charged 8.4% of the sale
price for his services. How much was her commission?

5. Francis Nicolas is paid a basic salary of P20,000 a month plus 9.5% commission on all sales made. Compute for his
gross earnings if he made total sales of P185,000.

6. Celeste Saron a salesman, is paid 2.5% commission on the first P12,000; 3.5% on the next P15,000 and 6.5% on all
sales over P25,000. Last month, her total sales were P64,000. Find the total commission.

7. Annie Espineda, a sales representative, receives a monthly salary of P23,000 plus 3% on all sales over P1 million. What
were her total earnings during the month of December if her sales amounted to P1.6 million?

8. JoeffreyUy received 10% commission on the product he sold plus 2.5% commission of the sales made by the
representatives under his supervision. If his sales amounted to P28,000 and the sales made by his 18 representatives
amounted to P73,000, how much did he earn?

9. Uzziel a salesman receives a semi-monthly salary of P10,300 plus a commission of 4.5% of monthly sales. Find his gross
earnings for the month of November if his sales were P200,000.
10. A salesman on a certain boutique was paid a commission of 7% on his sales. If his sales were P12,000 on Monday,
P13,000 on Tuesday, P14,500 on Wednesday, P10,000 on Thursday, and P15,000 on Friday, find his total commission.

TAXES
Taxation – it is the imposition of a mandatory tax of the government of a country to their citizens.
Sales Tax – is a tax based on the retail selling, rental price of tangible personal property, admission charges on
amusement centers, sports, recreation and other services.
Sale Tax Rate – is expressed as a percent and varies from one government to another.

Tax = Tax Rate x Purchase Price

𝑇𝑎𝑥
Purchase Price =
𝑇𝑎𝑥 𝑅𝑎𝑡𝑒
𝑇𝑎𝑥
Tax Rate = 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒 𝑃𝑟𝑖𝑐𝑒
Total Purchase Price = Purchase Price + Tax
𝑇𝑜𝑡𝑎𝑙 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒 𝑃𝑟𝑖𝑐𝑒
Purchase Price =
1+𝑇𝑎𝑥 𝑅𝑎𝑡𝑒

Example 1: Suppose the sales tax rate is 5%. If the sales tax on a 21” LED TV is P1,245, what is the purchase price, and is
the total price of the LED TV?
Solution:
Given: Tax Rate = 5% = 0.05 Tax P1,245

We need to solve for the purchase price first.

𝑇𝑎𝑥
Purchase Price = 𝑇𝑎𝑥 𝑅𝑎𝑡𝑒
𝑃1,245
= 0.05
= P24,900

Now we can solve for the total price of the LED TV.
Total Purchase Price = Purchase Price + Tax
= P24,900 + P1,245
= P26,145
Thus, the purchase price is P24,900 and the total price is P26,145

Example 2: If the purchase of a 1 liter bottle of wine is P2,300 and the sales tax is P529, what is the sales tax rate?
Solution:
Given: Tax = P529 Purchase Price = P2,300

𝑇𝑎𝑥
Tax Rate = 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒 𝑃𝑟𝑖𝑐𝑒
𝑃529
= 𝑃2,300
= 0.23 or 23%
Thus, the tax rate is 23%
Example 3: At the end of the day, RecyRealeza’s Hardware Store showed total sales, including sales, of P51,135. If the
city and the local sales taxes amounted to 5%, what is the amount of Recy’s actual sales? How much sales tax did she
actually collect that day?
Solution:
Given: Total Purchase Price = P51,135 Tax Rate = 5% = 0.05

𝑇𝑜𝑡𝑎𝑙 𝑃𝑢𝑟𝑐ℎ𝑎𝑠𝑒 𝑃𝑟𝑖𝑐𝑒

Purchase Price = 1+𝑇𝑎𝑥 𝑅𝑎𝑡𝑒
𝑃51,135
= 1+ 0.05
𝑃51,135
=
1.05
= P48,700
Thus, the purchase price of the customers is P48,700.

Taxes Exercise
Solve the following on the space provided:

1. What is the sales tax on a new 7 cubic feet refrigerator was purchased for P10,900 and the sales rate tax is 8%?

2. Suppose the sales tax rate in Manila is 14%. How much is the sales tax on a P360 basketball game ticket? What is the
total price?

3. The sales tax on P27,200 truck tires is P1,441.60. Find the sales tax rate.

4. Suppose that the sales tax rate in Makati City is 11.8%. How much sales tax is charged on a new truck if the purchase
price is P1,990,000? What is the total price?

5. The sales tax rate paid by the company owner was P42,860. If her gross receipt was P285,733.33, what was the sales
tax rate?
6. The tag on a MacBook shows the selling price to be P74,000. If the sales tax is 6%, how much will Riana have to pay for
the MacBook?

7. A store owner earned a net profit of P1.62 million which is 23% of his gross sales. If the sales tax is 4% of the gross
sales, how much is the sales tax paid?

8. Find the actual price of the food a family consumed at a fast-food chain if the sales tax amounted to P103.20 which is
equivalent to 12% tax.

9. Jhudiel bought a new smartphone for P36,500. This includes 7.2% sales tax. What is the amount of sales tax and the
selling price before the tax?

10. Winston pays a property tax of P16,400. In his community, the tax rate is 4.2%. What is Winston’s assessed value?