Introduction to Salary and

Wages

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Employment is doing work
for an organization in
exchange for financial
compensation.

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Some people would seek to
become employees or
workers to practice their
profession and contribute
their skills.

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Others want to
become employers
and hire their
workforce.

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It would be best if you
understood that there are
various ways in which an
employee or worker can be
paid for the work they do.

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EMPLOYEE COMPENSATION
Joel and Erika discuss whether it is better to earn a fixed salary or per
hour in the industry they belong to. Joel is a wage-earner who is paid
₱120 per hour every week, and Erika receives a fixed salary of ₱18,720 per
month. In February, they worked for 8 hours every day for 20 days. Who
earned more, Joel or Jenny?

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EMPLOYEE COMPENSATION
Solution:

Step 1: Identify what is required in the problem.

You are asked to compute the total earnings of Joel, a wage-

earner, and compare it to the monthly salary of Erika, which is
₱18 720.

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EMPLOYEE COMPENSATION

Step 2: Identify the given in the problem.

The fixed salary of Erika is ₱18,720 per month. On the other hand,
Joel earns ₱120 per hour. He worked for 8 hours every day for 20
days.

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EMPLOYEE COMPENSATION

Step 3: Write the working equation.

Earnings = (Hourly wage)(Number of hours per day)(Number of

days)

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EMPLOYEE COMPENSATION

Step 4: Substitute the given values.

Earnings = (₱120/hour)(8 hours/day)(20 days)

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EMPLOYEE COMPENSATION

Step 5: Find the answer.

The total earnings of Joel are₱19,200

Therefore, Joel’s earnings amounting to ₱19,200 are greater than Erika’s

monthly salary, ₱18,720.

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QUESTIONS TO PONDER

1. How are Joel and Erika compensated for the work they do?
2. What is the difference between salary and wages?
3. How do you compute the total earnings of a wage earner?

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What type of compensation would be best
for a business enterprise and their
workforce?

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 INTRODUCTION TO SALARIES AND WAGES

SALARY WAGES
● a fixed amount paid to ● an amount paid per
an employee for a hour of work rendered
specific pay period ● example of wage-earner:
● example of salary- construction worker
earner: teacher

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 SALARY

S = SR ➗ PP

where
S = salary
AS = annual salary rate
PP = number of pay periods per year

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 Earning a Salary

Your employment contract with Company ABC entitles you to

an annual salary of ₱384,000. How much would you earn every
month?

Solution:
S = AS ➗ PP
S = ₱384,000 ➗ 12
S = 32,000

You are entitled to earn ₱32,000 every month.

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 Evaluating Job Offers

After you graduate from a business course, two companies are

interested in giving you a job. Company A offers you a steady
salary of ₱24,500 per month. On the other hand, Company B
offers you ₱985 per day. If both jobs expect you to work 24
days per month, which company will give you better
compensation?

Solution:
In solving the problem, you may compute the daily rate offered
by Company A and compare it to Company B’s.

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 Evaluating Job Offers

S = AS ➗ PP
S = ₱24,500 ➗ 24
S = ₱1,020.84

Company A gives better compensation. They offer ₱1,020.84

per day, which is higher compared to Company B’s offer of
₱985 per day.

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 JEN IS THE IN-HOUSE BOOKKEEPER OF COMPANY BCD. HER
EMPLOYMENT CONTRACT ENTITLES HER TO A MONTHLY
1 SALARY OF ₱31,500.00. HOW MUCH IS HER ANNUAL SALARY
(EXCLUDING ALLOWANCES, BENEFITS, AND OTHER
BONUSES)?
Answer area

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 WAGES

W=RxH

where
W = wage
R = hourly rate
H = no. of hours worked within the pay period

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 Earning Wage

Tonyo works as a mason in a construction firm. They are

paying him ₱92 per hour of work rendered. Every day, he works
for 7 hours. How much would Tonyo earn on a pay period of 5-
day work?

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 Earning Wage

Solution:
W=RxH
W = 92 x (7 x 5)
W = 92 x 35
W = 3,220

Tonyo will earn ₱3,220 for the pay period of 5-day work.

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 AN EMPLOYEE IS PAID ₱135 PER HOUR. IF HE WORKED FOR
2 46 HOURS IN A WEEK, HOW MUCH WOULD BE HIS
EARNINGS?

Answer area

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 OTHER TYPES OF COMPENSATION

PER-PIECE RATE COMMISSION

● compensation per piece compensation equivalent to
of work accomplished or a portion of the sales
item produced generated in a given period

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 OTHER TYPES OF COMPENSATION

Per-piece Rate

CP = PR x PP

where
CP = Compensation on per piece rate
PR = Per-piece rate
PP = Number of pieces produced

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 Calculating the Per-Piece Compensation

Dominick is a tailor who is paid ₱1,250 for every suit

that he sews. In March, he sewed seven suits. How
much is his income in the said month?

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 Calculating the Per-Piece Compensation

Solution:
C = PR x PP
C = ₱1,250 x 7
C = 8,750

Dominick’s income for sewing seven suits is ₱8,750.

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 A SEAMSTRESS IS GETTING PAID ₱4.50 FOR EVERY RUG THAT
3 SHE SEWS. IF SHE COULD FINISH 125 RUGS IN A DAY, HOW
MUCH WOULD SHE EARN?

Answer area

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 OTHER TYPES OF COMPENSATION

Commission

C=SxR

where
C = Commission
S= Sales
R = Rate of Commission

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 Compensation Based on Straight Commission

Sonny is a part-time sales agent of an insurance

company. He is being paid 20% of his annual sales. If he
sold a total of ₱120,000 worth of insurance in 2020, how
much would he earn at the end of 2020?

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 Compensation Based on Straight Commission

Solution:
C=SxR
C = 120,000 x 0.20
C = ₱24,000

Sonny would earn ₱24,000 at the end of 2020.

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 A SALES REPRESENTATIVE OF A JUICE COMPANY SOLD
₱450,000 WORTH OF MERCHANDISE IN SIX MONTHS. HE
4 WILL EARN 30% OF HIS SALES AS HIS COMMISSION. HOW
MUCH WOULD BE HIS COMMISSION?

Answer area

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 The Effects of Compensation

The globalization of product markets has intensified

competition in various industries. During the last 30 years,
productivity growth of the United States has been less than
in Japan, Germany, Sweden, and many other countries.

Compensation is an essential factor in strategic planning. It

might take a hit on the financial status of an organization,
but there is some empirical evidence that it is an excellent
factor to increase productivity.

Waldemar Karwowski and Gavriel Salvendy, Organization and Management of Advanced 33

Manufacturing (New York: John Wiley & Sons, Inc., 1994)
 The Effects of Compensation

The influence of Compensation practices on essential

objectives can be very straightforward, for example, skill-
based pay. Employees with more skills can get paid more
money.

Waldemar Karwowski and Gavriel Salvendy, Organization and Management of Advanced 34

Manufacturing (New York: John Wiley & Sons, Inc., 1994)
● Employees and workers receive compensation for the time, effort,
skill, and intellect they contributed to an organization. The typical
forms of compensation are salaries and wages.

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● Salary is a fixed amount given to an employee for a pay period.
Wages are the compensation that is given to a worker based on the
number of hours or days rendered for work.

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● Other types of compensation include per-piece rate and commission.
Per-piece rate is the compensation given to workers per piece of
product produced. Commission, on the other hand, is the
compensation given to an employee where the amount is from a
portion of the sales for a given period of time.

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38
Identify what is being described.

1. a fixed amount in each pay period Compensation

Salary
Answer area

Per-piece rate

Wages

Commission

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Identify what is being described.

2. given to a worker per piece of item Compensation

produced
Salary
Answer area

Per-piece rate

Wages

Commission

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Identify what is being described.

3. given to an employee in which the Compensation

amount is from a portion of the sales
Salary
Answer area

Per-piece rate

Wages

Commission

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Identify what is being described.

4. given to an employee based on an Compensation

hourly rate
Salary
Answer area

Per-piece rate

Wages

Commission

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Identify what is being described.

5. benefits that are received by an Compensation

employee or worker in exchange for
the service they provide to their
employer Salary
Answer area Per-piece rate

Wages

Commission

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Compute the earnings of the following employees.

1. Karla is receiving a monthly salary of ₱24 000. How much

will be her annual salary?

Answer area

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Compute the earnings of the following employees.

2. Klyde is offered ₱15 for every shirt that she sews. How much
would she earn if she finishes 80 shirts a day?

Answer area

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Answer the following:

1. You are a small business owner. You have three

employees. One of them earns a fixed salary of ₱4,200
every 2 weeks. Two of them are being paid ₱55 per hour. In
February, all employees worked for 8 hours for 20 working
days.

A. How much compensation would the employees earn?

B. Who will earn the most compensation?

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Answer the following:
2. In your coffee shop, there are two employees: A barista
and a cashier. Both of them are paid ₱75 per hour. The
barista worked overtime on his rest day for 4 hours. On the
other hand, the cashier worked overtime on a regular
holiday for 2 hours.

A. Who earned more overtime Pay?

B. What is the factor that caused the overtime pay
difference?

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