Commissions

A commission is a fee that a business pays to a salesperson (agent)

in exchange for his services in either facilitating, supervising, or
completing a sale

3 types of
1. Straight Commission, also called (revenue commission) – a commission
based on a percentage of sales only. (This is very profitable if you are
selling high-ticket items.)

Example 1: Mike receives 20% commission on the appliances he sells.

If he sell a TV for PhP7,000, a refrigerator for PhP12,000, and a heater
for PhP 1500, how much does Mike make in commission?

Solution: Total sales = PhP7,000 + PhP12,000 + PhP1,500 =

PhP20,500

2. Salary plus Commission – a commission in which a salesperson gets his

basic salary and a percentage of whatever sales he makes.

Example 2: Mike decides to work for another company that will pay
him PhP2,000 per week and 10% commission on sales above PhP20,000 for
the week. If he sold goods worth PhP26,000, what is his gross pay (salary plus
commission)?

Solution: Amount of goods sold minus salary of PhP20,000 =

PhP26,000 – PhP20,000 = PhP6,000 His commission will be PhP6,000 x 10%
= PhP6,000 x 0.1 = PhP600

Therefore, his gross pay for the week is PhP2,000 + PhP600 =

PhP2,600.
3. Graduated Commission – a commission, which varies according to how
much sales, is made.

Example 3: Mike works for a company that pays him 2% on the first
PhP 20,000 sold, 3% on the next PhP 30,000 sold and 5% on all sales beyond
PhP50,000. What is his gross pay if he sells PhP 60,000?

Solution:
First commission share = PhP20,000 x 2% = PhP20,000 x 0.02 =
PhP400
Second commission = PhP30,000 x 3% = +30,000 x 0.03 = PhP900
Third commission = (PhP60,000 – PhP50,000) x 5% = PhP10,000 x
0.05 = PhP500

Therefore, his gross pay is PhP400 + PhP900 + PhP500 = PhP1,800

 Computing Commissions
Computing Commissions on
This type of commission is similar to computing straight
commissions.

Example 1: Mike works at ABC Gadget Store. For every cash

purchase of a cell phone, he gets 6.1%commission. In a particular
month, he was able to sell 10 cellphones costing PhP18,000 each.
How much was his total commission for such cash sales?

Solution: Total Sales = PhP18,000/cellphone x 10 cellphones =

PhP180,000 Cash commission =PhP180,000 x 6.1% =
PhP180,000 x 0.061 = PhP10,980

Computing Commissions on
Example 2: At ABC Gadget Store, some items are paid on
installment basis through credit cards. Mike was able to sell 10
cellphones costing PhP18,000 each. Each transaction is payable
in 6 months equally divided into 6 equal installments without
interest. Mike gets 2% commission on the first month for each of
the 10 cell phones. Commission decreases by 0.30% every month
thereafter and computed on the outstanding balance for the
month. How much commission does Mike receive on the first
month? On the second month? On the third month? On the fourth
month? On the fifth month? On the sixth month? At the end of
installment period, how much will be his total commission?
 Solution:

First month commission: PhP18,000/cellphone x 10 cellphones x

0.02 = PhP3,600

Second month commission: PhP15,000/cellphone x 10

cellphones x (0.02 – 0.003) = PhP2,550

Third month commission: PhP 12,000/cellphone x 10 cellphones

x (0.017 – 0.003) = PhP1,680

Fourth month commission: PhP 9,000/cellphone x 10 cellphones

x (0.014 – 0 .003) = PhP990

Fifth month commission: PhP 6,000/cellphones x 10 cellphones x

(0.011 – 0.003) = PhP480

Sixth month commission: PhP3,000/cellphone x 10 cellphones x

(0.008 – 0.003) = PhP150

His total commission for six months is PhP9,450.

Down Payment
Down payment is a first payment that one
makes when one buys something with an
agreement to pay the rest later. Obtaining
Down Payments
Example 1: When one purchases a car or any big item not
through cash but installment terms, normally, a certain down
payment is required of the buyer. Car dealers normally require a
minimum down payment, which is usually 20% of the total cost
of the vehicle being purchased. The interest on the remaining
balance is then computed depending on the number of years a
buyer would want to amortize the remaining balance. If a car
costs PhP1,000,000 and a minimum 20% down payment is
required by the company, then the buyer will have an initial cash
out of PhP200,000; that is, 20% (1,000,000) = PhP200,000. The
remaining PhP800,000 will be amortized monthly and the
amount of monthly amortization depends on the number of years
the buyer will want to pay the loan. Normally, buyers prefer a 3-
year or 5-year payment period. The lesser the number of years,
the lesser the total amount of money paid as interest to the loan.
But with this arrangement, the monthly amortization will be

Example 2: Companies selling houses or condo units lure buyers

by stating that no down payment is required but only a certain
amount of reservation fee is required. The reservation fee paid is
deductible when the buyer decides to proceed with the purchase.
Otherwise, it will be forfeited in favor of the company. After the
reservation fee has been paid, the buyer is told to pay the
monthly amortization. For instance, P10,000 per month for two
years without interest. At the end of two years, the remaining
balance will now be subjected to an interest either through in-
house or bank financing. Example 3: Other companies selling
houses or condo units also have schemes like requiring the buyer
to pay a certain cash amount after one year aside from the
monthly amortization. The cash amount increases for the next
year up to the third year. At the end of the third year, all cash
amounts and monthly amortizations paid by the buyer are
deducted from the purchase price of the unit being bought. The
remaining amount will be the one subjected to an interest either
Book or Gross Balance
This refers to the total amount of money a bank has on
deposit before adjusting for uncleared checks or
deposits, as well as reserve requirements. That is, the
book balance is a measure of what the bank has on hand
before adding or subtracting regulatory obligations and
items that will soon appear on its books. This is the
term used by banks to describe the amount of money
available before any adjustment is made for deposits in
transit, checks that have not been cleared, and reserve
requirements and interest received from “float funds”.

Example 1: A simple case of gross balance refers to what is

readily available for you to use based on your bank deposits. For
example, a check amounting toPhP5,000 that has been deposited
today may not be withdrawn the next day because it has not
cleared yet. If your bank passbook currently contains PhP30,000,
you may not be able to withdraw the whole amount yet because
your gross balance is only PhP25,000 since your check has not
been cleared yet. Definition of current increased balance: This
may refer to the total amount you have to pay that includes
penalties or interest incurred by unpaid balance from a loan or
payment you are supposed to have made but was not able to do
Example 2: Refer to Example 9 of the instructional guide for
Problems involving Fractions, Decimals, and Percent. The
following is Example 9 reproduced below: As of this month’s
cut-off date, the current total amount due from your purchases
using your credit card is PhP 99,386.59. The minimum required
payment is 5% of the total amount due. If you pay only the
minimum required payment, a financing charge of 3.4% of the
remaining balance will be charged to the next bill. Assuming you
refrain from using your credit card on any of your purchases for
the next 3 months and the financing charge of 3.4% is charged
every billing period, show your expected monthly bill for the
next 3 months. Solution: Given the current bill of PhP 99,386.59,
the minimum required payment is 0.05(99,386.59) =
PhP4,969.33. If only the minimum required payment is paid, then
the remaining debt balance is 99,386.59 - 4,969.33 = PhP94,
417.26. Assuming there are no credit bill transactions for the next
3 months and only the minimum required payment each month is
Observe that for the next 3 months, a total of PhP14,386.44 has
already been paid for the credit card bills. However, only
PhP5,184.56 (99,386.59 - 94,202.03) has been deducted so far
from the original debt of PhP99,386.59. Hence, every time we
keep paying only the required minimum payment, more money
goes to interest payments rather than payment of the actual debt.

From the above example, your minimum required payment of

PhP4,969.33 serves as your down payment for your loan of
PhP99,386.59 leaving you with a balance of PhP94,417.26 at the
start of the month. However, because there is a finance charge of
3.4%, if you are not able pay for the next month, your current
increased balance will become PhP97,627.45
Benefits of Wage Earners
 Long Term Benefits such as retirement, death, disability,
dependent's allowance.
 Minimum wage earner tax exemption.
 Bonuses and allowances like travel allowance, meal and
clothing.
 13th Month pay, Holiday pay, special pay, overtime pay,
night shift differential and hazard pay.
 Leave incentives such sick, maternity, paternity, solo parent
and others.
 Health-related benefits and insurances.

Maternity
Benefits
Under the Expanded Maternity Leave Law (Republic Act 11210),
the SSS pays qualified SSS members a cash benefit equivalent to
100% of their average daily salary credit (See the SSS maternity
benefits computation in the next section).

The paid leave lasts for up to a certain number of days

as specified by the law:

 105 days for live childbirth, regardless if it's a normal or

cesarean delivery
 120 days for single mothers who are giving birth (105
days plus additional 15 days)
60 days for women who had a miscarriage or emergency
termination of pregnancy

If Mrs. Pontemayor will have a normal delivery she will received

42,724.24 good for 60 days.
Below is the computation.
21,371.12 x 2 = 42,724.24
 retirement
benefit
The minimum retirement pay is given by
R is for retirement pay, where P is the daily rate, and T is the
number of years served. If a person retire at the age of 60 and
render a total number of years for almost 34 years in service and
has a daily minimum wage of 365 per day. So below is the
computation.
The formula is R = 22.5 x P x T
R = 22.5 x 365 x 34 = 279,225.00...

13th-month
pay
Let x be the annual basic of an employee. The 13th month of an
employee must be at least 1/2 of x. So if a minimum wage earner
wants to know the computation of his 13th -month pay here it is.
For a private employee since its a no work no pay policy, usually
they receive around 15,000 for one month so the annual basic
salary for a minimum wage earner is 15,000 x 12 = 180,000

Holiday
pay
Holiday pay refers to payment of the regular daily wage of any
unworked regular holiday. Note, that if the employee worked on
the holiday. Then he will received twice his daily wage.
Remember a wage is fixed regular payment, typically paid on daily
and weekly basis, made ny an employer to an employee, especially
ro a manual or unskilled worker, it is the part of total production
that is the return to labor as earned income.
Income is a money received, especially on regular basis, for work
or through investments.
Benefit is a payment or gift made by an employer, the state, or an
insurance company.
 Minimum
wage
minimum wage rate
was set per region,
Overtime
pay
minimum wage rate
was set per region,
Premium
pay
minimum wage rate
was set per region,
Holiday pay

minimum wage rate

was set per region,
 Night shift
differential
minimum wage rate
wasth set per region,
13 month
pay
minimum wage rate
was set per region,
Service
charges
minimum wage rate
was set per region,
province and industry
Service incentive
leave
minimum wage rate
was set per region,
province and industry
 Parental
leaves
minimum wage rate
was set per region,
province and industry
sector. This may
vary depending on
the number of
employees and gross
sales of an
Separation
pay
minimum wage rate
was set per region,
 Special leave benefits for
women
minimum wage rate
was set per region,
province and industry
sector. This may
vary depending on
the number
Retirement
of
pay
minimum wage rate
was set per region,
province and industry
Employers may give benefits to their employees other than their regular
salaries and wages called de minimis benefits that are relatively small in
value and are not taxable.

Below is the updated list of de minimis benefits based on the BIR Revenue
Regulations No. 11-2018 (RR 11-2018).

DE MINIMIS BENEFITS
 monetized unused vacation leave credits of private employees not
exceeding ten (10) days during the year;
 monetized value of vacation and sick leave credits of government
officials and employees;
 medical cash allowance to dependents of employees, not exceeding
₱1,500 per employee per semester or ₱250 per month;
 rice subsidy of P2,000 or one (1) sack of 50kg rice per month
amounting to not more than P2,000;
 uniform and clothing allowance not exceeding P6,000 per annum;
 actual medical assistance, e.g. medical allowance to cover medical
and healthcare needs, annual medical/executive check-up,
maternity, assistance and routine consultations, not exceeding
P10,000 per annum;
 laundry allowance not exceeding P300 per month;
 employee achievement awards, e.g. for length of service or safety
achievement, which must be in the form of tangible personal
property other than cash or gift certificate, with an annual
monetary value not exceeding 10,000 received by the employee
under an established written plan which does not discriminate in
favor of highly paid employees
 gifts given during Christmas and major anniversary celebrations
not exceeding $5,000 per annum:
 daily meal allowance for overtime work and graveyard shift not
exceeding twenty-five percent (25%) of the basic minimum wage
on a per region basis; and
 benefits received by an employee by virtue of a collective
bargaining agreement (CBA) and productivity incentive schemes
provided that the total monetary value received from both CBA
and productivity incentive schemes combined do not exceed
P10,000 per employee per taxable year.
If the employer granted more than this account, the excess might be
Salaries
included and
as a taxable Wages income. If the excess
compensation Taxable
benefits, bonuses,
and(Basic Compensation)
the 13th month pay exceeds P90,000 limit, that's the time it is taxable.
De Minimis Benefits Non-Taxable
To summarize the tax rules applied to all income received by an employee,
you may use the following table:
Excess of De Minimis Non-Taxable
plus 13th Month Pay and
Bonuses (maximum of
90,00
Benefits and Bonuses in Taxable
excess of 90,000
All other benefits Taxable