What is back pay and computation of back pay? I have thought really hard before I started writing and just trying to grasp the entire meaning of it. I have been in the BPO industry for quite some time now yet personally, I have never had any major experiences of getting a back pay due to miscalculations for my salary.
This does not mean I have always been paid the exact amount equivalent to the time I’ve rendered for work though. One can find discrepancies with the compensation just about everywhere we work, whether we are in a private firm or in a government entity. According to some business dictionary, back pay is simply defined as any past wages or benefits which may include bonuses, overtime pays, and night differential premiums, to which an employee is entitled to.
Moreover, promotion to a higher position which entails an increase with one’s salary, changes in minimum wages, mistakes committed by the payroll department due to incorrect information forwarded by the team leaders, and confusion over service incentive leaves and holiday schedules can all resort to back pay calculations which can sometimes be a real financial concern in any company.
In its essence, back pay is simply the result of a missed payment or a payment that was intentionally not made. Truly, a back pay is unfortunate yet is necessary. I have heard many of my teammates complain and whine about their pay in the past when they did not get their expected salary for the payout. They would then go to HR and inquire to get things corrected. Once they get the explanation from HR, they would then wait for the next payout to get the computation rectified only to find out that the back pay is not there yet so they find themselves back in the Human Resource office.
Computation of Back Pay in the Philippines can be a real pain. We may need a human resource specialist to discuss how it is computed and as to how long employees need to wait to receive their back pay. Furthermore, Computation of Back Pay in the Philippines is normally computed on a spreadsheet program on a daily, weekly manner, or in any other time cycle appropriate to a given scenario. One can expect several columns and labels all throughout the spreadsheet to make room for several iterations.
Back pay computation may also include or may not include deductions for taxes and for Social Security but can include holidays and overtime and other deductions though. Ideally, when there is a dispute filed on one payout, back pay is expected to be given right after the next payout. However, this does not seem to apply in most centers I know. In the event that there is a discrepancy with the compensation, some employees would surely vent out their frustrations but would never really take the time to file for a claim on their disputes thinking it is not going to be credited back to them or it would take them forever to get it. What they don’t realize is that they are legally entitled for back pay and that they can take legal actions in the event that they are denied of the claim.
In summary, there is no concrete formula for Back Pay computation in the Philippines, as it varies depending on the factors. Some of the factors are:
- Pro-rated 13th month pay
- Last Salary – your last salary is normally held and will be release as back pay
- Unpaid salary due to cut-off – most companies implement 10th and 25th cutoff time for payroll. Assuming you resigned on the 30th, that means your backpay includes 5 days of work.
- Vacation Leaves & Sick Leaves – depending on company policies, leaves can be converted to cash. By labor code, maximum of 5 leaves should be converted to cash as mandated by law.
Here’s an example calculation of back pay.
Salary: Php 20,000 per month
Date of Resignation: September 1
Taxable Income: Php 16,500
- Bonus/Incentives: Php 2,000
- 1 cutoff + 5 days = Php 14,500
Non Taxable income: Php 22, 833.33
- Pro-rated 13th month pay: Php 13,333.33
- Rice Allowance: Php 2,500
- Leave conversion: Php 8,000
Tax due: Php 3,300
Final Net Pay: Php 36,033.33
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