MINIMUM WAGE EARNER UNDER THE TRAIN LAW

Minimum wage earner (MWE) refers to a worker in the private sector paid the statutory minimum wage or to an employee in the public sector with compensation income of not more than the statutory minimum wage in the non-agricultural sector where he/she is assigned. (Sec. 22 [HH], NIRC)

Such statutory minimum wage rates are exempted from income tax. The TRAIN Law (RA10963) likewise exempts the holiday pay from income tax. The TRAIN Law mentions that MWE shall be exempt from he payment of income tax on their taxable income: Provided, further, That the holiday pay, received by such minimum wage earners shall likewise be exempt from income tax.

How about other items of supplementary income like the overtime, night shift differential and the hazard pay that were expressly mentioned as exempt under RA 9504?

Republic Act 9504 expressly exempts from tax the minimum wage earners (MWE). It provides further that the holiday pay, overtime pay, night shift differential pay and hazard pay received by such minimum wage earners shall likewise be exempt from income tax.

Thus, sample computation of this exemption would look like this:

The Supplementary income of holiday pay, NSD and the OT will be exempt under RA 9504 prior to TRAIN Law.

With the TRAIN Law however, the relevant provision expressly mentions only the holiday pay as exempted.

Does this mean that overtime pay, night shift differential pay, and the hazard pay will now be taxable? On February 20, 2018 the BIR issued Revenue Regulation No. 8-2018 expressly exempting holiday pay, NSD,  OT and Hazard Pay. It seems the BIR will not be looking for tax remittances of these supplementary benefits.

Taxpayer is tax exempt as an MWE. The statutory minimum wage as well as the holiday pay, overtime pay. night shift differential pay and hazard pay’ received by such MWE are specificallv exempted from income tax under the law. (Sec. 3, RR 8-2018, Feb. 20, 2018; Published MB Feb. 22, 2018)

RR 8-2018 defines MWE as a worker in the private sector who is paid with a statutory minimum wage (SMW) rates, or to an employee in the public sector with compensation income of not more than the statutory minimum wage rates in the non-agricultural sector where the worker/employee is assigned. Such statutory minimum wage rates are exempted from income tax. Likewise, the exemption covers the holiday pay, overtime pay, night shift differential pay, and hazard pay earned by an MWE. (Sec. 2 (i) RR 8-2018)

How to properly determine the equivalent monthly or daily minimum wage in the book Solutions and Remedies on Wage Order and Minimum Wage.