BAGUIO CITY – Employees are expected to see a rise in their pay checks toward the end of the year as employers will be implementing the pertinent provisions of Republic Act (A) 10653 or the law that adjusts the ceiling for the non-taxability of 13th month pay and other benefits from P30,000 to P82,000. Other benefits include excess rice allowance, Christmas bonus, productivity-incentive bonus, loyalty award, gifts in cash or in kind and other benefits of similar nature actually received by officials and employees of both government and private offices.
With many employers still employing the old threshold, significant adjustments to the employees’ pay will be done in order to put into effect the increased thresholds at the end of the year. To illustrate, an employee with a total 13th month pay and other bonuses totaling 100,000 for the year will have to pay the taxes for the P70,000 since the employee is only allowed an exemption of up to P30,000. With the new law in place, the first P82,000 will be exempt from income tax and only the remaining P18,000 will be included in the computation of the employee’s income tax for the year. This in effect will increase the employee’s take home pay for the year by as much as P16,640, assuming he has a tax rate of 32 percent.
For many employees, the increased exemption threshold will effectively make their 13th month pay and other bonuses as tax exempt prompting employers to adjust their yearend take-home pay.
The new law also mandates the President to adjust this threshold every three years to its present value using the consumer price index (CPI) as published by the National Statistics Office (NSO).
With increased purchasing power, employees are advised to properly save and invest in proven savings and investment mechanisms duly approved by the government. Personal financial experts advise people to develop a proper money mentality driven by future financial needs such as retirement, education funding and health funding.
Milagros A. Rimando, regional director of the Cordillera office of the National Economic Development Authority (NEDA-CAR), said receiving bonuses should not mean purely spending but employees must also learn how to save and properly invest their money for their future needs and the needs of their children.
In this regard, a leading insurance and investment firm has recently launched Live Free, Philippines, an advocacy that seeks to help build a nation of Filipinos empowered to choose and take action to achieve a new kind of freedom – financial freedom. This advocacy was launched by Sun Life of Canada (Philippines) after a recent national survey conducted by the Social Weather Station (SWS) regarding Filipinos’ own personal financial situation revealed that 18% of the people surveyed said they are not doing anything to improve their financial situation.
Sun Life Financial encourages employees to seek the help of their professional financial advisors or visit their various Sun Life offices across the country in order to be informed on proper financial planning concepts.
“Sun Life aims to encourage Filipinos to pursue financial freedom and we have over 7,000 advisors nationwide to help them in their journey towards this new kind of freedom,” said Sun Life Chief Marketing Officer Mylene Lopa.
Dexter A. See