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For many of us, payday is a highly anticipated day of the month. But while the focus is often on the amount of money credited to our bank accounts, not everyone takes the time to review and fully understand the document that comes with every “sahod”: our payslip.
A payslip is an official document that contains the breakdown of your earnings and deductions. All companies are mandated by the Department of Labor and Employment (DOLE) to issue payslips to employees for better tracking and transparency.
“Your payslip is more than just a list of numbers – it paints a picture of how much money you earned, where part of it goes, and how you can better manage your cash,” said Julie Ann Flores, Human Resources – Center of Excellence Head at CIMB Bank Philippines. “You’d be surprised at the number of employees who reach out to HR departments every payday with questions that can be easily answered if they only knew how to decipher their payslips.”
Understanding the money that goes in and out of your monthly salary
Your payslip is typically divided into two sections: compensation and deductions. One of the most common questions employees ask is the difference between basic pay, gross pay, and net pay.
Flores shared an easy way to distinguish the three, explaining that your basic pay is the fixed amount you are expected to receive based on your employment agreement or contract. It can be computed by multiplying your daily rate by the number of days you worked during the pay period. Once you add company allowances to your basic pay, such as transportation, telco, or rice allowances as well as additional earnings like bonuses, night differential, holiday pay, and overtime pay, this becomes your gross pay.
She further explained that payslips also show the different items that are deducted from your salary. This includes mandatory items like income taxes and government contributions, as well as special items like loan repayments. When deductions are subtracted from your gross pay, you will then arrive at your net pay, or more commonly referred to as your “take-home pay”
“Many employees would zero in on their net pay when looking at their payslips, sometimes missing out on the opportunity to double check if their earnings and the corresponding deductions are correct,” said Flores. “It’s important to check both so you can determine if you are being paid correctly. After all, you worked hard to earn your salary. If you find any discrepancies, even months down the line, report this immediately to your company’s payroll officer for immediate correction.”
Maximizing the other uses of your payslip
Your payslip isn’t just a company-issued file; it is also considered a legal document that is required by DOLE to be issued to all employees every payday.
“Your payslip serves as a key proof of income. It supports your Certificate of Employment when trying to borrow money such as for housing loans or a new car. Just make sure that your payslip has been signed off by your HR department so that it can be considered as a certified true copy,” shared Flores. “Same with visa applications – payslips can also be used to prove your earning capacity to help the embassy assess your profile better.”
When you eventually decide to move to a different company, your payslip can also be used as a reference point by hiring managers to make sure their offers are competitive and attractive enough for candidates. Knowing the ins and outs of your payslip can help you navigate these discussions and arrive at a new starting salary that you’re comfortable with.
Aiming for a “healthy” payslip
Flores shared that there are instances where employees are surprised at how low their take-home pay is and are puzzled at what affects their net pay.
“The usual deductions in your payslip are the ones mandated by the government, which are your income tax and statutory benefits,” she said. “But if you have loans from various sources – calamity loans, multipurpose loans, personal loans, etc., the debt repayment can really affect your net pay.”
According to Flores, this is where the information in your payslip can be used to guide you on how to adjust your finances. While mandatory deductions are fixed, understanding them better can help you become more aware of your actual cash flow to manage your finances more effectively.
“By learning how to read payslips properly, employees can make more informed financial decisions, avoid confusion about deductions, and plan budgets more effectively. Understanding your payslip is one of the first steps towards financial empowerment,” she ended.
