Split-Rate Payroll Guide Under Wage Order NCR-27 Today

The daily minimum wage will jump from ₱695 to ₱755 from July 25, 2026, in Metro Manila under Wage Order NCR-27 by DOLE. The shift of implementation from the calendar by just six days seems relatively insignificant, but is really a two-day payroll period with two different wage rates which causes extra payroll work.

In the business world, whether you’re a payroll administrator, or part of HR, it is crucial to comprehend how to compute split rate payroll precisely in order to stay current with labor laws and avert salary conflicts.

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Why Is Split-Rate Payroll Necessary?

Payroll week that includes the days before and after the effective date of the new wage order. The members of staff who worked in both periods aren’t able to just get half of the salary they could get if they worked longer each day.

Employers, instead, are required to determine wages individually on a per period basis. This will help employees to get the accurate pay as per the effective date defined under Wage Order NCR-27.

Step 1: Separate the Payroll Period

The first step in splitting the payroll period into two is to define the part of the period that is in your control.

July 16–24: Daily wage remains ₱695
Above 25 July: Wage rate increases to ₱755 per day.

When determining working days, rest days and approved leave shall not be taken into account unless it is set out in the company’s policy.

Step 2: Calculate Earnings for Each Period

After the working days have been determined, and assuming a certain number of workdays are “eligible” as discussed above, one should use this and multiply each of the eligible days by the appropriate daily wage.

Assume, for example, that an employee has been on work on July 25 between 6th and 10th and after July 25 between 25th and 30th. Then the payroll would be computed as:

6 × ₱695 = ₱4,170
5 × ₱755 = ₱3,775

The total basic salary payroll period would thus be ₱7,945 (excluding deductions and additional benefits).

Step 3: Recalculate Premium Pay

The new rate of pay not only changes an employee’s daily income, but it also influences other things as well. Payroll teams would also need to do a recalculation to statutory earnings which are related to the new minimum wage. These include:

This is included in billing as Night Shift Differential (NSD).

Overtime Pay
Holiday Premiums
Rest Day Premiums
Accrual of 13th Month Pay for non-of-diseases.
Computation of SSS and PhilHealth contributions

Premiums that were earned prior to July 25th should be calculated with the old rate and premiums earned on or after July 25th should be calculated with the new rate of ₱755.

Watch for Wage Distortion

After raising the minimum wage, hopefully the most serious issue that arises is wage distortion, or simply the large wage gap between the minimum wage worker and the supervisor is narrowed significantly.

Employment contracts should take these salary compression issues into account, and be negotiated and/or resolved in consultation with the employer, if possible, or determined according to the company’s salary policy, in line with Article 124 of the Philippine Labor Code which encourages employers to consider these salary compression issues.

Tips for Payroll Compliance

Employers should update the payroll program before salaries are paid, inform workers of the changes in the payroll process and create a payroll log to demonstrate how the changes are calculated.

When hiring a service provider to handle payroll, businesses should also make sure that Wage Order NCR-27 is being complied with correctly, otherwise problems might arise during the payroll inspections that could lead to compliance problems.