Ms. Ma.

Lourdes Valero
VP Finance and Admin
Bistro Group Restaurant Concepts
2176 Primo Rivera St.
La Paz, Makati City
Philippines, 1204

September 23, 2011

Subject: Engagement letter to provide Timekeeping and Payroll
Processing Services.

Dear Ms. Valero:

Following our discussion regarding handling of your payroll processes, Assurance
& Business Advisory Resource, Inc. (ABAR) is pleased to present our
engagement letter to provide Bistro Group (Bistro) confidential payroll services.
Fundamentally, our role is to process the payroll requirements of your 88
personnel in the corporate rank & file group, supervisory and certain managerial
positions.
Our approach considers the fact that Bistro wishes to engage ABAR to outsource
its timekeeping and payroll processing with the primary goals of:

Gaining access to needed skills

Increase flexibility and responsiveness
Reducing operating cost
Focusing on data analysis

Presented in detail are the scope of our service, statement of confidentiality and
our fees.
Scope of services
Based on our understanding of your needs and requirements, the following are
the scope of work to be undertaken by ABAR:

1. Initial Set-up
This particular area of the work consist of the following activities:
Set-up of the initial master file data (employer and employee information and
policies on attendance, leaves, and other payroll related policies) in ABARs
payroll system. ABAR shall work with Bistro HR manager and payroll officer or
nominated officer in this activity. The following are the preliminary requirements
for the set up:

Policies on attendance, vacation and sick leave, overtime and others related to
payroll.
Number of working days in a year which will be the basis of computing daily
and hourly rates.
List of officers and employees to be included in the payroll showing:
Complete name of officers and employees with the following information:
Marital status, names of spouse and qualified dependent children and
dates of Birth or names of dependents, relationship and date of birth, if
taxpayer is head of the family.
Officers and Employees Dates of birth
Date Hired
Citizenship
Registered address and ZIP Code
Local Home Address and ZIP Code
Respective division, department and/or cost center position
Basic salary and benefits (indicate taxable and non taxable portion)
Taxpayer Identification Number (TIN)
SSS, HDMF and Philhealth ID Number
Bank account number
Withholding tax exemption unit (BIR Form No. 2305)
Deductions (loans, etc. balances, start/end of deductions, monthly
amortization, etc)
Employer
Bank account from where the salary transfer to the individual officers and
employees originate
Contact officer
Taxpayer Identification Number
Name, position, marital status, citizenship and address of the authorized
officer who will sign the BIR Form 2316 or Certificate of Compensation
Payment/Tax Withheld (should be occupying a rank not lower than Head of
Personnel or equivalent office) as well as other government reports

 Community tax certificate of the authorized officer (number, place and

date of issue)
SSS ID number
Philhealth ID number
Aggregate balances of all earnings (in details and deductions for
withholding taxes, SSS, Philhealth and HDMF from January of the current
year up to the payroll period immediately preceding the inception of our
services.
Other specific procedures such as cut-offs and arrangement with your paying
banks and others will be discussed with you upon acceptance of this proposal.
2. Timekeeping
a.

Process documents related to timekeeping activities such as but not limited

to the following:
Timesheets
Overtime authorization
Official Business authorization
Approved leave application

Information and instructions received after the cut-off date (on or before the 2 nd
and 17th) shall be included in the next processing. Should Bistro require, however
that instructions received after the deadline dates be effected, a schedule of
special run will be made and the time spent will be charged to Bistro equivalent
to 50% of the monthly fee.
Specific outputs for this activity include:
Attendance Summary
Overtime summary
Leave summary
3. Semi-monthly Payroll processing
a. Process the regular payroll, bonuses, incentives, cycle payments and other
policy-based payments which involve the calculation of earnings and
allowances and deductions. The processing of the payroll will be based solely
on Bistros business rules, employee master data and on information and
instructions that will be provided by Bistro on a timely basis. As there is a
deadline to meet, the timetable should be strictly followed. These information
and instructions shall include, but not limited to:

Changes in employment status

Changes in salary
Additional officers and employees
Attendance
One time earnings
One time deductions
Deductions to be discontinued
Other earnings and deductions

The calculation of taxes shall be based on the BIR tax table.

Likewise, information and instructions received after the cut-off date (on or before
the 2nd and 17th) shall be included in the next processing. Should Bistro require,
however that instructions received after the deadline dates be effected, a
schedule of special run will be made and the time spent will be charged to Bistro
equivalent to 50% of the monthly fee.
b. Prepare and send in one package to Bistros designated officer the individually
sealed payslips marked Private and Confidential for distribution.
c. Furnish Bistro the accounting data as basis for taking up in Bistros books the
payroll transactions.
d. Prepare, generate and submit to Bistro all the necessary reports related to
payroll processing.
Specific outputs from this activity are the following:

Payroll register

Earnings register

Deduction register

Loans Register

Bank list in hard and soft copies showing net pay of employees

Individual payslips

Accounting Entry

4. Year-end Computation of Payroll Income Taxes (Annualization)

a. Calculate and determine the annual taxable income and payroll income taxes
on employees annual payroll at the end of the year based on information
obtained from ABARs payroll files and on additional information and

documents that will be provided by Bistro (like BIR Form 2316 from previous
employer of newly hired officers and employees).
b. Prepare the annual certificates of withholding taxes (BIR Form 2316) for each
officer and employee. Bistro will have to submit to ABAR not later than
January 15th of each year the name of the officer who will sign the Form 2316,
and the current community tax certificate (number and date and place of
issue) of the officer.
c. Prepare and submit to Bistro the Annual Return of Income Tax Withheld on
Compensation (BIR Form No. 1604) together with the Alphabetical List of
Employees from Whom Taxes Have Been Withheld (Alphalist) which is due on
or before January 31 of each year.
5. Monthly Payroll Income Tax Reporting
a. Advise Bistro of the amount of withholding taxes to be paid to the BIR.
b. Prepare and submit to Bistro for filing the BIR monthly withholding income tax
report.
The deliverable is the BIR form that shall accompany the remittance of the
withholding taxes and withholding tax register.
6. Monthly/Quarterly Social Security, Philhealth and HDMF Reporting
a. Advise Bistro of the amounts of SSS, Philhealth and HDMF premium
contributions and loan repayments to be remitted to the respective
government agencies.
b. Prepare and submit to Bistro for filing the required monthly/quarterly reports
related to SSS, Philhealth and HDMF premium contributions and loan
repayments. It will not be the responsibility of ABAR to ensure that the
respective agencies have posted the payments in their records.
The specific outputs from this activity are the reports required to come with the
remittances of premium contributions and loan repayments to the government
agencies.
6.

Adhoc Final Pay Computation

a. Compute the final pay and withholding tax of an officer or employee who is
separated during the year based on the payroll records as well as instructions
of Bistro.

b. Annualize and determine the taxable compensation income and related payroll
income tax of a separated officer or employees based on the payroll records
after taking into consideration the instructions of Bistro.
c. Prepare the certificate of withholding income tax and forward to Bistro for
releasing to the separated officer or employee.
The deliverables are:
Payslips
BIR Form no. 2316
Final Pay computation report

Confidentiality Clause
ABAR acknowledges that in the course of its performance of services for Bistro
under this agreement, it and its designated service team, in particular, will
acquire information concerning the business affairs or property of Bistro, all of
which are considered confidential and proprietary in nature.
ABAR agrees to protect all such confidential or proprietary information received or
acquired by it or its designated service team from Bistro as it would its own
confidential and proprietary information, and further agrees that it will not
disclose such information to third parties or use the same for its own commercial
benefit or for the benefit of others, without the prior written consent from Bistro.
This confidentiality obligation shall survive the termination or expiration of this
agreement.
Fees
We shall require that Bistro be bind with the contract for two (2) years upon the
commencement of the engagement.
Based on our understanding of your requirements, the payroll cycle and number
of employees covered, we propose the following fees:

No. of Employees
Set up fee
Monthly Retainer

88
@ Php 157.50 per
employee
@ Php 315 per
employee

Total
Php13,860
Php27,720

Annualization

@ Php 315 per

employee

Php27,720

The monthly retainer fee rate shall apply up to 100 employees. Conversely, if the
number of employees exceeds 100, the rate per employee to in excess of 100 will
be subject to an upward adjustment mutually agreed upon by Bistro and ABAR.
The one time set-up fee, which will cover the setting up of the payroll data in our
system, will be billed upon acceptance of the engagement. The annualization
fee, which covers the annualization of earnings and taxes and preparation of BIR
Form 2316 and 2307, will be billed upon submission of the Alpha List and BIR
Form 2316 and 2307. The monthly retainer fees will be billed every 10 th of month.
The fees are exclusive of value added tax (VAT).
We shall request for additional billings or adjustments in our fees in consideration
of any of the following:

Significant increase in our cost of servicing your payroll due to inflation or

general increase in cost of goods and/or services;

Additional reports or services that you may require other than those
enumerated above;

Re-processing of regular payroll as a result of changes in instructions received

by us after cut-off date and

Payroll adjustments arising from new/approved government

regulations.

Terms and Conditions

The terms and conditions of this engagement letter shall be governed by, and
construed in accordance with the laws of the Philippines and it is hereby
irrevocably agreed and accepted that only the courts of Quezon City shall have
exclusive jurisdiction to settle any claim, difference or dispute, including, without
limitation, claims for set-off or counterclaims which may arise out of or in
connection with such engagement. Each party irrevocably waives any claim that
the action has been brought in an inconvenient forum.
*****

We are pleased to have the opportunity to provide our services to Bistro Group
Restaurant Concepts and appreciate your confidence in us. To accept this
Engagement Letter and to confirm the Contract, please sign both copies of this
Engagement Letter and return one copy to ABAR for record purposes. In so
signing, Bistro agrees to engage ABAR on the terms of this Contract and Bistro
acknowledges that it has received a copy of the Standard Terms that form an
integral part of the Contract between the parties.

Very truly yours,

Augusto C. Cabugao
Managing Director

Agreed by Bistro Group:

Signature of Client Official
Please print name
Title
Date

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