Payroll and taxes in the Philippines
Philippine payroll runs twice a month, with wages due at intervals of no more than 16 days. On top of salary the employer pays 10% SSS on a salary credit capped at PHP 35,000, 2.5% PhilHealth on salary up to PHP 100,000, 2% Pag-IBIG on a PHP 10,000 fund salary, and a 13th month by 24 December. Income tax is withheld on a progressive scale from 0% to 35%.
At a glance
Key figures with the official source for each, checked November 2026.
| Item | Rule or figure | Official source |
|---|---|---|
| Payroll cycle | At least twice a month, intervals of no more than 16 days (Labor Code Art. 103) | Labor Code of the Philippines (PD 442) |
| SSS contribution | 15% of monthly salary credit: employer 10%, employee 5%. Salary credit range PHP 5,000 to PHP 35,000 | Social Security System |
| Employees' Compensation (EC) | Employer only: PHP 10 a month for salary credit of PHP 14,500 and below, PHP 30 for PHP 15,000 and above | Social Security System |
| PhilHealth premium | 5% of basic monthly salary, split equally. Floor PHP 10,000, ceiling PHP 100,000 (total premium PHP 500 to PHP 5,000) | PhilHealth Advisory 2025-0002 |
| Pag-IBIG contribution | 2% employer and 2% employee on a maximum fund salary of PHP 10,000 (Circular 460, from February 2024) | Pag-IBIG Fund Circular No. 460, as summarised by Forvis Mazars |
| Income tax withholding | 0% up to PHP 250,000 a year, then 15%, 20%, 25%, 30%, and 35% above PHP 8,000,000 | National Internal Revenue Code as amended by RA 10963 (TRAIN) |
| 13th-month pay | One twelfth of basic salary earned in the year, due by 24 December. Compliance report to DOLE by 15 January | PD 851 and implementing rules |
| Tax-exempt bonus ceiling | 13th-month pay and other benefits are excluded from taxable income up to PHP 90,000 a year | RA 10963 (TRAIN), Section 32(B)(7)(e) |
| SSS remittance deadline | Last day of the month following the applicable month for regular employers | Social Security System |
| NCR minimum wage | PHP 755 a day non-agriculture under Wage Order NCR-28, effective 26 September 2026 | National Wages and Productivity Commission |
Payroll cycle and employer registrations
Article 103 of the Labor Code requires wages to be paid at least once every two weeks or twice a month, at intervals of no more than 16 days. Most employers pay on the 15th and the last day of the month. A single monthly pay run does not meet the rule.
Before the first pay run an employer needs four accounts:
- Bureau of Internal Revenue (BIR). Registration as a withholding agent for tax on compensation.
- Social Security System (SSS). An employer number. The Social Security Act (RA 11199) requires covered employees to be reported, and an Annual Register of New and Separated Employees is filed each January.
- PhilHealth. A PhilHealth Employer Number (PEN), which also sets the remittance window.
- Pag-IBIG Fund (HDMF). An employer account for housing fund contributions.
A foreign company with no Philippine entity cannot hold these accounts in its own name. That is the practical reason companies without an entity hire through an EOR, which runs payroll under its own registrations while the client directs the work.
Income tax withholding
The employer withholds income tax from each pay run and remits it to the BIR. The annual schedule in force since 1 January 2023 under the TRAIN Law (RA 10963) is:
| Annual taxable income (PHP) | Tax |
|---|---|
| Up to 250,000 | 0% |
| Over 250,000 to 400,000 | 15% of the excess over 250,000 |
| Over 400,000 to 800,000 | 22,500 plus 20% of the excess over 400,000 |
| Over 800,000 to 2,000,000 | 102,500 plus 25% of the excess over 800,000 |
| Over 2,000,000 to 8,000,000 | 402,500 plus 30% of the excess over 2,000,000 |
| Over 8,000,000 | 2,202,500 plus 35% of the excess over 8,000,000 |
Minimum wage earners are exempt from income tax on their wages. Employee shares of SSS, PhilHealth and Pag-IBIG reduce taxable pay. The 13th month and other bonuses are excluded up to a combined PHP 90,000 a year. Fringe benefits given to managerial and supervisory staff are subject to a separate 35% final tax on the grossed-up value, paid by the employer.
Social contributions: rates and caps
Three agencies collect contributions, each on its own capped base. Current figures:
| Scheme | Employer | Employee | Base and cap |
|---|---|---|---|
| SSS | 10% | 5% | Monthly salary credit, PHP 5,000 to PHP 35,000 |
| Employees' Compensation | PHP 10 or PHP 30 a month | None | PHP 30 applies at salary credit of PHP 15,000 and above |
| PhilHealth | 2.5% | 2.5% | Basic monthly salary, floor PHP 10,000, ceiling PHP 100,000 |
| Pag-IBIG | 2% | 2% | Fund salary capped at PHP 10,000 |
At the caps, the employer's monthly cost is PHP 3,500 for SSS plus PHP 30 for EC, PHP 2,500 for PhilHealth and PHP 200 for Pag-IBIG. For an employee earning PHP 100,000 a month that is PHP 6,230, or about 6.2% of salary. The percentage is higher for lower salaries because the caps bite less.
The part of the SSS contribution on salary credit above PHP 20,000 goes to the employee's Mandatory Provident Fund account. The SSS rate has been 15% since 1 January 2025. PhilHealth's 5% rate is the maximum set by the Universal Health Care Act.
13th-month pay and premium pay
Presidential Decree 851 requires every employer to pay rank-and-file employees a 13th month. The amount is total basic salary earned in the calendar year divided by 12. An employee who worked at least one month in the year qualifies, and leavers are paid pro rata. Payment is due by 24 December. Employers may pay half earlier in the year and the balance by that date. A compliance report goes to DOLE through its online Establishment Report System by 15 January.
Managerial employees are outside PD 851, but most employers pay them a 13th month by contract.
Payroll must also apply statutory premiums for covered staff:
- Overtime: hourly rate plus 25%.
- Night shift differential: 10% for each hour worked between 10 pm and 6 am.
- Rest day or special day worked: 130% of the daily rate.
- Regular holiday: 100% if not worked, 200% if worked, 260% if it also falls on a rest day.
These premiums matter for teams working night shifts to cover US hours. They should be costed before offers go out.
Filing and remittance deadlines
Each agency has its own calendar. The recurring deadlines are:
- BIR Form 1601-C (monthly remittance of tax withheld on compensation): the 10th of the following month for filers outside the electronic filing and payment system (eFPS). eFPS filers file between the 11th and 15th depending on their group.
- SSS: the last day of the month following the applicable month.
- PhilHealth: the 11th to 15th of the following month for employer numbers ending in 0 to 4, and the 16th to 20th for those ending in 5 to 9. Payment and reporting go through the Electronic Premium Remittance System.
- Pag-IBIG: monthly, on the schedule the Fund assigns to the employer.
Late payment is expensive. The Social Security Act adds a penalty of 2% a month on unpaid SSS contributions. The Universal Health Care Act sets interest of at least 3%, compounded monthly, on missed PhilHealth premiums. PhilHealth Circular 2026-0001 offers a one-time waiver of interest on arrears from July 2013 to December 2024 for employers who apply by 31 December 2026.
Year-end annualisation and reporting
Tax withheld during the year is an estimate. In December the employer recomputes each employee's tax on actual annual pay and adjusts the final pay run, refunding any excess or collecting any shortfall. This should be finished before the December withholding return is filed.
The year-end documents are:
- BIR Form 2316 (Certificate of Compensation Payment and Tax Withheld): issued to every employee by 31 January, signed by both the employer and the employee.
- BIR Form 1604-C with the alphalist of employees: filed by 31 January.
- Duplicate Forms 2316 for employees under substituted filing: submitted to the BIR by 28 February.
- 13th-month compliance report: filed with DOLE by 15 January.
- SSS Annual Register of New and Separated Employees: filed in January.
Substituted filing means the employee does not file a personal return. It applies when the employee had only compensation income, from one Philippine employer in the year, and the tax withheld equals the tax due. Other employees file their own return by 15 April.
Frequently asked questions
How often do employees have to be paid in the Philippines?
At least twice a month. Article 103 of the Labor Code requires wages at least once every two weeks or twice a month, with no more than 16 days between pay dates. Most employers pay on the 15th and the last day of the month.
What are the employer contribution rates in the Philippines in 2026?
The employer pays 10% SSS on a monthly salary credit capped at PHP 35,000, 2.5% PhilHealth on basic salary between PHP 10,000 and PHP 100,000, and 2% Pag-IBIG on a fund salary capped at PHP 10,000. The employer also pays PHP 10 or PHP 30 a month for Employees' Compensation. At the caps this totals PHP 6,230 a month.
Is 13th-month pay mandatory in the Philippines?
Yes, for rank-and-file employees who worked at least one month in the year. It equals total basic salary for the year divided by 12 and must be paid by 24 December. The employer reports compliance to DOLE by 15 January.
Is the 13th-month pay taxable?
The 13th month and other bonuses are excluded from taxable income up to a combined PHP 90,000 a year under the TRAIN Law. Any amount above that ceiling is taxed as compensation at the employee's marginal rate.
More on hiring in the Philippines
Employer of record and hiring guide for the Philippines · Termination and notice · Benefits and leave · Contractors vs employees · Cost calculator · EOR vs PEO vs entity
Sources
- Social Security System: contribution schedule
- PhilHealth Advisory 2025-0002: premium rate, floor and ceiling
- PhilHealth: employer payment and reporting procedures
- PhilHealth Circular 2026-0001: interest waiver
- RA 10963 (TRAIN Law)
- Labor Code of the Philippines (PD 442)
- PD 851 and implementing rules: 13th-month pay
- RA 11199, Social Security Act of 2018
This page is general information, not legal, tax or immigration advice. Rates, thresholds and procedures change, and how they apply depends on the facts. Confirm current figures with a qualified adviser or with Dryft before acting. Checked November 2026.
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