For any business operating in the Philippines, compliance with statutory benefits is non-negotiable. The government mandates that employers deduct contributions for the Social Security System (SSS), Philippine Health Insurance Corporation (PhilHealth), and Home Development Mutual Fund (Pag-IBIG) from their employees' salaries, while also providing a corresponding employer counterpart share. This guide explains how these deductions work and how to compute them accurately.
1. Social Security System (SSS)
The SSS provides social security protection to workers in the private sector. It offers benefits for sickness, maternity, disability, retirement, and death.
How to Compute SSS Contributions
The SSS contribution is based on the employee's Monthly Salary Credit (MSC), which is determined by their gross monthly compensation. The SSS publishes a contribution schedule that employers must strictly follow.
- Current Rate (2023 onwards): 14% of the MSC.
- Employee Share (EE): 4.5% of the MSC.
- Employer Share (ER): 9.5% of the MSC.
For example, if an employee earns PhP 20,000 a month, you must check the SSS table for the exact bracket to find the MSC, then apply the percentages. The employer is also responsible for paying the Employees' Compensation (EC) contribution, which is either PhP 10 or PhP 30 depending on the salary bracket.
Important: Only the Employee's share is deducted from their payroll. The Employer share is a company expense.
2. Philippine Health Insurance Corporation (PhilHealth)
PhilHealth provides health insurance coverage for all Filipinos. The contribution is a direct percentage of the employee's basic monthly salary, capped at a certain maximum limit.
How to Compute PhilHealth Contributions
Under the Universal Health Care Law, the PhilHealth premium rate increases incrementally. As of the current schedule, the rate is set at 5% of the basic monthly salary.
- Sharing: The total premium is shared equally (50/50) between the employer and the employee.
- Example: For a basic salary of PhP 20,000, the total premium is PhP 1,000 (5%). The employee pays PhP 500, and the employer pays PhP 500.
- Income Caps: There is a minimum and maximum salary ceiling. If an employee earns above the maximum ceiling, their contribution is fixed at the maximum limit.
3. Home Development Mutual Fund (Pag-IBIG)
The Pag-IBIG fund offers a national savings program and affordable housing financing. It is mandatory for all SSS-covered employees.
How to Compute Pag-IBIG Contributions
The Pag-IBIG contribution is based on the Monthly Fund Salary (MFS). However, the maximum MFS used for computation was recently raised to PhP 10,000 (starting Feb 2024).
- Contribution Rate: 2% of the MFS for both the employee and the employer.
- Maximum Contribution: With the PhP 10,000 cap, the maximum mandatory contribution is PhP 200 for the employee and PhP 200 for the employer.
4. Best Practices for Payroll Deductions
When should you deduct these contributions? The most common practice in the Philippines for semi-monthly payrolls is the "Half-Half" method or the "End of Month" method:
- Half-Half: Deduct half of the required SSS, PhilHealth, and Pag-IBIG in the first period (e.g., 15th), and the other half in the second period (e.g., 30th). This evens out the net take-home pay.
- End of Month: Deduct all statutory contributions entirely in the second period of the month.
5. Automating Compliance with PayrollCenter.ph
Keeping track of varying contribution tables, changing maximum caps, and ensuring the correct employee vs. employer share is incredibly tedious. PayrollCenter.ph automates this entire process.
Our calculation engine has the official government tables hardcoded and updated regularly. You simply choose your deduction schedule (e.g., Half-Half), and the system automatically computes the exact SSS, PhilHealth, and Pag-IBIG deductions for every employee. Furthermore, the system generates the precise remittance reports needed for your monthly payments to these agencies, ensuring you never miss a deadline or make an underpayment.