Payroll Essentials Guide – Philippines

Payroll in the Philippines

General information

• Currency: Philippine Peso (PHP)
• Tax year: 1 January – 31 December
• Working hours:
  • Standard: 40-48 hours/week
  • Daily: Up to 8 hours, with flexible arrangements possible
• Payroll cycle: Semi-monthly

Governing laws

• Labor Code
• National Internal Revenue Code
• Data Privacy Laws are governed by the Data Privacy Act of 2012. Employers must ensure secure handling of employee information, adhering to local data protection rules.

Mandatory registrations for Philippine payroll

Employers must register with:

1.     Bureau of Internal Revenue (BIR): For tax deduction and compliance (TIN).

2.     Social Security System (SSS): For social security contributions.

3.     Philippine Health Insurance Corporation (PhilHealth): For health insurance.

4.     Home Development Mutual Fund (Pag-IBIG Fund): For housing fund contributions.

Work visa requirements

Types of work visas

9(g) Pre-arranged Employment Visa:

• For foreign nationals working in the Philippines.
• Requires a valid employment contract and relevant qualifications.

Ease of obtaining

Documentation and compliance are strict; varies by region depending on local authorities.

Employment contracts and policies

Contracts

• Written contracts are highly recommended and often required.
• Must comply with the Labor Code of the Philippines and local regulations.

Employee handbook

Useful for outlining company policies, benefits, and compliance with regional laws.

Employment commencement

Probation period

• Typically 6 months; widely practiced and regulated.

Payslip requirements

• Itemised payslips must include details of earnings, tax deductions, and statutory contributions.
• Compensation, wages, and allowances

Minimum wage

• Set by the Regional Tripartite Wages and Productivity Board; varies by region.
• Example: As of 2025, the minimum wage in Metro Manila is higher than in many other regions

Overtime

• Governed by the Labor Code.
•  Generally, 1.25x hourly wage for overtime, 1.3x for rest days and special non-working holidays, and 2x for regular or legal holidays.

Common allowances and taxability

• Taxable: Allowances for Housing, travel or transportation, and communication.
• Non-taxable/De Minimis: Allowances for Rice, uniform, medical, and laundry (up to certain limits).

Payment frequency

• At least once every two weeks or twice a month, with paydays not more than 16 days apart.

Employee benefits and leave

Statutory benefits

• SSS: Employer contributes 9.5%, and employee contributes 4.5% of monthly salary.
• PhilHealth: Employer contributes 2.5 %, and employee contributes 2.5% of monthly salary.
• Pag-IBIG: Employer and employee each contributes 2% of P10,000 or P200 with employee and employer equal share.

Leave entitlements

• Statutory Leave: minimum of 5 days/year (Service Incentive Leave), but most companies provide above this requirement.
• Sick Leave: Not mandated, but often provided by employers.
• Maternity Leave: 105 days paid leave.

Public holidays

• National holidays: Classified as regular holidays or special non-working days. Learn more.
• Regional holidays: Vary by local customs (e.g., local festivals).

Social security and retirement

SSS

• Employee: Contributes 4.5% of salary.
• Employer: Contributes 9.5% of salary.
• Mandatory for all employees.

Retirement scheme

• SSS Pension: Main retirement savings scheme.
• Voluntary additional contributions possible.

Work injury compensation

• Employers must have work injury compensation insurance for eligible employees.
• Governed by the Employees' Compensation Commission (ECC).
• Employer is liable to compensate employees for workplace injuries, accidents, or occupational diseases.
• Compensation depends on the nature of injury and salary.

Tax

Personal Income Tax (PIT)

• Progressive rates:
  • Up to PHP 250,000: 0%
  • PHP 250,001–400,000: 20%
  • PHP 400,001–800,000: 25%
  • PHP 800,001–2,000,000: 30%
  • PHP 2,000,001–8,000,000: 32%
  • Above PHP 8,000,000: 35%

Withholding tax (WHT)

• Varies for non-residents, with rates ranging from 15%-25%.

Employer obligations

• PIT deductions must be remitted to the BIR by the 10th of the following month.

Termination

Notice period

Generally, 30 days advance notice, subject to employment contract’s terms and conditions.

Severance pay

This is for authorized causes like redundancy, retrenchment, installation of labor-saving devices, closing or cessation of business, and disease. Severance pay is computed at one half month or one month salary for every year of service whichever is higher. A fraction of six months services is considered as one year of service for the purpose of computing the separation pay.

Offboarding requirements

Includes final settlement of salaries and benefits, and issuance of Certificate of Tax Withheld (BIR form 2316).

Forvis Mazars payroll services in the Philippines 

Keeping up with changes to payroll regulations while ensuring precise computations and timely releasing can be challenging.  Our payroll services are designed to meet the requirements of companies that are seeking accurate, on-time, and secure payroll outsourcing services. Whether your headcount in the Philippines is one or one thousand, our team can provide tailored solutions that maintain confidentiality and protect employee data. We are present in over 100 countries, enabling you to scale with efficiency internationally.

To contact us, you can click the link HERE or click on the box below this page.