Understanding Employer Tax Obligations in the Philippines

As an international HR professional, navigating the Philippines' employment tax landscape requires careful attention to mandatory contributions. The Department of Labor and Employment oversees labor regulations that require employers to make several compulsory payments toward employee benefits.

Total Employer Contribution: 24%

Social Security: 10%
Employees' Compensation Program: PHP 10-30
Workers' Investment and Savings Program: 9.5%
National Health Insurance Program: 2.5%
Home Development Mutual Fund: 2%

Philippines Social Security System Framework

The Social Security System (SSS) operates as a comprehensive social insurance program covering private sector employees and self-employed individuals. Both employers and employees share responsibility for SSS contributions, which provide crucial protection against disability, illness, maternity, and other income-disrupting events. Monthly contributions are calculated based on member compensation and distributed across three programs.

Social Security Program Details

Monthly Social Security contributions utilize the Monthly Salary Credit (MSC) system, with the MSC range set between PHP 5,000 and PHP 20,000 for benefit calculations. Beginning in 2025, the contribution rate will be 15% of MSC, capped at PHP 35,000. Employers carry 10% of this burden, while employees contribute the remaining 5%.

Employees' Compensation Program Structure

The Employees' Compensation Program (ECP) provides compensation packages for work-related illnesses, injuries, or fatalities. Employers bear full responsibility for ECP contributions, which vary based on MSC ranges:

PHP 10 monthly contribution for MSC between PHP 4,000-14,500
PHP 30 monthly contribution for MSC of PHP 15,000 and above

Workers' Investment and Savings Program

The Workers' Investment and Savings Program (WISP) encourages regular savings through employer-managed accounts. Employees with MSC exceeding PHP 35,000 are automatically enrolled in this 14% contribution program, with employers covering 9.5% of the total.

National Health Insurance Program

PhilHealth provides nationwide healthcare coverage with premiums set at 5% of monthly salary. Contribution ceilings range from PHP 10,000 to PHP 100,000, with employers and employees sharing costs equally at 2.5% each.

Home Development Mutual Fund

Commonly known as Pag-IBIG, this fund requires 2% employer contributions based on a maximum salary of PHP 10,000. Late payments incur penalties of 1/10 of 1% daily, creating significant financial risk for non-compliant employers.

Additional Voluntary Benefits

While not legally required, many employers enhance their compensation packages with supplementary benefits like group life insurance, health and dental coverage, Christmas bonuses, transportation allowances, and flexible work arrangements to remain competitive in the Philippine market.

Employee Tax Responsibilities in the Philippines

Filipino employees share responsibility for several mandatory contributions alongside their income tax obligations.

Total Employee Contribution Range: 13%-49%

Social Security: 5%
Workers' Investment and Savings Program: 4.5%
National Health Insurance Program: 2.5%
Home Development Mutual Fund: 1%-2%
Personal Income Tax: 0%-35%

Social Security Benefits Structure

The SSS provides retirement, disability, and income protection benefits. Members qualify for monthly pensions after 120 months of contributions, with minimum pensions ranging from PHP 1,000 to PHP 2,400 based on years of service.

Workers' Investment and Savings Benefits

WISP helps employees build financial security through disciplined savings and investment opportunities. The program includes financial education components to improve members' money management skills.

PhilHealth Coverage Details

PhilHealth offers comprehensive medical coverage including hospitalization, outpatient services, specialized treatments, and maternity benefits, ensuring employees receive essential healthcare services.

Pag-IBIG Contribution Rates

Employees contribute 1% for salaries up to PHP 1,500 monthly, and 2% for higher earnings. Voluntary members can contribute additional amounts above the PHP 100 minimum.

Personal Income Tax Framework

Philippine income tax follows a progressive structure with annual tax rates:

Annual Taxable Income (PHP)	Tax Rate
0 - 250,000	0%
250,001 - 400,000	15%
400,001 - 800,000	20%
800,001 - 2,000,000	25%
2,000,001 - 8,000,000	30%
8,000,001 and above	35%

Significant exemptions include the 13th month pay, personal allowances (PHP 50,000 annually), and family allowances (PHP 25,000 per dependent). Managerial and supervisory employees receiving fringe benefits face an additional 35% Fringe Benefit Tax.

Philippines Employer and Employee Tax Guide 2025: Compliance Requirements