Payroll is more about paying your employees on time every month. When employing in the Philippines, it’s important to be mindful of the particular taxes and contributions that must be paid to the Philippines authorities on a monthly basis, making employing in a new, unfamiliar market a challenging task. That’s why it’s a good idea to use a partner like INS Global to outsource your payroll and tax Philippines management to.
Why outsource payroll in the Philippines?
The Philippines has its own set of distinct rules and regulations when it comes to payroll and tax compliance. INS Global makes it easy for companies with a local entity in the Philippines to outsource their payroll to a third party. When you outsource payroll and tax management to us, you remain the employer of record in the Philippines while we manage your monthly payroll calculations and tax deductions. Our solution means that you can fully focus on your business operations while we handle all HR and payroll needs relating to your employees, including social security contributions, wherever your employees are based in the Philippines.
Understanding payroll in the Philippines
Employers in the Philippines must observe a range of payroll regulations in compliance with the Department of Labor and Employment (DOLE) and the Bureau of Inland Revenue (BIR).
Employers in the Philippines are required to deduct and withhold tax from their employees’ wages every month in accordance with Philippine Law. They are then required to issue BIR Form 2316 (Certificate of Compensation Payment/ Tax Withheld) to the employee, indicating the withheld amount to be remitted to the Philippines Bureau of Inland Revenue (BIR). Income tax is thus collected from the employee through payroll, with the employer acting as the withholding agent.
Income Tax rates
Citizens of the Philippines and foreign nationals must pay income tax on their earnings at the following progressive rates:
|Amount of Taxable Income (PHP)||Tax rate applied|
|Up to 250,000||0%|
|Over 250,000 – up to 400,000||20%|
|Over 400,000 – up to 800,000||25%|
|Over 800,000 – up to 2,000,000||30%|
|Over 2,000,000 – up to 8,000,000||32%|
No withholding of tax is required when an individual’s income does not exceed the statutory minimum wage, or PHP 5,000.
Social Security contributions
Employees working in the Philippines are required to make contributions to the mandatory Philippine Social Security System, which comprises of the following three elements:
- Social Security System (SSS): Deductions are taken automatically from the employee’s salary every month.
- Home Development Mutual Fund (HDMF)
- Philippine Health Insurance (PhilHealth)
The current contribution rate for the Social Security System (SSS) is 11% of the monthly salary not exceeding PHP16,000, shared between the employer (7.37%) and the employee (3.63%).
Let INS Global manage your Payroll & Tax in Philippines
As Asia’s leading market-entry consulting firm, INS Global can manage all aspects of payroll and tax for your employees in the Philippines including withholding taxes, social security benefits and the issuing of pay slips, all while you remain the employer of record. Our solution works for both foreign workers and Filipino nationals making it a simple, cost-effective way of managing employees in the Philippines, and ensures complete compliance with Philippine employment laws. Contact us today to learn more about how we can manage your employees in the Philippines.