Employment Cost Calculator in Philippines

Employer Tax Contributions

Tax Type	Rate	Base
Withholding Tax on Compensation	0% - 35%	Graduated tax system based on employee's income
Social Security System (SSS)	10% (Employer)	Employee's Monthly Salary Credit (MSC)
Philippine Health Insurance Corporation (PhilHealth)	2.5% (Employer)	Employee's monthly basic salary (5% total, equally shared)
Home Development Mutual Fund (Pag-IBIG)	2% (Employer)	Employee's monthly compensation (max ₱200 from employer)

Filing & Compliance

• Monthly Remittances:
  • Withholding Tax on Compensation (BIR Form 1601C): By the 10th day of the following month.
  • SSS Contributions: By the last day of the following month (or specific dates based on ERN).
  • PhilHealth Contributions: By the 11th-15th or 16th-20th day of the following month, based on Employer PEN ending.
  • Pag-IBIG Contributions: By the 10th day of the following month (or specific dates based on business name).
• Annual Information Returns:
  • BIR Form 1604-C (Compensation) and Annual Alphalist of Employees: By January 31.
  • BIR Form 2316 (Certificate of Compensation Payment/Tax Withheld): Provide to employees by January 31; submit signed copies to BIR by February 28.
• Registration: Employers must register with SSS, PhilHealth, and Pag-IBIG before hiring. Coverage and employer contributions begin on the employee's first day of paid service.

In the Philippines, employers deduct various taxes from employee salaries, including income tax, social security, health insurance, and housing fund contributions. These deductions fund government services and social security programs.

Income Tax

As of 2025, the income tax system in the Philippines follows a progressive scheme, meaning higher earners pay higher tax rates. Those earning ₱250,000 or less annually are exempt from income tax. The tax rates are as follows:

• ₱250,001 - ₱400,000: 15% of the excess over ₱250,000
• ₱400,001 - ₱800,000: ₱22,500 + 20% of the excess over ₱400,000
• ₱800,001 - ₱2,000,000: ₱102,500 + 25% of the excess over ₱800,000
• ₱2,000,001 - ₱8,000,000: ₱402,500 + 30% of the excess over ₱2,000,000
• Above ₱8,000,000: ₱2,202,500 + 35% of the excess over ₱8,000,000

Social Security System (SSS)

Both employers and employees contribute to the SSS, which provides retirement, disability, and other benefits. The contribution amount depends on the employee's salary bracket, with a fixed ceiling for higher earners. Employers are responsible for remitting both the employee's and employer's share to the SSS.

Philippine Health Insurance Corporation (PhilHealth)

PhilHealth provides national health insurance coverage. Both employers and employees contribute equally based on the employee's monthly salary.

Home Development Mutual Fund (Pag-IBIG)

Pag-IBIG is a housing fund that provides affordable housing loans and other benefits. Both employers and employees contribute, and the contribution amount depends on the employee's salary bracket.

Other Deductions

Other possible deductions include:

• Withholding tax on fringe benefits: A 35% tax applied to non-cash benefits provided to managerial and supervisory employees.
• Other deductions: Loan payments, salary advances, and other authorized deductions can also be made with the employee's written consent. Note that the 13th-month pay, a mandatory year-end benefit, cannot be subject to deductions other than government-mandated contributions and taxes.

Employer Responsibilities

Employers must:

• Register their business with the Bureau of Internal Revenue (BIR), SSS, PhilHealth, and Pag-IBIG.
• Deduct the correct amounts from employee salaries and remit them to the appropriate agencies by the deadlines.
• File necessary tax returns and reports accurately and on time.
• Obtain the employee's SSS number.
• Report all new employees for SSS coverage within 30 days of their employment date.

This information is current as of February 5, 2025, and might be subject to change due to legal updates. Always consult with a tax professional for the most recent regulations.