Labor Laws and Regulations
Contract
There are two main types of employment contracts
Fixed Term Employment (Contractual Employment)
Regular Employment
Common to both Fixed-Term Employment (Contractual Employment) and Regular Employment contracts
Language
Dual language contracts are required if the employee is a Filipino national. These contracts must be in both English and Filipino to ensure both parties fully understand the terms.
Best practices and legal interpretations suggest that employment contracts should ideally be in English and/or Filipino (Tagalog). If discrepancies arise between the English and Filipino versions, it’s generally advisable to clarify which language version will prevail, although in practice, both versions should ideally convey the same meaning.
An employment relationship is established through an employment agreement, which can be verbal or written, though written contracts are strongly advised for clarity and legal protection.
Mandatory terms
- Working hours
- Benefits
- Place of work
- Grounds for termination
- Collective Bargaining Agreement / CBA (if applicable)
Applicable Company Policies and Rules
- Parties to the contract
- Position and job Description
- Term of employment
- Regular employment: State that the employment is “regular” or “permanent”.
- Fixed-Term Employment: Clearly state the specific duration of the contract, the start and end dates, or the project completion date that defines the contract’s term.
- Probationary period (if applicable)
- Compensation
- Wage or salary
- Method and frequency of payment
- Allowances and benefits
- Working hours and days
- Benefits
- Place of work
- Grounds for termination
- Collective Bargaining Agreement / CBA (if applicable)
- Company policies and code of conduct
Probation
Probation is allowed.
Probationary Employment:
Allows employers to assess an employee’s suitability for a regular position, typically for a maximum of six months. To qualify as a regular employee after probation, the employer must communicate standards of regularization and the employee must meet these standards.
There are no strictly mandated legal requirements outlining a specific procedure for confirming an employee after probation. Regularization is not automatic and requires action from the employer to formally recognize the employee as regular.
Best practice is:
- Written Regularization Notice: If the employee’s performance is satisfactory, issue a written notice of regularization or a confirmation letter to the employee before or on the last day of the probationary period.
- Communicate Non-Regularization Before End of Probation: If the employee’s performance during probation is not satisfactory based on the pre-communicated standards, the employer must inform the employee before the end of the probationary period that they will not be regularized and that their employment will be terminated at the end of the probationary period.
- Notice of Termination (During Probation): While technically termination at the end of probation is not always considered “termination” in the same way as firing a regular employee, it is still good practice to provide a written notice of non-regularization/termination before the end of probation.
Specific for Fixed-Term Employment (Contractual Employment) contracts
Minimum contract duration
Not specified
Maximum contract duration
No statutory maximum duration.
The Supreme Court has recognized the validity of fixed-term contracts lasting up to five years.
Probation
No Specific Statutory Limit for Fixed-Term Probation: The Philippine Labor Code does not explicitly set a separate statutory limit for probation periods within fixed-term contracts.
General Probation Limit May Apply: However, the principle of the 6-month probationary limit for positions that could become regular is often interpreted to guide reasonableness even within fixed-term contracts. While technically not a statutory limit specifically for fixed-term probation, the 6-month period is a strong benchmark for what is considered a reasonable assessment period in Philippine labor practice.
Fixed-Term Contracts: Fixed-term contracts in the Philippines are distinct from probationary employment. While a probationary period assesses suitability for regular employment, fixed-term contracts are for a predetermined period. Probationary periods are more relevant to contracts intended to become permanent. Fixed-term contracts themselves do not typically have probation periods in the same way, as they are for a specific duration already.
Reasonableness is Key: For probation within fixed-term contracts, the duration should be reasonable and justifiable in relation to the length of the fixed term itself. A probation period that is excessively long compared to a short fixed-term contract might be viewed as unreasonable or an attempt to circumvent employee rights. For instance, a 6-month probation in a 7-month fixed-term contract could be questioned.
Type of work
The Labor Code does not explicitly list specific types of work that are either eligible or ineligible for fixed-term contracts.
The key principle is that fixed-term contracts must be for specific projects or undertakings where the employment is genuinely for a limited duration.
Specific for Regular Employment contracts
Probation
Statutory Limit: For positions that are intended to become regular employment after probation, the probationary period cannot exceed six (6) months from the date the employee started working. This is a statutory limit mandated by the Philippine Labor Code.
Minimum wage
The Philippines sets minimum wages on a regional basis through Regional Tripartite Wages and Productivity Boards (RTWPBs). Minimum wages vary significantly across regions and sometimes by industry within regions. These are regularly reviewed and adjusted.
See full list from https://nwpc.dole.gov.ph/#dmwr
E.g.
National Capital Region - Wage Order for workers in the private sector
WO No. NCR-25 Effective 17 July 2024
Minimum Wage Rates : ₱608.00 – ₱645.00 per day
Working hours
Normal working hours
The standard work week is 40 hours, or 8 hours per day for 5 days a week. Work beyond 8 hours a day is considered overtime.
Rest Days
Employees are entitled to a weekly rest day of 24 consecutive hours, usually on Sunday, or as agreed upon.
Overtime
Overtime working hours
Work performed beyond 8 hours a day is compensated at an overtime rate, typically at least 125% of the regular hourly rate on ordinary days. Higher rates apply for overtime work on rest days, holidays, and night shifts.
Overtime Work on Regular Working Days
- Normal Working Hours: The normal working hours in the Philippines are 8 hours per day or 40 hours per week (for a 5-day work week).
- Overtime Rate: For any work performed beyond 8 hours on a regular working day, the employee is entitled to an overtime premium of at least 25% of their regular hourly rate.
- Calculation: Hourly Regular Rate x 1.25 x Number of Overtime Hours Worked
Overtime Work on Rest Days or Scheduled Days Off
- Work on Rest Day (First 8 hours): If an employee is made to work on their scheduled rest day or day off, they are entitled to a premium of at least 30% of their regular daily rate for the first 8 hours.
- Calculation for first 8 hours on Rest Day: Daily Regular Rate x 1.30
- Overtime on Rest Day (Beyond 8 hours): For work exceeding 8 hours on a rest day, the employee is entitled to an additional overtime premium on top of the rest day premium. This is calculated as 30% of their hourly rate plus an additional 25% overtime premium on that rate. Effectively, it’s 1.30 x 1.25 = 1.625 times the hourly regular rate for overtime on a rest day.
- Calculation for Overtime on Rest Day (beyond 8 hours): Hourly Regular Rate x 1.30 x 1.25 x Number of Overtime Hours Worked
Overtime Work on Regular Holidays
- Work on a Regular Holiday (if worked): If an employee works on a regular holiday, they are entitled to 200% of their regular daily rate for the first 8 hours.
- Calculation for first 8 hours on Regular Holiday: Daily Regular Rate x 2.00
- Overtime on Regular Holiday (Beyond 8 hours): For work exceeding 8 hours on a regular holiday, the employee is entitled to an additional overtime premium on top of the holiday premium. This is calculated as 200% of their hourly rate plus an additional 30% overtime premium on that rate. Effectively, it’s 2.00 x 1.30 = 2.60 times the hourly regular rate for overtime on a regular holiday.
- Calculation for Overtime on Regular Holiday (beyond 8 hours): Hourly Regular Rate x 2.00 x 1.30 x Number of Overtime Hours Worked
Overtime Work on Special Non-Working Days
- Work on a Special Non-Working Day (if worked): If an employee works on a special non-working day, they are entitled to a premium of at least 30% of their regular daily rate for the first 8 hours.
- Calculation for first 8 hours on Special Non-Working Day: Daily Regular Rate x 1.30
- Overtime on Special Non-Working Day (Beyond 8 hours): For work exceeding 8 hours on a special non-working day, the employee is entitled to an additional overtime premium on top of the special day premium. This is calculated as 130% of their hourly rate plus an additional 30% overtime premium on that rate. Effectively, it’s 1.30 x 1.30 = 1.69 times the hourly regular rate for overtime on a special non-working day.
- Calculation for Overtime on Special Non-Working Day (beyond 8 hours): Hourly Regular Rate x 1.30 x 1.30 x Number of Overtime Hours Worked
Overtime Work on a Regular Holiday that falls on the Employee's Rest Day
- Work on a Regular Holiday AND Rest Day (if worked): This is a combination of holiday and rest day premiums. For the first 8 hours, the premium is 260% of the regular daily rate.
- Calculation for first 8 hours on Regular Holiday AND Rest Day: Daily Regular Rate x 2.60
- Overtime on Regular Holiday AND Rest Day (Beyond 8 hours): For work exceeding 8 hours on a regular holiday that also falls on a rest day, the employee is entitled to an additional overtime premium on top of the combined holiday and rest day premium. This is calculated as 260% of their hourly rate plus an additional 30% overtime premium on that rate. Effectively, it’s 2.60 x 1.30 = 3.38 times the hourly regular rate for overtime on a regular holiday and rest day.
- Calculation for Overtime on Regular Holiday AND Rest Day (beyond 8 hours): Hourly Regular Rate x 2.60 x 1.30 x Number of Overtime Hours Worked
How to Calculate Hourly Regular Rate
To calculate overtime pay, you first need to determine the employee’s “hourly regular rate.” This is generally calculated as follows:
- Monthly Salary Basis: Monthly Salary / Number of Working Days in a Month / 8 hours
Number of Working Days in a Month typically considers the standard work schedule (e.g., 26 working days per month, assuming a 6-day work week with Sundays off, or approximately 22 working days for a 5-day work week with weekends off). The exact number should be based on the company’s defined work schedule.
Night Shift Differential
Employees working between 10 PM and 6 AM are entitled to a night shift differential pay, which is an additional percentage (usually 10%) of their regular hourly rate.
Example
Let’s say an employee’s monthly regular rate of pay is PHP 30,000, and they work a 5-day work week, considering approximately 22 working days in a month.
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Daily Regular Rate: PHP 30,000 / 22 working days = PHP 1,363.64 per day (approximately).
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Hourly Regular Rate: PHP 1,363.64 / 8 hours = PHP 170.46 per hour (approximately).
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Overtime on Regular Working Day (2 hours): PHP 170.46 x 1.25 x 2 = PHP 426.15
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Rest Day Work (Full Day, 8 hours): PHP 1,363.64 x 1.30 = PHP 1,772.73
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Overtime on Rest Day (2 hours beyond 8 hours): PHP 170.46 x 1.30 x 1.25 x 2 = PHP 553.72
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Regular Holiday Work (Full Day, 8 hours): PHP 1,363.64 x 2.00 = PHP 2,727.28
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Overtime on Regular Holiday (2 hours beyond 8 hours): PHP 170.46 x 2.00 x 1.30 x 2 = PHP 886.40
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Regular Holiday and Rest Day Work (Full Day, 8 hours): PHP 1,363.64 x 2.60 = PHP 3,545.46
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Overtime on Regular Holiday and Rest Day (2 hours beyond 8 hours): PHP 170.46 x 2.60 x 1.30 x 2 = PHP 1,147.38
Public holidays and annual leaves
Official public holidays
The Philippines has both regular and special holidays. Employees are entitled to paid regular holidays even if unworked. If working on a regular holiday, they receive double their daily rate. Special holidays have different pay rules, often depending on whether the holiday is worked or unworked, and if it’s declared a “special (non-working) day” or “special (working) day”.
Regular Holiday Pay (if working): If an employee works on a regular holiday, they are entitled to 200% of their daily wage for the first 8 hours. Any work beyond 8 hours on a regular holiday is paid at an additional rate.
Special Non-Working Day Pay (if not working): The “no work, no pay” principle generally applies to special non-working days unless there is a company policy or CBA providing for payment even if not worked. Some companies may choose to pay employees even if they don’t work on a special non-working day as a benefit.
Special Non-Working Day Pay (if working): If an employee works on a special non-working day, they are entitled to an additional premium, typically at least 30% of their daily wage for the first 8 hours (making it 130% of their regular daily wage). This premium may be higher based on company policy or CBA.
Holiday Falling on Rest Day: If a regular holiday falls on an employee’s rest day, the employee is entitled to the regular holiday pay for that day. If the employee works on a regular holiday that is also their rest day, they are entitled to additional premium pay.
Service Incentive Leave (SIL)
Employees who have rendered at least one year of service are entitled to 5 days of paid service incentive leave annually, which can be converted to cash if not used.
SIL generally applies to rank-and-file employees. It typically does not apply to managerial employees, supervisory employees, confidential employees, domestic helpers, persons in the personal service of another, homeworkers, employees of family-run businesses, and government employees.
SIL can be used for vacation leave OR can be converted to cash at the employee’s option.
Annual paid leave
While there isn’t a law in the Philippines mandating annual leave for all employees in the private sector, it is a common practice and a standard employee benefit provided by most employers. The provision of vacation leave is usually based on company policy, employment contract, or Collective Bargaining Agreement (CBA).
The Labor Code of the Philippines does not explicitly require employers to grant paid vacation leave to all employees in the private sector.
Typical Vacation Leave Days: While varying, it is common for companies to offer at least 10-15 days of vacation leave per year, often increasing with seniority. Some companies may offer more generous vacation benefits.
Sick leave
While not mandated by law for all employees in the private sector, many employers offer sick leave and vacation leave as part of their benefits package. Collective Bargaining Agreements (CBAs) or company policies often stipulate these leaves.
Sick Leave as a Benefit: Providing paid sick leave is also a very common and widely expected employee benefit in the Philippines.
Typical Sick Leave Days: Companies commonly offer 10-15 days of paid sick leave per year, often provided together with vacation leave as a combined “Vacation and Sick Leave” (VSL) benefit.
Medical Certificate: For absences exceeding a certain number of days (e.g., 2-3 days) or for consecutive absences before/after weekends or holidays, employers often require employees to submit a medical certificate from a licensed physician to validate the sick leave claim. Company policies vary on the specific requirements.
Maternity / paternity leave
Paid maternity leave
Female employees are entitled to 105 days of paid maternity leave for live childbirth, with an option to extend for an additional 30 days without pay.
Solo parents are entitled to an additional 15 days of leave. Maternity leave pay is shouldered by the Social Security System (SSS), but employers usually advance the payment.
Eligibility: Applies to all female workers in the private and public sectors, including those on fixed-term, casual, or contractual employment, provided they have made at least three monthly contributions to the Social Security System (SSS) in the 12 months preceding childbirth or pregnancy termination.
Miscarriage leave
In case of miscarriage or emergency termination of pregnancy, female employees are entitled to 60 days of paid maternity leave.
This leave applies regardless of the frequency of pregnancy or miscarriage
Paternity leave
Married fathers are entitled to 7 days of paid paternity leave upon the legitimate spouse giving birth, for the first four deliveries. This is also typically advanced by the employer and reimbursed by SSS.
Eligibility: Applies to all married male employees regardless of their employment status (fixed-term or permanent), provided they cohabit with their spouse and notify their employer within a reasonable period.
Solo Parent Leave
Solo parents who have rendered at least one year of service are entitled to 7 days of paid solo parent leave annually.
Family leave
Violence Against Women and Children (VAWC) Leave
Women who are victims of violence and have rendered at least six months of service are entitled to up to 10 days of paid VAWC leave, extendable as needed.
Special Leave Benefits for Women
Duration: Maximum of 2 months with full pay.
Eligibility: Female employees who undergo surgery for gynecological disorders.
Condition: Must have rendered at least 6 months aggregate service in the last 12 months.
Termination
Common to both Fixed-Term Employment (Contractual Employment) and Regular Employment contracts
Mutual Termination Agreement
For mutual termination or employee resignation in the Philippines, there is no legal requirement for the employer or employee to file a notice with the government (such as the Department of Labor and Employment, or DOLE) simply because the employee is resigning or a mutual separation agreement is reached.
Reasons of dismissal related to individual employees
Employers can terminate fixed-term contract and permanent employees for the following just causes:
- Serious misconduct or willful disobedience
- Gross and habitual neglect of duties
- Fraud or willful breach of trust
- Commission of a crime against the employer or immediate family
- Other causes analogous to the above
Reasons of dismissal related to business
Employers may also terminate both fixed term and permanent employees for authorized causes, which include:
- Installation of labor-saving devices
- Redundancy
- Retrenchment to prevent losses
- Closure or cessation of business operations
- Disease not curable within six months, as certified by a competent public authority
Prohibits employment termination due to the following reasons:
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No Termination for Protected Characteristics
Termination based on discrimination (such as race, gender, religion, political beliefs, or other protected characteristics) is not allowed.
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No Termination for Pregnancy or Maternity Leave
Employers cannot terminate a female employee for reasons related to pregnancy or maternity leave.
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No Termination for Illness or Disability Unless Authorized
Termination due to illness or disability is only permitted if the disease is certified as incurable within six months and continued employment is prejudicial to health, and only after following the authorized cause procedure.
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No Termination for Refusing to Perform Illegal Acts
An employee cannot be terminated for refusing to perform acts that are illegal or against public policy.
Termination of employment notification
Minimum Standard:
- 30 days’ written notice is the minimum required by law for voluntary resignation without just cause.
Exceptions: - Resignation with just cause (such as serious insult, inhumane treatment, or crime by the employer) allows the employee to resign immediately or with a shorter notice period.
- Mutual agreement: The 30-day notice can be waived or shortened if both employer and employee agree.
- Contractual or Policy Variations: Employment contracts or company policies may require a longer notice period (for example, 60 days for managerial or specialized roles), but cannot impose a period shorter than 30 days, unless mutually agreed or under just cause.
Failure to Comply: - If an employee does not provide the required notice, the employer may hold the employee liable for damages incurred due to the abrupt resignation, but must still release all legally mandated benefits and final pay.
Right to object to the termination
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Right to Be Notified and to Explain
For terminations based on just causes (e.g., misconduct, gross neglect, breach of trust), the employer must provide the employee with a written notice specifying the grounds for termination and must give the employee a reasonable opportunity to submit a written explanation and present evidence in their defense.
The employee must be allowed to attend a hearing or conference to respond to the charges, unless waived by the employee.
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Right to Due Process
Employees have the right to a fair and impartial investigation before any decision is made. This means the employer must consider the employee’s side and any evidence they present before issuing a final notice of termination.
If the termination is for authorized causes (e.g., redundancy, retrenchment, closure), the employer must notify the employee and the Department of Labor and Employment (DOLE) at least 30 days in advance, but the employee still has the right to contest the legality or basis of the termination.
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Right to Challenge Termination
If an employee believes the termination is unjustified or illegal, they may file a complaint for illegal dismissal before the National Labor Relations Commission (NLRC) or the DOLE.
The burden of proof is on the employer to show that the termination was for a valid just or authorized cause and that due process was observed.
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Right to Reinstatement and Back Wages
If the termination is found to be illegal, the employee is entitled to reinstatement without loss of seniority rights and to payment of full back wages and other benefits from the time compensation was withheld until actual reinstatement.
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Right to Legal Counsel and Representation
Employees have the right to be represented by legal counsel or a union representative during any hearing or investigation related to termination.
Specific for Fixed-Term Employment (Contractual Employment) contracts
Natural Termination
Fixed term employment typically ends when:
- The contract period expires
- The specified work is completed
- A certain event or situation stated in the agreement occurs
Unilateral Termination
An employer can terminate a fixed-term contract before its expiration date only if there is a valid reason to do so.
The employer must follow due process, which includes:
- Providing a written notice specifying the grounds for termination
- Giving the employee an opportunity to explain their side
- Conducting a hearing or conference
- Issuing a notice of decision after considering all evidence
- No advance notice to DOLE is required for just cause terminations.
- However, employers are generally required to submit a report to DOLE within 30 days after the termination of employment, regardless of the cause (just or authorized), as per Department Order No. 147-15 and related guidelines. This is a post-termination reporting requirement, not a pre-termination notification.
Termination benefits for termination by employer
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Termination Before Contract Expiry (Without Just Cause)
If the employer terminates the contract before its agreed end date without just or authorized cause, the employee may be entitled to compensation equivalent to the salary for the unexpired portion of the contract or, in some cases, damages for illegal dismissal.
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Termination Due to Authorized Causes
If the fixed-term contract is terminated due to authorized causes (such as redundancy, retrenchment, closure, or installation of labor-saving devices), the employee is entitled to separation pay as provided by law, unless the contract, CBA, or company policy provides otherwise.
The standard formula for separation pay in such cases is at least one month’s pay or one-half month’s pay for every year of service, whichever is higher.
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Contractual Provisions or Company Policy
If the employment contract, CBA, or company policy provides for termination benefits (such as separation pay or a gratuity) upon expiration or termination, the employer must honor that agreement.
Termination benefits for employee resignation
Early Termination by Employee:
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An employee may terminate the contract by serving a written notice to the employer at least one month in advance.
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If the employee fails to provide notice, they may be liable for damages.
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In certain instances, an employee may terminate employment without notice if there are just causes, such as serious misconduct by the employer or inhumane treatment
Mandatory Benefits Upon Resignation -
Unpaid Wages
The employee is entitled to all unpaid wages up to the last day of work.
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Pro-rated 13th Month Pay
The employee must receive the pro-rated portion of the 13th month pay for the period worked during the calendar year.
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Leave Conversion (if applicable)
If the employee has unused service incentive leave (SIL), the employer is required to pay the cash equivalent of unused SIL, provided the employee qualifies.
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SSS, PhilHealth, and Pag-IBIG Contributions
These statutory contributions are mandatory and must be remitted by the employer up to the last month of employment.
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Certificate of Employment
The employer is legally required to issue a Certificate of Employment upon request, stating the duration of employment, job description, and compensation.
Additional Considerations
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No Separation Pay
There is no statutory requirement for separation pay when an employee resigns from a fixed-term contract, unless otherwise stipulated in the contract, collective bargaining agreement, or company policy.
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Notice Period
Employees are generally required to provide at least 30 days’ written notice for resignation without just cause, unless the contract specifies otherwise.
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Penalty Clauses
If the employee resigns before the end of the fixed term without a valid reason, the employer may enforce contractual penalty or liquidated damages clauses, provided these are expressly written, reasonable, and do not violate labor laws or public policy
Specific for Regular Employment contracts
Unilateral Termination
For both just and authorized causes, employers must follow strict due process requirements:
For just causes:
- Serve a written notice specifying the grounds for termination
- Provide an opportunity for the employee to respond
- Conduct a hearing or conference
- Issue a written notice of decision
- No advance notice to DOLE is required for just cause terminations.
- However, employers are generally required to submit a report to DOLE within 30 days after the termination of employment, regardless of the cause (just or authorized), as per Department Order No. 147-15 and related guidelines. This is a post-termination reporting requirement, not a pre-termination notification.
For authorized causes:
- Provide a written notice to the employee and DOLE at least 30 days prior to the intended termination date
- Explain the reasons for termination in the notice
Termination benefits for termination by employer
Employees dismissed for just causes are generally not entitled to separation pay, but may be entitled to back wages and other earned benefits up to the date of termination.
Employees terminated for authorized causes are entitled to separation pay, typically equivalent to one month’s salary for every year of service, or one-half month’s salary for every year of service if due to installation of labor-saving devices or retrenchment to prevent losses (depending on the specific authorized cause and if the company is suffering losses).
Termination benefits for employee resignation
Mandatory Benefits for Resigning Employees on Permanent Contracts
| Final Pay (Back Pay) | Includes all unpaid wages up to the last day worked. Must be released within 30 days from the date of separation, unless a more favorable company policy exists. |
| Pro-rated 13th Month Pay | The employee is entitled to a pro-rated portion of the 13th month pay for the period worked within the calendar year. |
| Service Incentive Leave (SIL) Conversion | Employees who have rendered at least one year of service are entitled to the cash equivalent of unused SIL (minimum five days per year), unless otherwise waived by the employee. |
| Other Leave Conversions | If company policy, contract, or collective bargaining agreement (CBA) allows, employees may also receive the cash equivalent of unused vacation or sick leave. |
| Government-Mandated Benefits | Social Security System (SSS), PhilHealth, and Pag-IBIG contributions must be remitted up to the last month of employment. |
| Certificate of Employment (COE) | Employers must issue a Certificate of Employment within three days of the employee’s request. |
| Tax Refund | If there is over-withheld tax, the employee is entitled to a refund as part of the final pay. |
What Is Not Mandatory
| Separation Pay | Employees who voluntarily resign are not entitled to separation pay, unless otherwise stipulated in a CBA, employment contract, or company policy. |
| Exception | If the resignation is due to “just cause” (e.g., serious insult, inhuman treatment, or crime by the employer), the employee may claim constructive dismissal and potentially receive separation pay or financial assistance if proven. |
| Retirement Pay | Retirement pay is only required if the employee meets the statutory or company retirement age and service requirements |
| Minimum Separation Pay | All employees terminated for authorized causes are entitled to at least one month’s salary as separation pay, even if they have served less than one year. If the employee has worked for a fraction of at least six months, that fraction is generally considered as one year for the purpose of computing separation pay. |
Payroll and Statutory Contributions
Payroll
Payment
Wages must be paid at least once every two weeks or twice a month at intervals not exceeding sixteen days.
Wages typically include basic salary and overtime pay, night shift differential, holiday pay, and other taxable allowances and benefits. The basic salary must comply with the applicable regional minimum wage.
Payslip
Employers are required to provide employees with itemized pay slips detailing gross pay, deductions (taxes, social security contributions), and net pay.
Record Keeping
Employers must maintain accurate payroll records for compliance and audit purposes, typically for at least three years.
Wage deduction
Mandatory deductions include:
SSS contributions (employee share)
PhilHealth contributions (employee share)
Pag-IBIG contributions (employee share)
Withholding Tax (income tax, based on tax brackets)
Other authorized deductions with employee consent or legal basis (e.g., union dues, loan repayments)
Late payment
The Philippines labor code does not specify exact deadlines for salary payments. However, employers are mandated to pay their employees on time according to the agreed-upon dates. Delayed salary payments can be grounds for employees to file complaints with the Department of Labor and Employment (DOLE).
13th month bonus
Employers are mandated to provide 13th-month pay, equivalent to one month’s salary, to all rank-and-file employees regardless of employment status, who have worked for at least one month during a calendar year. It is usually paid on or before December 24th of each year.
When to pay?
It is usually paid on or before December 24th of each year.
Income tax obligations from employers
Payroll taxes in the Philippines are calculated and managed through a system of mandatory deductions and contributions for both employees and employers. These contributions primarily fund social security, health insurance, and housing development programs, along with income tax withholdings.
Here’s a breakdown of how payroll taxes are calculated and managed in the Philippines:
Employee Income Tax (Withholding Tax on Compensation - WTC)
Taxable Income: WTC is calculated on an employee’s taxable compensation income, which includes gross salary, wages, allowances, benefits, and other taxable income.
Annualized Taxable Income: The tax calculation is based on annualized taxable income. The monthly income is grossed up to an annual equivalent, and then tax is calculated based on the annual income tax rates. This annual tax is then divided by 12 to get the monthly withholding tax.
Deductions and Exemptions: Taxable income is reduced by:
- Non-Taxable Income: Certain income components are exempt from tax, such as de minimis benefits (within limits), 13th-month pay and other benefits up to PHP 90,000 (in 2024).
- Personal Exemptions: While personal and additional exemptions were removed under the TRAIN Law, employees can claim dependency exemptions for qualified dependent children for taxable years before 2023 (for those hired before 2023, or for certain mixed-income earners). For employees hired on or after January 1, 2023, or purely compensation income earners, personal exemptions are generally no longer applicable.
- Deductions: Mandatory contributions to SSS, PhilHealth, and Pag-IBIG (employee shares) are deductible from gross income for income tax purposes.
Progressive Tax Rates: The Philippines uses a progressive income tax rate system based on annual taxable income brackets.
Monthly Withholding: Employers are responsible for withholding the correct amount of WTC from employees’ monthly salaries based on the annualized tax calculation and remitting it to the BIR.
Employer’s Role as Withholding Agent: Employers act as withholding agents for employee income tax.
Payment date
File BIR Form 1601-C monthly to report and remit the total Withholding Tax on Compensation (WTC) deducted from employees’ salaries. Payment and filing are generally due on or before the 10th (for eFPS filers) or 15th (for manual filers) of the month following the month for which taxes were withheld. Payment can be made through authorized banks, online banking, or e-payment channels of the BIR.
Annual Information Return on Income Taxes Withheld on Compensation (BIR Form 1604-C): File BIR Form 1604-C annually to summarize the total WTC withheld for all employees during the calendar year. The deadline is generally on or before January 31 of the following year. This is accompanied by BIR Form 1604-CF, which is the List of employees and their annual compensation and tax withheld.
Certificate of Compensation Payment/Tax Withheld (BIR Form 2316): Issue BIR Form 2316 (Certificate of Compensation Payment/Tax Withheld) to each employee annually on or before January 31 of the succeeding year. This form summarizes the employee’s annual income and taxes withheld for their personal income tax filing (if needed).
Recommended Retention Period
It’s generally advised to retain payroll and benefits records for at least 10 years in the Philippines for compliance and audit purposes.
Mandatory benefits and social security
Social Security System (SSS)
Mandatory social insurance program for private sector employees. Contributions are shared between employers and employees and provide benefits for:
- Sickness
- Maternity
- Disability
- Retirement
- Death
- Funeral
- Unemployment (Separation Benefits)
- Salary Loan
- Housing Loan
Contribution Rate: The total SSS contribution rate is 15% of monthly salary credit.
- Employer’s share: 10%
- Employee’s share: 5%
Salary Credit (Monthly Salary Range): SSS contributions are based on a monthly salary credit, which is a range of salaries. For each salary range, there’s a corresponding fixed monthly contribution. As of 2025:
- Monthly Salary Credit: Ranges from PHP 5,000 to PHP 35,000 (graduated scale within the range).
- Maximum Monthly Salary Credit: PHP 35,000. If an employee’s monthly salary exceeds PHP 35,000, the contribution is still based on the maximum salary credit of PHP 35,000.
Monthly Salary Credit (MSC) Ranges for 2025
- The MSC serves as the basis for calculating contributions and benefits. For 2025:
- Minimum MSC: PHP 5,000 (up from PHP 4,000 in 2024).
- Maximum MSC: PHP 35,000 (up from PHP 30,000 in 2024)
| Compensation Range (PHP) | Monthly Salary Credit (PHP) | Employer Share (10%) | Employee Share (5%) | Total Contribution (15%) |
|---|---|---|---|---|
| ≤ 5,249.99 | 5,000 | 500 | 250 | 750 |
| 5,250–9,999.99 | 9,500 | 950 | 475 | 1,425 |
| 10,000–14,999.99 | 14,500 | 1,450 | 725 | 2,175 |
| 15,000–35,000 | 35,000 | 3,500 | 1,750 | 5,250 |
Employees’ Compensation (EC) Contribution (Employer-funded)
Provides benefits for work-related injuries, illnesses, or death. Contributions are solely employer-funded and are integrated with SSS and Government Service Insurance System (GSIS) for public sector employees.
EC Contribution Rates (Effective 2025)
Employees with a Monthly Salary Credit (MSC) of PHP 14,500 and below:
- EC Contribution: PHP 10 per month
Employees with an MSC of PHP 15,000 and above:
- EC Contribution: PHP 30 per month
Employers must remit the EC contribution within the first 10 days of the following month
Philippine Health Insurance Corporation (PhilHealth)
Mandatory national health insurance program. Contributions are shared and provide access to healthcare services.
PhilHealth’s contribution model for 2025 adheres to a 5.0% premium rate applied to monthly basic salaries or declared incomes, with contributions shared equally between employers and employees. The system employs a progressive bracket structure with defined income thresholds:
- Salary Floor: ₱10,000
- Salary Ceiling: ₱100,000
Contribution Breakdown
| Monthly Basic Salary | Total Contribution (5.0%) | Employer Share (2.5%) | Employee Share (2.5%) |
|---|---|---|---|
| ₱10,000 and below | ₱500 | ₱250 | ₱250 |
| ₱20,000 | ₱1,000 | ₱500 | ₱500 |
| ₱50,000 | ₱2,500 | ₱1,250 | ₱1,250 |
| ₱100,000 and above | ₱5,000 | ₱2,500 | ₱2,500 |
Example: An employee earning ₱30,000 monthly contributes ₱750 (2.5% of ₱30,000), matched by their employer. For incomes below ₱10,000, contributions are calculated using the floor, while earnings above ₱100,000 use the ceiling.
Home Development Mutual Fund (Pag-IBIG Fund)
Mandatory savings program for housing development. Contributions are shared and provide access to housing loans and other benefits.
Pag-IBIG’s contribution model operates on a progressive bracket system tied to the Monthly Fund Salary (MFS). The 2024 reforms doubled the MFS ceiling from PHP 5,000 to PHP 10,000, marking the first increase since the fund’s establishment in 1986. The updated rates are structured as follows:
| Monthly Income Bracket | Employee Contribution Rate | Employer Contribution Rate | Maximum Monthly Contribution (Employee + Employer) |
|---|---|---|---|
| ≤ PHP 1,500 | 1% | 2% | PHP 45 (PHP 15 + PHP 30) |
| > PHP 1,500 | 2% | 2% | PHP 400 (PHP 200 + PHP 200) |
For incomes exceeding PHP 1,500, contributions are capped at PHP 200 monthly from both parties, regardless of actual earnings. This ceiling ensures proportionality while maintaining affordability for high-wage earners.
Employers must enroll workers within 30 days of hire, remitting contributions by the 10th of each month. Late payments incur 2% monthly interest.
Employer’s General Obligations
SSS Form R-5 (Contribution Collection List): Submit SSS Form R-5 monthly along with payment of SSS (regular and EC) contributions. Payment and submission deadlines depend on the last digit of the employer’s SSS number, varying from the 10th to the last day of the month following the month for which contributions are due. Payment can be made through SSS branches, authorized banks, or online payment channels.
Deadlines vary based on the last digit of the employer’s SSS number:
| Employer’s SSS number last digit | Deadline |
|---|---|
| 1 or 2 | 10th of the following month. |
| 3 or 4 | 15th of the following month. |
| 5 or 6 | 20th of the following month. |
| 7 or 8 | 25th of the following month. |
| 9 or 0 | Last day of the following month. |
PhilHealth Form ER-4 (Employer Remittance Report): Submit PhilHealth ER-4 monthly with payment of PhilHealth contributions. The deadline for submission and payment is generally within 10 days after the end of each calendar month. Payment can be made through PhilHealth offices, accredited banks, or online payment facilities.
Pag-IBIG Fund Remittance Form (Contribution Payment Form): Submit the Pag-IBIG Fund Contribution Payment Form (no specific form number widely cited, often employer-designed forms are acceptable, or Pag-IBIG provides templates) along with payment of Pag-IBIG contributions monthly. The deadline is generally within 10-15 days after the end of each calendar month, but may vary slightly. Payment can be made through Pag-IBIG branches, authorized collecting agents, or online payment channels.
Recommended Retention Period
It’s generally advised to retain payroll and benefits records for at least 10 years in the Philippines for compliance and audit purposes.
