Comprehensive Payroll Guide for the Philippines

Employee Benefits and Deductions

In addition to salary and mandatory contributions, employers must provide certain benefits to employees, including paid leave and holidays. Employers should also be aware of other required deductions that must be made from employees’ wages.

Leave Entitlements and Paid Holidays

Employees in the Philippines are entitled to several types of leave, including:

• Annual leave: Employees who have been with the company for at least one year are entitled to five days of paid service incentive leave per year.
• Sick leave: While there is no statutory requirement for paid sick leave, many employers provide this benefit as part of their internal policies.
• Maternity and paternity leave: Female employees are entitled to 105 days of paid maternity leave, while male employees can take seven days of paid paternity leave.

Employees are also entitled to 12 regular public holidays and several special non-working holidays. Employers must ensure that employees are compensated appropriately if they work on these holidays.

Mandatory Contributions and Other Deductions

In addition to SSS, Pag-IBIG, and PhilHealth contributions, employers must make other deductions from employees’ salaries as required by law or company policy. These may include deductions for loan repayments, union dues, or other voluntary contributions.

Employers must ensure that all deductions are lawful and agreed upon by the employee. Providing a detailed breakdown of these deductions in the employee’s payslip helps to maintain transparency and avoid disputes.

When Non-Compliance May Occur

Non-compliance with payroll regulations in the Philippines can result in serious consequences for employers, including fines, legal disputes, and damage to the company’s reputation. Below are common areas where non-compliance may occur and how to avoid them:

Late Salary Payments

Employers are required to pay their employees on time according to the agreed-upon pay schedule. Failure to do so can result in fines and legal disputes. To avoid this, businesses should implement a reliable payroll system that ensures timely payments.

Missed SSS, Pag-IBIG, or PhilHealth Contributions

Employers who fail to submit SSS, Pag-IBIG, or PhilHealth contributions on time may face penalties and a loss of benefits for employees. To prevent this, businesses should automate their payroll processes to ensure timely submission of contributions.

Incorrect Income Tax Withholding

Failing to withhold the correct amount of income tax or delaying tax submissions can lead to audits and penalties from the BIR. Employers must ensure that their payroll systems calculate taxes accurately and submit them on time.

Non-Compliance with 13th-Month Pay

Employers who fail to pay the 13th-month bonus on time may face legal claims and fines. To avoid this, employers must plan for this mandatory payment and ensure it is disbursed by the December 24th deadline.

How AYP Can Help

Managing payroll in the Philippines requires a deep understanding of local laws and regulations. AYP provides comprehensive payroll solutions to help businesses navigate these challenges and ensure compliance.

Professional Employer Organisation (PEO) Services

With AYP’s PEO services, businesses can outsource payroll management, including salary payments, tax withholding, and mandatory contributions to SSS, Pag-IBIG, and PhilHealth. AYP ensures that all payroll processes are compliant with Philippine labor laws.

Employer of Record (EOR) Services

As an Employer of Record, AYP assumes full responsibility for your workforce in the Philippines, handling payroll, statutory contributions, and compliance on your behalf. This allows you to focus on your core business operations without worrying about payroll compliance.

Payroll Outsourcing Management (POM) Services

AYP’s POM services provide a complete payroll solution, handling everything from calculating employee salaries and deductions to managing compliance with Philippine laws. By outsourcing your payroll to AYP, you can ensure that your business remains compliant with all payroll regulations.