There are specific rules that apply to payroll and taxation in the Philippines. In 2014, the national government made paying taxes easier for companies by introducing an electronic filing and payment system for social security contributions.
A remote payroll system is where a foreign company, i.e. a non-resident company, payrolls a resident employee in the Philippines. Under Philippine law, companies registered in other countries are allowed to obtain a license to do business and have employees in the Philippines. One option for a non-resident company to payroll its employees (local and foreign) in the Philippines is to use a fully outsourced service like a GEO or PEO which will employ and payroll the staff on their behalf.
In some cases, a company will register their business in the Philippines under one of the forms available: branch office, representative office, regional headquarters (RHQ) or regional operating headquarters (ROHQ), but prefer to have another company administering its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.
Larger companies with a commitment to the Philippines may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a Philippine payroll, and can fulfil all tax, withholding, and payroll requirements.
This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Filipino employment laws.
Companies can outsource the employment and payroll of their staff in the Philippines to a GEO, like Shield GEO. This is possible for both foreign workers and Filipino nationals. This is the easiest, fastest and safest way to payroll staff in the Philippines.
Shield GEO manages all aspects of payroll for workers in the Philippines, including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client.
Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips.
Read more about outsourced payroll and employment through Shield GEO.
The national currency is the Philippine Peso (PHP) and it is equal to approximately 0.02 USD.
|Social Security Registration ?||
The SSS (Social Security System) contribution rate is equivalent to 10.4% of a worker’s monthly salary credit, which shared by;
• Employer contribution is 7.07%
• Employee contribution is 3.33%
|Corporate Income Tax ?||
30%, calculated on taxable profit.
|Income Tax Rate ?||
|Payroll Tax ?||
1.16%-1.19% (per employee per month). The Payroll Tax is separated from employer social security. For more info please consult the Employment Section.
|Sales Tax ?||
VAT is equal to 12%.
|Withholding Tax ?||
Tax on Interest is equal to 20%.
|Employee Social Security (EE SS)||
The employee Social Security contribution is 1.33% to 2.98%, calculated on gross salary (withheld).
|Employer Social Security (ER SS)||
The employer Social Security contribution is PHP 1,208.7 per employee per month, calculated on gross salary.
|Reporting Requirements ?||
Annual Tax Filing
|Invoice / Payslips required ?||
Monthly available on web-site, pdf or paper
|Working on Sundays ?||
|Time Off Work ?||
Annual vacation is dependent on an employee’s years of service with the company.
• 1 year to less than 3 years-10 working days
• 3 years to less than 5 years-12 working days
• 5 years up-15 working days
An approval from the superior must be obtained at least one day in advance.
This reserves the right to call an employee back to work in an emergency case.
|Medical Leave ?||
The employee is permitted to take sick leave with pay of no more than 30 days per year and can use this right since starting work with the company.
If taking 3 or more consecutive day’s sick leave, the medical certificate and a sick leave form must be submitted to his/her superior as soon as he/she returns to the office.
The employee is permitted to take sick leave with pay of no more than 60 days per year, if the employee gets an illness or has an accident arising from work.
Female employees are allowed to take 90 days maternity leave (holidays are counted) excluding normal sick leave, but will receive normal salary and/or wages for only 45 days.
|Holiday Allowance ?||
Full-time employees are paid for public holidays.
|Business Leave ?||
The employee is permitted to take business leave of no more than 10 days per year and can use this right since starting work with the company.
An approval from the employee’s superior must be obtained at least 1 day in advance.
Any business leave without the approval from the employee’s superior will be regarded as desertion or absence from work.
|Religious Leave ?||
Male employees who complete 3 years of service with the company can take paid religious leave not exceeding 30 days (including holidays).
Religious leave is permitted only 1 time per person. Approval from an employee’s superior must be obtained at least 30 days in advance.
After the end of religious leave, an employee has to submit the certificate issued by the temple or sacred place to his superior, within 7 days after returning to the office.
|Military Leave ?||
Any male employee who is conscripted for military service will be regarded as terminating his employment from the date of conscription.
After completing the conscription, he may reapply for work which will depend on the suitability of the position and the availability.