Many local and foreign investors are attracted to investing and expanding their businesses in the Philippines as the government has liberalized several measures on investments and business applications.

In comparison to other ASEAN countries, the Philippines received a 29% increase in Foreign Direct Investors (FDIs), according to the 38th Global Investment Trends Monitor. In the fourth quarter of 2020, approved foreign investments in the country totaled $36.5 billion (US$749 million).

Information and communication, power, gas, steam and air conditioning supply, manufacturing, and administrative and support service activities are the sectors that have seen the most foreign investment.

Furthermore, the United States, Singapore, China, and South Korea are the top donors to the country’s foreign direct investment. This proves the thriving economy of the Philippines amid the pandemic.

When starting or doing in the Philippines, one of the things that you should take note of is the payroll system. For business owners, knowing the ins and outs of payroll management is critical. Here are the factors you should take into account when managing payroll in the Philippines.

REQUIRED WORKING HOURS

Most industries require eight hours of work per day from Monday to Friday, excluding the 1-hour lunch break, but certain employers demand 48 hours per week without overtime pay. The minimum wage in the Philippines varies between different regions depending if it’s agricultural or non-agricultural work.

The rate of overtime pay is usually negotiated between the company and the employee and stipulated in the employment contract before the start working date. In the law, it must be at least 125% of the normal wage, or at least 130% for overtime undertaken on a rest day or a holiday.

For the night differential rate, employees working at any point between 10:00 Pm and 6:00 AM are subject to night shift differential pay.

Also, employees who have worked in the company for at least one month must receive 13th-month pay. The 13th-month pay is the employee’s total basic salary for the year divided by 12.

An automated payroll system such as EasyHR which has automatic DTR (Daily Time Recording) computation makes it easier for the companies to compute the compensation.

Easy POS sets your establishment the right way by helping you manage day-to-day transactions on the dot.

Click to Learn More.

Easy POS sets your establishment the right way by helping you manage day-to-day transactions on the dot.

Click to Learn More.

TIME OFF & PAID LEAVES

Employees in the Philippines are only allowed five days of “service incentive leave” per year. Over and above this, most reputable businesses provide more vacation leaves to their employees, although they are not legally compelled to do so.

Working on holidays is subject to an adjusted rate too, according to the law. For the regular holiday,s the employee shall be paid 200% of the basic daily rate and 130% of the basic daily rate for work hours rendered on a special non-working holiday.

EasyHR payroll system has leave management, overtime management, and overtime and tardiness computation functionalities that allow accurate monitoring of working hours and absences.

WITHHOLDING TAX

In recent years, the personal income tax rates in the Philippines have undergone considerable reform. As a result of these changes, many low-wage earners are no longer subject to income tax, and even full-time workers in Manila must earn more than double the minimum wage to reach the first income tax threshold.

Employees with annual wages totaling PHP 250,000 or less are tax-exempt. Employers typically deduct taxes from employees on a monthly or semi-monthly basis.

MANDATORY SALARY DEDUCTIONS

In the Philippines, employees make mandatory government contributions of which employers also pay a share. These deductions are Social Security System (SSS), Philippine Health Insurance Corporation (PhilHealth), and Home Development Mutual Fund (Pag-IBIG).

Accurately computing your employees’ taxable income is a confusing task with all the possible salary adjustments. One way of eliminating this burden is to use EasyHR which has an automated payroll computation of the Philippine Statutory and Mandatory Deductions.

As this guide explains, there are a variety of complicated nuances to consider when starting a business and managing payroll in the Philippines. With a cloud-based payroll management system, the company can avoid discrepancies and other legal issues of an inaccurate payroll computation.

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Easy POS sets your establishment the right way by helping you manage day-to-day transactions on the dot.

Click to Learn More.

Easy POS sets your establishment the right way by helping you manage day-to-day transactions on the dot.

Click to Learn More.