How To Do Payroll In The Philippines

The Philippines is one of the fastest emerging markets and the third highest economy in Southeast Asia.

It has a strong and stable economy with hard-working citizens.

It has a population of almost 90 million people who are considered to be the second most confident consumers in the world. 

This is the reason why many companies find it interesting to invest and start their business in the Philippines.

Many business owners from the international market are geared towards expanding their business because of the attraction of tax deductions and exemptions as well as a friendly offer of permanent residency for foreign investors. 

However, with all the potential business opportunities in the Philippines, business owners and future investors must know that there is a lot of responsibility involved in looking after and managing a business in the Philippines. 

One needs to be fully compliant with the Philippines’ labor laws as well as regulations that involve payroll. 

Now, let us talk about the payroll system in the Philippines.

This is one crucial component in establishing a business which is under the Human Resource Department in coordination with Accounting.

Knowing the ins and out of handling the payroll system in the Philippines like calculating the employee’s salary, the inclusion of mandatory benefits and other voluntary and government-mandated deductions is imperative for every business. 

Apart from doing the company’s payroll, HR and accounting are also tasked to do a plethora of things that will help grow the business.

More often there are payroll service providers that help ensure payroll processes run accurately, efficiently, and smoothly.

They help in paying employees accurately and on time, taking away the stress of these complex and time-consuming processes. 

Or, another option that is widely practiced these days is having a payroll software system. 

Using the payroll software system helps to keep the process constantly updated and compliant with the changing rules and regulations of labor laws in the Philippines.

How is payroll in the Philippines done?

Let’s look at what are the things to be considered while managing payroll in the Philippines.

Government Mandate (DOLE)

Whether there are only 50 employees in your company or 5,000, The Department of Labor and Employment (DOLE) has given provisions for companies to follow as far as payroll is concerned.

Employers are mandated to comply with these payroll rules and regulations which will include the monthly withholding taxes.

Here are the following basic payroll contributions that need to be deducted from employee salaries every month.

1. Social Security (SSS)

Social security includes general social insurance that covers sickness, disability, old age, and maternity benefits of the employee.

The social security contribution is dependent on the salary of the employee.

For employees earning a monthly salary of P20,000, they are required to pay with the employer’s corresponding share of the said insurance coverage. 

2. Philippine Health Insurance Corporation (PhilHealth)

This is a national health insurance program in the Philippines that generally aims to provide quality health services in medical and healthcare for all employees.

At the same time, the employer also provides an equal share for their employees.

3. Home Development Mutual Fund (Pag-IBIG)

This is a short-term housing loan or program that is provided by the government to employees.

It is a national savings housing program to help Filipinos have their own house and property. 

4. Income Tax Returns

This is the amount that is deducted as income tax and directly deducted from the salary by the employer.

This applies to individual citizens and resident aliens earning an individual salary and compensation and also individuals engaged in business and practice of the profession.

Shown below are the graduated Income Tax Rates under Section 24(A)(2) of the Tax Code of 1997, as amended by Republic Act No. 10963.

Amount of Net Taxable Income	Rate
Over	But Not Over
–	P250,000	0%
P250,000	P400,000	20% of the excess over P250,000
P400,000	P800,000	P30,000 + 25% of the excess over P400,000
P800,000	P2,000,000	P130,000 + 30% of the excess over P800,000
P2,000,000	P8,000,000	P490,000 + 32% of the excess over P2,000,000
P8,000,000		P2,410,000 + 35% of the excess over P8,000,000

With all these deductions,  employees are required to be provided with a payslip which can be either printed or available for online access and downloading.

Foreign companies that are new to the Philippine market need to develop a payroll solution that takes care of the employees’ compensation requirements.

Generally, doing payroll is a tough and complicated job.

Salary adjustments and net pay is hard to compute when done manually.

Computation of an employee’s salary and taxable income can be done swiftly and accurately with user-friendly payroll software in the Philippines. 

What are the options for doing and managing payroll in the Philippines? 

Manual and traditional payroll is almost extinct.

There are better options to do payroll in the Philippines. 

1. Payroll Outsourcing Provider

Many companies prefer to have a partner who can do payroll processing for them.

The service is provided by the payroll provider who then provides payroll software that is compliant with the employment regulations in the Philippines and takes care of all the calculations related to the salary payment.

2. Having an Internal payroll system

Companies who have the capacity to do their payroll can actually run their own with the help and assistance of bankable payroll software that can handle withholding tax and other mandatory deductions provided for by Philippine labor laws.

They can also have personnel who are knowledgeable enough to do the payroll by themselves.

Taking into account the numerous complexities associated with payroll regulations in the Philippines, the best option is to have a payroll service provider like EasyHR.

It basically helps your HR team manage employees through robust record-keeping and payroll functions and has the following standard features:

On-line and Real-time Employee 201 File

EasyHR enables users to see the employee’s detailed records including General Information (Address, Contact Numbers, Email, etc.), Payroll Details, Salary, Government statutory deduction details and numbers (TIN, SSS, PHIC, HDFM).

It also shows the History of Changes and who made such updates in the 201 File records.

Users can also attach documents under the Memo tab purposely supporting changes in the 201 Filing.

Automatic DTR (Daily Time Recording) Computation

Txt files or CSV Logs that are uploaded in the EasyHR will be computed automatically.

Users will no longer have to manually compute for Lates, Undertime, Overtime, Absences and Holiday Pay computations.

Payroll Computation with Philippine Statutory and Mandatory Deductions

EasyHR also automatically computes standard Philippine Payroll including Statutory and mandatory deductions with ease and saves a lot of time in computing accurate net pay for Employees.

Loan Management

EasyHR allows an unlimited number of employee Loans (Ex. Cash Advances, SSS Salary and Calamity Loans, HDFM Loans, etc.) monitoring.

This will automatically reflect in the employee’s Loan Ledger as well as the Employees payslips.

Leave Management

Flexible and definable Leave Types that allows your HR staff to input employee’s Leave Types and Leave Credits.

EasyHR can view the history of Leaves already availed of by an employee.

Employee Portal

Allows employees to log in to EasyHR and check their records online.

Instead of checking or having a hard copy of their payslips, Daily Time Records, and even loans.

All they need to do is check on their own the Employee Self Service portal and view these, saving both the employee’s and the HR personnel ‘s time. 

Multi-company and Multi-Branch

EasyHR is capable of handling multi-company with multiple branches.

It will be very easy for a company to monitor a group of companies with multiple locations and branches and saves a lot of money and time.

Let us do payroll in the Philippines though EasyHR today, Book a demo today! https://human-incubator.com/easy-hr/