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Minimum wage in the Philippines

Philippines payroll

Statutory benefits for employees in the Philippines

Other benefits given to employees in the Philippines

Outsource payroll service in the Philippines

Payroll in the Philippines

The Philippines has increasingly become an attractive hub for international companies looking to hire highly skilled professionals. With the surge in demand for top-tier talent, offering an attractive compensation package can help companies stand out in the competition.

Crafting such a competitive compensation package, however, requires a thorough understanding of local labour laws and regulations, particularly around wages and benefits. While the process can be overwhelming, it’s crucial to get it right to avoid any legal and financial repercussions.

That’s where outsourcing payroll comes into play. Partnering with a reliable payroll service provider like CXC simplifies the process. It takes the time-consuming and complex payroll tasks off your plate, allowing your team to redirect their focus and energy on more important aspects of the business.

In this detailed guide, you’ll gain insights on everything you need to know about payroll in the Philippines, including mandatory benefits, the minimum wage, and how to leverage payroll outsourcing services to simplify your expansion in this promising market.

Minimum wage in the Philippines

Minimum wages in the Philippines continue to be governed by Republic Act No. 6727 (the Wage Rationalisation Act). The law establishes a regional wage-setting system, allowing minimum wages to reflect differences in cost of living, productivity, and economic conditions across the country. Regional Tripartite Wage and Productivity Boards (RTWPBs) remain responsible for reviewing and adjusting wages within their jurisdictions.

There is no single national minimum wage. Employers must apply the rate in force for the region, sector, and establishment size where the employee works.

Minimum wage in Metro Manila

In Metro Manila (National Capital Region – NCR), which generally has the highest wage levels due to higher living costs, the daily minimum wage remains at PHP 645 per day in 2026, following the most recent approved adjustment. This rate applies to covered private-sector workers in non-agricultural establishments, subject to applicable exemptions.

Provincial and regional minimum wages

Outside NCR, minimum wages vary by region and, in some cases, by sector or establishment size. Indicative daily minimum wage levels in 2026 include:

Ilocos Region

Non-agricultural establishments with 10 or more workers: PHP 435.
Non-agricultural establishments with fewer than 10 workers and agricultural workers: PHP 402.

Western Visayas

Non-agricultural establishments with more than 10 workers: PHP 480.
Non-agricultural establishments with 10 workers or fewer: PHP 450.
Agricultural workers: PHP 440.

Central Luzon

Daily minimum wage: PHP 460.

CALABARZON

Daily minimum wage: PHP 500.

Actual rates depend on the latest RTWPB wage orders and may differ by industry classification.

Employer flexibility and market practice

The statutory minimum wage represents the legal floor, not the standard or maximum pay. Employers are free—and often required by market conditions—to offer higher wages to:

Attract and retain talent.
Reflect higher skill levels or experience.
Account for higher local living costs.

Many employers, particularly in competitive or specialised industries, pay well above the minimum wage to remain competitive.

Philippines payroll

The payroll policy in the Philippines is designed to ensure fair compensation for employees while providing structured guidelines or frameworks for employers.

Payroll cycle in the Philippines

As mandated by the Department of Labour and Employment (DOLE), employees must be paid at least twice a month at intervals not exceeding sixteen days. In the Philippines, it’s common for workers to be paid on a bi-monthly basis. Employers generally choose the 15th and the last day of the month for salary release.

Payroll deductions in the Philippines

Payroll deductions are part of the compensation system in the Philippines to ensure compliance with tax regulations and contribution schemes mandated by law. The primary payroll deductions include:

Withholding Tax: This is income tax withheld from employees and remitted to the Bureau of Internal Revenue (BIR). The amount depends on the income level and tax status of the employee.
Social Security System (SSS) Contributions: These are mandatory for both employees and employers, providing benefits for retirement, disability, maternity, and more. The contribution is based on the employee’s salary.
PhilHealth Contributions: This is required for health insurance contributions to the Philippine Health Insurance Corporation, which provides medical coverage. Both employers and employees contribute to this fund.
Pag-IBIG Fund Contributions: Also referred to as the Home Development Mutual Fund, Pag-IBIG contributions are intended to provide housing finance for Filipino workers. This deduction is mandatory for both employees and employers.

These payroll deductions ensure that both the employee and the employer are contributing to the nation’s welfare and development schemes, while also adhering to tax regulations set forth by the government.

13th-month salary in the Philippines

The 13th-month salary is a mandatory benefit in the Philippines. This statutory requirement is mandated by Presidential Decree No. 851, which requires that all rank-and-file employees be entitled to this benefit.

Every employer in the Philippines is required to pay this bonus, which is equivalent to one-twelfth (1/12) of an employee’s basic annual salary, excluding allowances and monetary benefits that are not integrated into the regular wage. This payment must be disbursed no later than December 24th each year, providing an essential financial boost for employees during a period typically associated with higher spending. Employers can release half of the 13th-month salary in June and the other half in December, as long as it will be disbursed no later than December 24th each year.

Statutory benefits for employees in the Philippines

A comprehensive set of mandatory employee benefits in the Philippines is established by law, including:

Statutory health insurance benefits in the Philippines

In the Philippines, statutory health insurance is managed and provided by the Philippine Health Insurance Corporation (PhilHealth), a government-owned and operated corporation. With the rising costs of healthcare, PhilHealth provides essential financial support during medical needs, reducing the burden on employees and ensuring they can obtain necessary care without undue stress

Benefits of statutory health insurance in the Philippines

The contribution rate for PhilHealth is currently set at 5% of the monthly salary, with the cap at 100,000 PHP, which ensures that high earners don’t pay disproportionately more than lower earners. It offers a range of inpatient and outpatient benefits, including room and board, medicines, laboratory exams, and professional fees. Other health insurance benefits include:

Inpatient care: This covers room and board, drugs and medicines, laboratory exams, and operating room fees.
Outpatient coverage: Provides special benefit packages for terminal illnesses and diseases such as end-stage renal disease, tuberculosis, and breast cancers among others.
Z benefit package: This provides coverage for catastrophic illnesses, such as leukemia, prostate cancer, and kidney transplants.
Mental health care: Covers consultations and diagnostic follow-ups for mental health conditions.
Maternity care package: This ensures women have access to vital healthcare services during pregnancy, such as antenatal care, safe childbirth, and postpartum services.

Service Incentive Leave (SIL) in the Philippines

Employers must grant five days of annual service incentive leave with pay. This benefit can be used for sick or vacation leave purposes.

Employee leave entitlements in the Philippines

All employees in the Philippines are entitled to a minimum number of paid leave days per year, which include annual, sick, and maternity/paternity leaves. Implementing these leave benefits promotes work-life balance, reduces burnout, and improves overall productivity and focus when employees are at work.

Housing finance and saving programs in the Philippines

The Pag-IBIG fund or the Home Development Mutual Fund offers affordable housing finance and savings programs. Employees benefit from accessible loans for housing and related needs while contributing to a national savings program.

Social insurance program: This statutory employee benefit is under the Social Security System (SSS), which provides covered workers and their families with benefits and assistance in times of need, including retirement, disability, maternity, sickness, unemployment, and death. Other benefits that workers can get from SSS include:

Retirement benefit: It offers a lifetime monthly pension or a lump sum amount to members who reach retirement age.
Unemployment benefit: Also known as involuntary separation benefit, qualified members who were involuntarily separated from work can avail of this benefit.
Maternity benefit: This offers a daily cash allowance for female members who are unable to work due to childbirth or miscarriage. Following the Expanded Maternity Leave Law, this now grants 105 days of paid leave for childbirth, and an additional 15 days for single parents. In cases of miscarriage or emergency termination of pregnancy, a 60-day paid leave is provided.

Other benefits given to employees in the Philippines

In the Philippines, companies often provide other benefits to employees that go beyond the mandatory government-provided benefits. These benefits are typically offered to attract and retain talent, as well as to enhance the overall compensation package for employees.

Some of the other non-statutory benefits given to employees are:

Flexible working arrangements in the Philippines

Flexibility can also be considered a non-statutory benefit, with options such as telecommuting, flexible work hours, and compressed workweeks. These arrangements are particularly appreciated for promoting a better balance between personal life and work commitments, catering to the modern employee’s needs.

Health and wellness programs in the Philippines

Offering health insurance coverage significantly alleviates the financial burden on employees regarding medical expenses. Moreover, comprehensive health packages, including annual physical examinations, vaccinations, and even mental health support, can ensure that your workforce is healthy and more productive. An increasingly popular benefit in today’s health-conscious world involves wellness programs that might include gym memberships, fitness challenges, or onsite fitness facilities.

Retirement benefits in the Philippines

Although the Social Security System (SSS) provides basic retirement benefits, many companies choose to offer supplemental pension plans or retirement fund contributions to enhance retirement security for their employees.

Life and disability insurance in the Philippines

Another valuable benefit is life and disability insurance, which provides employees with the peace of mind and a secure financial future for themselves and their dependents in case of any unforeseen events.

Educational and professional development in the Philippines

Investing in your employees’ growth can yield substantial returns. This can range from sponsorship for further education, professional training, access to conferences, and seminars to in-house training programs.

Bonuses and profit sharing in the Philippines

Performance-related bonuses and profit-sharing schemes can enhance motivation and foster a sense of ownership and alignment with the company’s goals.

Other perks in the Philippines

Many companies also choose to offer other perks such as company outings, team-building activities, recognition programs, childcare assistance, and even free or subsidised meals. These perks are designed to support workers’ needs and make the workplace more enjoyable.

Outsource payroll service in the Philippines

Managing payroll in-house can often present a significant challenge, particularly if you do not have enough expertise or resources. Navigating the complexities of ever-evolving tax laws and labour regulations adds a layer of difficulty, making payroll management even more overwhelming. Incorrect payroll processes can expose your business to hefty penalties, legal complications, and reputational damage.

Worry no more. Our team of HR and compliance experts is here to make the process as smooth and stress-free as possible. By outsourcing your payroll to CXC, you leave the complex work of managing HR tasks, calculating taxes, and handling bonuses for your team in the Philippines to us.

Contact our team and we will provide guidance on your specific requirements.

Read about EoR services

FAQ's

How does payroll work in the Philippines?

Payroll in the Philippines works on a semi-monthly cycle, meaning employees are paid at least twice a month, with no more than 16 days between paydays. Employers calculate gross pay, deduct mandatory contributions, withhold income tax, and remit everything to the relevant government agencies before paying the net salary to employees.

Here is what every payroll in the Philippines involves:

Gross pay calculation based on the employee’s basic salary, overtime, allowances, and other agreed compensation

Statutory deductions for SSS (Social Security System), PhilHealth, and Pag-IBIG (Home Development Mutual Fund)

Income tax withholding under the TRAIN Law, using the graduated tax table set by the Bureau of Internal Revenue (BIR)

Net pay transferred to the employee, with an itemised payslip issued every payday

The Philippine Labour Code requires employers to keep payroll records for at least three years, covering pay dates, total earnings, deductions, and net salary for each employee.

Employers in the Philippines must also register with four government agencies before running their first payroll: the BIR, SSS, PhilHealth, and Pag-IBIG. Missing any of these registrations may expose the company to penalties, administrative findings, and compliance risks.

How do you set up payroll in the Philippines?

Setting up payroll in the Philippines requires registering your business with four government agencies and establishing a compliant pay process before you can legally pay your first employee. The full setup typically takes several weeks, so it is worth starting early.

Step-by-step process of setting up payroll in the Philippines

Register with the BIR to get an Employer Identification Number and set up income tax withholding under the TRAIN Law (RA 10963). New employees without a Tax Identification Number (TIN) need to complete BIR Form 1902.

Register with the SSS to set up social security contributions for both employer and employee.

Register with PhilHealth to enable mandatory health insurance contributions.

Register with Pag-IBIG (HDMF) to cover the housing fund contributions.

Set your payroll schedule. Wages must be paid at least twice a month, with no more than 16 days between paydays.

Choose a payroll method. Most employers use bank transfers. Note that employees must consent in writing if wages are paid via bank, and the bank must be within 1 km of the workplace.

Calculate, deduct, and remit. Each pay cycle, collect timesheets, calculate gross pay, apply statutory deductions, and remit contributions to the relevant agencies by their deadlines.
Issue payslips. Employees must receive an itemised payslip every payday showing gross pay, deductions, and net pay.

Do you need a local entity to run payroll in the Philippines?

Yes, you need a registered legal entity in the Philippines to run payroll directly and employ staff compliantly. Without one, you cannot register with the BIR, SSS, PhilHealth, or Pag-IBIG, which means you cannot legally withhold taxes or make statutory contributions on behalf of your employees.

Setting up a local entity (such as a corporation or branch office) takes time, involves registration with the Securities and Exchange Commission (SEC), and comes with ongoing compliance obligations.

What if you are not ready to set up an entity?

If you want to hire in the Philippines without establishing your own entity, an Employer of Record (EOR) is the most practical option. The EOR becomes the legal employer of your workers in the Philippines, handling:

Payroll processing and tax withholding.

SSS, PhilHealth, and Pag-IBIG contributions.

Employment contracts compliant with Philippine labour law.

13th-month pay and other mandatory benefits.

Your team members work for you day-to-day, but the EOR manages certain local employment administration, payroll, and compliance obligations.

If you need to hire quickly or want to test the Philippine market before committing to a local entity, an EOR can reduce administrative setup requirements while supporting compliant payroll operations.

What payroll taxes must employers pay in the Philippines?

Employers in the Philippines are responsible for contributing to three mandatory funds and for withholding income tax from employee salaries on behalf of the government. Here is a breakdown of each obligation.

Mandatory employer contributions

Agency	Employer Contribution	Employee Contribution	Notes
SSS (Social Security)	9.5%	4.5%	Salary credit capped at ₱30,000/month
PhilHealth (Health Insurance)	2.5%	2.5%	5% total; income ceiling of ₱100,000
Pag-IBIG / HDMF (Housing Fund)	2%	1–2%	Based on salary up to ₱5,000
Employees’ Compensation (EC)	₱10–₱30/month	None	₱10 for salaries ≤₱14,749; ₱30 above

Income tax withholding

Employers do not pay income tax on behalf of employees, but they are legally required to act as the withholding agent. This means deducting the correct amount from each employee’s salary and remitting it to the BIR monthly. The Philippines uses a graduated income tax system under the TRAIN Law, with rates ranging from 0% (on annual income up to ₱250,000) to 35% (on income above ₱8,000,000).

Remittance deadlines

BIR (income tax): 10th of the following month (or 11th–15th for electronic filers).

SSS: 15th of the following month.

PhilHealth: 10th of the following month.

Pag-IBIG: 10th of the following month.

Missing these deadlines triggers penalties and interest charges, so building remittance dates into your payroll calendar from the start is essential.

What employee benefits must employers provide in the Philippines?

Employers in the Philippines must provide a set of mandatory employee benefits defined under the Labour Code and related legislation. These are non-negotiable regardless of company size, industry, or whether the employer is local or foreign.

Mandatory benefits in the Philippines

13th-Month Pay. All rank-and-file employees who have worked for at least one month in a calendar year are entitled to a 13th-month payment. It equals one-twelfth of the employee’s total basic salary for the year and must be paid by 24 December. It is tax-free up to ₱90,000 when combined with other bonuses.

SSS Coverage. Social security protection covering disability, maternity, sickness, and old age. Employer contributes 9.5%, employee contributes 4.5%.

PhilHealth Coverage. State health insurance. The total premium is 5% of the basic monthly salary, split equally between employer and employee, with an income ceiling of ₱100,000.

Pag-IBIG (HDMF) Coverage. A mandatory housing and savings fund. Employers contribute 2%, employees contribute 1–2% depending on their salary.

Service Incentive Leave (SIL). Employees who have worked for at least one year are entitled to five days of paid leave per year.

Maternity Leave. Female employees are entitled to 105 days of paid maternity leave (120 days for solo parents), funded through the SSS.

Paternity Leave. Married male employees are entitled to seven days of paid paternity leave for up to four childbirths.

Solo Parent Leave. Employees who qualify as solo parents under Republic Act 8972 receive an additional seven days of paid leave per year.

These benefits apply to all employees covered by the Philippine Labour Code. Contractors and freelancers are not entitled to most of these benefits, which is one reason correct worker classification matters so much.

What supplementary benefits are common in the Philippines?

Beyond the mandatory benefits, many employers in the Philippines offer supplementary benefits to attract and retain talent, particularly in competitive sectors like technology, finance, and business process outsourcing (BPO). These are not required by law, but they have become market expectations in many industries.

Common supplementary benefits in the Philippines

Private health insurance (HMO): A Health Maintenance Organisation (HMO) plan is one of the most valued benefits for Filipino employees. It covers outpatient consultations, hospitalisation, and sometimes dental and vision care, going beyond what PhilHealth provides.

Rice allowance. Up to ₱2,000 per month in rice subsidy is classified as a de minimis benefit, meaning it is non-taxable. Many employers provide this as a fixed monthly allowance.

Transportation and meal allowances. Common in Metro Manila and other urban centres where commuting costs are significant.

Clothing or uniform allowance. Up to ₱6,000 per year is tax-free under de minimis rules.

Performance bonuses. A 14th-month pay or annual performance bonus is common in mid-to-large companies, though not legally required.

Retirement benefits. The Republic Act 7641 (Retirement Pay Law) sets minimum retirement pay, but many employers offer enhanced retirement plans above the statutory floor.

Life and accident insurance. Group life insurance policies are a common employer-sponsored benefit, particularly in larger organisations.

In the Philippines, de minimis benefits, including rice subsidies, uniform allowances, and certain medical allowances, are exempt from income tax up to prescribed limits. Structuring supplementary benefits within these thresholds may help reduce the tax burden for both employer and employee.

The right mix of supplementary benefits depends heavily on your industry and the seniority of the roles you are hiring for. In tech and finance, HMO coverage and performance bonuses are often deciding factors for candidates.

What are the minimum wage and salary expectations in the Philippines?

The minimum wage in the Philippines is set at the regional level, not nationally, so the rate your employees are entitled to depends on where they are based. As of 2026, the daily minimum wage for non-agricultural workers in the National Capital Region (NCR) is ₱695, following a ₱50 increase approved under Wage Order No. NCR-26 in July 2025.

Regional minimum wage snapshot (2026)

Region	Daily Minimum Wage (Non-Agriculture)
NCR (Metro Manila)	₱695
Region IV-A (CALABARZON)	₱485–₱600
Region VII (Central Visayas)	₱500–₱540
Region XI (Davao)	₱505–₱510
Region III (Central Luzon)	₱435–₱550
Region VI (Western Visayas)	₱480–₱513
BARMM	₱366–₱411

Rates are set by the Regional Tripartite Wages and Productivity Boards (RTWPB) under the Department of Labor and Employment (DOLE) and are reviewed periodically. Non-compliance carries fines of ₱100,000 to ₱500,000 and possible imprisonment.

What about actual salary expectations?

The minimum wage is the legal floor, not a market benchmark. For professional and skilled roles, actual salaries are significantly higher. Here are typical monthly basic salary ranges for common roles in Metro Manila:

Customer service / BPO agents: PHP 18,000 – PHP30,000.

Software developers: PHP 40,000 – PHP 120,000.

Accountants: PHP 25,000 – PHP 80,000.

HR professionals: PHP 25,000 – PHP 55,000.

Marketing managers: PHP 40,000 – PHP 80,000.

When planning total employment cost, add approximately 12 – 15% on top of the basic salary to account for mandatory employer contributions (SSS, PhilHealth, Pag-IBIG, EC) plus the 13th-month pay obligation.

How much does payroll administration cost in the Philippines?

The cost of running payroll in the Philippines depends on whether you manage it in-house or outsource it, and how many employees you have. There is no single fixed price, but here is a practical breakdown of what to expect.

In-house payroll costs

Running payroll internally means absorbing the cost of:

HR or payroll staff salaries to manage calculations, deductions, and government remittances.

Payroll software or accounting systems capable of handling Philippine statutory requirements (SSS, PhilHealth, Pag-IBIG, BIR e-filing).

Compliance management including keeping up with wage order updates, PhilHealth rate changes, and BIR filing requirements.

Penalties and corrections when errors occur, which cost time and money to resolve.

For a small team of 10–20 employees, the administrative overhead alone can easily absorb the equivalent of a part-time HR role.

Outsourced payroll costs

The costs of outsourcing payroll in the Philippines to a local provider or global payroll partner typically depends on the scope of services, the size of your workforce, and whether the provider also handles compliance filings and reporting.

The real cost question is not what you pay for payroll processing, it is what you risk by getting it wrong. BIR penalties, SSS surcharges, and PhilHealth interest charges can add up quickly, and DOLE audits are a genuine risk for non-compliant employers.

For companies hiring across multiple regions in the Philippines, or managing a mix of full-time employees and contractors, outsourcing removes the operational burden and may help reduce payroll and compliance risk exposure.

When should companies outsource payroll in the Philippines?

Companies should consider outsourcing payroll in the Philippines when the complexity or risk of managing it internally outweighs the cost of getting specialist help. There are several situations where outsourcing makes clear sense.

Signs it is time to outsource payroll in the Philippines

You are hiring your first employees in the Philippines and do not have local HR or finance staff who understand BIR, SSS, PhilHealth, and Pag-IBIG requirements.

Your team is growing quickly, and your current payroll process cannot scale without adding headcount to manage it.

You are managing employees across multiple regions, each with different minimum wage rates and wage order obligations.

You have had payroll errors or late remittances that triggered penalties or employee complaints.

Your HR team is spending more time on payroll admin than on people management, which is a signal that the process has outgrown the team.

You do not have a local entity and are using an Employer of Record, in which case payroll is already handled as part of that arrangement.

What outsourcing typically covers?

A payroll outsourcing provider in the Philippines will handle gross pay calculations, statutory deductions, BIR withholding tax filing, SSS/PhilHealth/Pag-IBIG remittances, payslip generation, and year-end reporting. Some providers also manage 13th-month pay calculations and DOLE compliance documentation.

The point at which outsourcing pays for itself is usually when the cost of a single compliance error, penalty, or DOLE investigation exceeds what you would have paid a provider for the entire year. For most growing teams, that point arrives earlier than expected.

How can businesses reduce payroll errors by partnering with CXC in the Philippines?

Businesses reduce payroll errors in the Philippines by partnering with CXC because we manage the full payroll process, from calculations and statutory deductions to government remittances and compliance filings, so your team does not have to navigate it alone.

What working with CXC looks like in practice?

When you work with us, we take on the parts of Philippines payroll that create the most risk for growing businesses:

Accurate payroll calculations every cycle, covering basic salary, overtime, allowances, and all mandatory deductions.

Timely remittances to the BIR, SSS, PhilHealth, and Pag-IBIG, so you never miss a deadline or incur penalties.

Compliant employment contracts aligned with Philippine labour law, including correct benefit entitlements and termination provisions.

13th-month pay management budgeted and processed correctly, with full documentation for DOLE compliance.

Worker classification support to ensure your contractors and employees are correctly categorised, reducing misclassification risk.

Payslip generation and record-keeping in line with the three-year documentation requirement under the Labour Code.

Why it matters for your business?

Payroll errors in the Philippines are not just an HR inconvenience. Late BIR remittances attract surcharges and interest. Incorrect SSS contributions can affect employee benefit entitlements. DOLE audits can disrupt operations and damage your employer brand.

CXC has over 30 years of experience managing compliant payroll across 100+ countries, including the Philippines. Our clients, including global enterprises managing large, distributed teams, rely on us to keep payroll accurate and on time so their people get paid correctly and their business stays compliant.

If you are hiring in the Philippines and want payroll handled by people who know the local rules inside out, get in touch with our team to find out how we can help.

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