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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
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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 wage law in the Philippines
In the Philippines, the minimum wage is governed primarily by Republic Act No. 6727, also known as the Wage Rationalisation Act. This law establishes the framework and standards for determining minimum wages across different regions of the country. It aligns the setting of wages with regional differences, productivity improvements, and national development plans. The law was set in place to ensure a fair standard of living for workers and their families and to adjust wage levels considering the prevailing economic conditions.
Minimum wage in Metro Manila, Philippines
As the country’s economic and business hub, the National Capital Region, or Metro Manila, boasts the highest minimum wage rates, reflecting the area’s higher cost of living and operation.
The daily minimum wage for workers in Metro Manila is 645 PHP, following a 35 PHP wage increase approved by the Regional Tripartite Wage and Productivity Board in the National Capital Region (NCR).
Provincial rates in the Philippines
The minimum daily wage per region in the Philippines varies accordingly. Because of economic activities and living costs, provinces and regions outside the capital have lower rates than the minimum daily wage set in Metro Manila.
Here are the daily minimum wages for a few regions:
- Ilocos: The minimum daily wage is 435 PHP for non-agricultural establishments with 10 or more workers. The minimum daily wage for non-agricultural establishments with less than 10 workers and agricultural workers is 402 PHP.
- Western Visayas: The minimum daily wage is 480 PHP for non-agricultural establishments with more than 10 workers, 450 PHP for non-agricultural establishments with 10 workers or less, and 440 PHP for workers in agriculture.
- Central Luzon: The minimum wage is approximately 460 PHP. The region is known for its agriculture, services, and growing industry sectors.
- CALABARZON: The minimum daily wage in the region is approximately 500 PHP.
The minimum wage set by law only acts as the minimum amount that workers must be paid for their labour. Employers have the flexibility to offer wages above the minimum level to attract and retain workers, as well as acknowledge the higher cost of living in other areas. Increasing the salary beyond the minimum wage can also reflect the higher skill level or experience that a worker brings to the job. In fact, many companies, especially those in competitive industries or with roles requiring specialised skills, offer salaries that are significantly above the minimum wage to ensure they attract the best talents.
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.
Compliantly hire workers anywhere with CXC
With our EoR solution, you can engage workers anywhere in the world, without putting your business at risk. No more worrying about local labour laws, tax legislation or payroll customs — we’ve got you covered.
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