Hiring employees in the Philippines means taking on a set of statutory obligations that go well beyond paying a salary. Foreign companies need to register with four government agencies, withhold income tax correctly, and remit contributions to three social insurance programs every month. This guide breaks down exactly what you’re responsible for, what the numbers look like, and how to stay compliant from day one.
Employer registration requirements
Before you put a single employee on payroll, you need active employer accounts with all four agencies. Skipping this step or registering late exposes you to penalties that can compound quickly.
The four registrations every employer must complete are:
- Bureau of Internal Revenue (BIR): required for withholding and remitting income tax
- Social Security System (SSS): required for monthly SSS contributions
- Philippine Health Insurance Corporation (PhilHealth): required for health insurance contributions
- Home Development Mutual Fund (Pag-IBIG Fund): required for housing fund contributions
Each agency issues its own employer number, and you’ll need all four before processing your first payroll run.
Statutory contributions: what employers pay
Philippine payroll compliance involves three social contribution programs plus a smaller employer-only program, each with its own rate structure and monthly cap. Here’s how each one works.
Sss (social security system)
SSS contributions are calculated on a Monthly Salary Credit (MSC), not the employee’s raw salary figure. The total contribution rate is 15%, split 10% employer and 5% employee. The MSC floor is ₱5,000 and the ceiling is ₱35,000, which puts the maximum employer contribution at ₱3,500 per month.
The governing legislation is the Social Security Act of 2018 (Republic Act 11199).
Members with an MSC above ₱20,000 are also covered by the Workers’ Investment and Savings Program (WISP). WISP contributions apply to the portion of the MSC that exceeds ₱20,000 and are additional to the standard 15% rate. Both the employer and employee contribute to WISP on that excess amount.
Philhealth
PhilHealth contributions are set at 5% of monthly basic salary, shared equally: 2.5% from the employer and 2.5% from the employee. Contributions are capped at a monthly basic salary of ₱100,000, so the maximum each party contributes is ₱2,500 per month.
Pag-ibig fund
Pag-IBIG contributions are calculated on a Maximum Fund Salary (MFS) of ₱10,000, with both employer and employee contributing 2% each. That puts the maximum monthly contribution at ₱200 per side. Contributions above the MFS cap aren’t required, though employees can opt to make voluntary additional contributions.
Employees’ compensation program (ecp)
The ECP is funded entirely by the employer. Employees don’t contribute to this program. The monthly contribution ranges from ₱10 to ₱30 depending on salary level. ECP provides work-related injury and disability benefits.
Employer contribution summary
| Program | Employer rate | Employee rate | Cap (employer) |
|---|---|---|---|
| SSS | 10% of MSC | 5% of MSC | ₱3,500/month |
| ECP | ₱10–₱30/month | None | N/A |
| PhilHealth | 2.5% of monthly basic salary | 2.5% | ₱2,500/month |
| Pag-IBIG | 2% of MFS (max ₱10,000) | 2% | ₱200/month |
Income tax withholding
Employers in the Philippines don’t pay a separate payroll tax on employee wages. Instead, you act as a withholding agent: you deduct the applicable income tax from each employee’s pay and remit it to the BIR each month. This is called creditable withholding tax.
The 2026 personal income tax brackets under the TRAIN Law are:
| Annual taxable income | Tax due |
|---|---|
| ₱0 to ₱250,000 | 0% |
| ₱250,001 to ₱400,000 | 20% of the excess over ₱250,000 |
| ₱400,001 to ₱800,000 | ₱30,000 + 25% of excess over ₱400,000 |
| ₱800,001 to ₱2,000,000 | ₱130,000 + 30% of excess over ₱800,000 |
| ₱2,000,001 to ₱8,000,000 | ₱490,000 + 32% of excess over ₱2,000,000 |
| Over ₱8,000,000 | ₱2,410,000 + 35% of excess over ₱8,000,000 |
To calculate monthly withholding, annualize the employee’s taxable income, apply the correct bracket, then divide by 12. The liability sits with the employer if the withholding is wrong.
Remittance deadlines
All three contribution programs (SSS, PhilHealth, and Pag-IBIG) require monthly remittances. Deadlines are staggered by employer registration number, so the exact cutoff date varies. The BIR also requires monthly remittance of withheld income tax, with the schedule depending on whether you’re a large taxpayer or in the regular filing track.
Missing a deadline triggers surcharges, interest, and compromise penalties under each agency’s rules.
Using an EOR to manage philippines payroll
Setting up a local entity in the Philippines takes time, capital, and ongoing compliance work. Many foreign companies use an Employer of Record (EOR) to hire in the Philippines without incorporating locally. The EOR becomes the legal employer on record, handles all registration and remittance obligations, and ensures contributions are calculated and filed correctly each month.
This is especially useful for companies hiring a small number of employees or moving quickly into the market. If you’re evaluating your options, an EOR handles the compliance infrastructure so your team can focus on the work itself rather than agency deadlines and contribution schedules.
For a comparison of providers, see this guide to EOR services.
FAQ
Do foreign companies need to set up a local entity to hire employees in the Philippines?
Not necessarily. Foreign companies can hire in the Philippines through an Employer of Record, which takes on the legal employer obligations without you needing a registered local entity. If you do establish a Philippine entity, you’ll need to register directly with SSS, PhilHealth, Pag-IBIG, and the BIR before hiring.
Is there a 13th month pay requirement in the Philippines?
Yes. The 13th month pay is a mandatory benefit under Presidential Decree 851. It’s equivalent to one-twelfth of an employee’s basic annual salary and must be paid by December 24 of each year. It’s separate from any statutory contribution and isn’t covered in the contribution rates above.
What happens if an employer misses a contribution remittance deadline?
Each agency imposes its own penalties. SSS charges a 2% per month penalty on unpaid amounts. PhilHealth and Pag-IBIG have similar penalty structures. The BIR adds surcharges, interest, and compromise penalties for late withholding tax remittances.
Are contractors subject to the same contribution requirements?
No. Independent contractors in the Philippines aren’t covered by SSS, PhilHealth, or Pag-IBIG in the same way employees are. However, misclassification risk is real: if a contractor relationship looks like employment in practice, the authorities may assess back contributions and penalties. Getting the classification right from the start matters.
