Navigating the intricacies of payroll management in the Philippines requires a comprehensive understanding of various labor regulations and compliance requirements. From minimum wage Philippines regulations to additional compensation and benefits, employers must stay informed to ensure fair treatment of their workforce while adhering to legal mandates.
Minimum Wage Regulations
In the Philippines, minimum wage rates vary across different regions and sectors. The National Wages and Productivity Commission (NWPC) sets the minimum wage rates, taking into account factors such as cost of living, inflation, and productivity. As of 2024, the minimum wage in Metro Manila (PHP610) is higher compared to other regions, reflecting the higher living costs in the capital.
Employers must ensure compliance with the prevailing minimum wage rates applicable to their business location and industry. Failure to adhere to these regulations can lead to legal repercussions, including fines and penalties.
Additional Compensation and Employee Benefits
Apart from the basic wage, employers in the Philippines are mandated to provide various benefits and allowances to their employees. These include:
- 13th Month Pay:
- Holiday Pay:
- Overtime Pay:
- Night Shift Differential:
- Service Incentive Leave:
- Maternity Leave:
- Paternity Leave:
- Solo Parent Leave
- Magna Carta of Women Leave
The 13th-month pay is a mandatory benefit equivalent to one-twelfth (1/12) of an employee's basic annual salary. It must be paid no later than December 24th of each year.
Employees are entitled to holiday pay for regular holidays, special non-working holidays, and special holidays falling on their rest day or regular workday. It is 100% higher than the regular daily rate. So if the regular daily rate is PHP610, the regular holiday daily rate is PHP1220.
Overtime work is compensated at a higher rate than regular work hours. The standard overtime rate is 25% higher than the regular hourly rate. So if the regular hourly rate is PHP76.25 then 4 hours of overtime is PHP381.25.
Employees working during night shifts are entitled to receive additional compensation, commonly referred to as night shift differential pay. The rate is 10% higher than the regular daily rate.
Employees who have rendered at least one year of service are entitled to a yearly service incentive leave of five days with pay which they can convert into cash if they don’t use them.
Filipino working mothers are entitled to a paid maternity leave of up to 105 days to foster a stronger bond with their newborns. Furthermore, an extension of up to 30 days may be granted upon the employee's request, albeit without pay, provided that it is requested before the original 105-day period elapses.
Male employees who are married and residing with their legitimate spouse are eligible for seven (7) days of paid paternity leave for up to four deliveries of their spouse.
Solo parent leave is an option for parents who are raising a child under the age of 18 or a child with a disability on their own, without the assistance or support of a partner or spouse. As long as they hold a Solo Parent ID and have been employed for a minimum of one year, any solo Filipino parent can take advantage of up to seven days of parental leave.
The Magna Carta of Women offers a unique benefit called "Special Leave for Women," specifically designed for female employees facing gynaecological disorders. This law provides female employees with a maximum of two months of leave in a calendar year to receive medical treatment for their gynaecological disorders.
De Minimis Benefits
The implementation of the TRAIN Law in January 2018 enables employers to offer their employees a range of de minimis benefits, but it is not compulsory. These benefits are intended to improve the working conditions of employees and to help employers comply with the law. The benefits are as follows:
- Private employees can convert up to 10 days of unused holiday leave credits into cash.
- Government officials and employees are entitled to a monetised value of both holiday leaves and sick leaves.
- Dependents of employees are entitled to a medical cash allowance of up to PHP1,500 per semester or PHP250 per month. This is an increase from the previous amount of PHP750 and PHP125, respectively.
- Employees are given a rice subsidy of up to PHP2,000, or a 50kg sack of rice. The value of this subsidy must not exceed PHP2,000.
- The clothing or uniform allowance has been increased to PHP6,000.
- Actual medical assistance, such as maternity assistance, routine checks, and annual medical, is available up to a maximum of PHP10,000 annually.
- A laundry allowance of PHP300 per month is provided.
- Employees who work overtime or night or graveyard shifts are entitled to a meal allowance of up to 25% of the basic minimum wage per region.
- Perks received by employees as part of a collective bargaining agreement or productivity incentive must not exceed PHP10,000 per year.
- Employee achievement awards, such as those for length of service or recognition for outstanding service, must be in the form of tangible personal property, and not cash or gift cards. The monetary value of such awards must not exceed PHP10,000 per year.
- Gifts or tokens given during Christmas or company anniversary celebrations must not exceed PHP5,000 per employee per year.
Employers need to take note that benefits, tokens, or incentives that are not included in the aforementioned list cannot be considered as de minimis benefits. As a result, such benefits are subject to income and withholding taxes.
Cost of Living Allowance (COLA)
An additional payment known as the Cost-of-Living Allowance (COLA) is given to employees to help them cope with inflationary pressures on their essential living expenses such as food, housing, clothing, and transportation. This allowance is typically calculated by monitoring changes in the Consumer Price Index (CPI), which tracks the price fluctuations of goods and services over time. However, it should be noted that not all employers include COLA in their compensation packages.
Payroll Processing and Compliance
Ensuring accurate and timely payroll processing is essential for maintaining employee satisfaction and compliance with labour regulations. Businesses operating in the Philippines must adhere to the following payroll procedures:
- Record-keeping:
- Payroll Calculation:
- Compliance Reporting:
Employers must maintain accurate records of employee attendance, working hours, wages, and benefits. These records are crucial for payroll processing and compliance audits. Susan.one Timekeeping system which comes with Susan.one Time tracker application makes the records collection process easy.
Payroll calculations should take into account various factors, including basic wages, overtime pay, allowances, and deductions for taxes and contributions to government-mandated programs such as social security, health insurance, and the Home Development Mutual Fund.
Employers are required to submit regular reports and filings to government agencies such as the Bureau of Internal Revenue (BIR), the Social Security System (SSS), the Philippine Health Insurance Corporation (PhilHealth) and the Home Development Mutual Fund (PAG-Ibig). Susan.one solution generates these reports within seconds.