The Philippines, an archipelagic country in Southeast Asia, is fast becoming a hub for global talent. If you employ people from this region in your organization, you need to adhere to the payroll requirements of the country. Like every other nation, The Philippines has its own set of labor laws and payroll requirements. Here’s a rundown of all the things you need to know about payroll in the Philippines.
1. Labor Code of the Philippines
The Philippine Labor Code defines the employer-employee relationship by laying out stipulations. It mainly protects the workers’ rights and ensures fair and equal compensation.
Working Hours
The workday in the Philippines is capped at 8 hours a day. Employees are granted 1-hour lunch breaks. Working hours include the time that the employee is required to be in office, the hours worked and the breaks allowed to avoid burnout.
Night Shift
If an employee is expected to work a night shift, between 10 PM and 6 AM, they are entitled to minimum 10% extra compensation per hour above the hourly rate.
Overtime
If an employee is required to work overtime, i.e. more than 8 hours a day, they must be compensated accordingly. Below are the overtime rate per Department of Labour and Employment (DOLE).
| Worked on: | Eligible Pay |
|---|---|
| Ordinary Day | 1 or 100% |
| Ordinary Day, Night Shift | 1 x 1.1 = 1.1 or 110% |
| Ordinary Day, Overtime | 1 x 1.25 = 1.25 or 125% |
| Ordinary Day, Night Shift, Overtime | 1 x 1.1 x 1.25 = 1.375 or 137.5% |
| Sunday / Rest Day | 1.3 or 130% |
| Rest Day, Night Shift | 1.3 x 1.1 = 1.43 or 143% |
| Rest Day, Overtime | 1.3 x 1.3 = 1.69 or 169% |
| Rest Day, Night Shift, Overtime | 1.3 x 1.1 x 1.3 = 1.859 or 185.9% |
| Special Day | 1.3 or 130% |
| Special Day, Night Shift | 1.3 x 1.1 = 1.43 or 143% |
| Special Day, Overtime | 1.3 x 1.3 = 1.69 or 169% |
| Special Day, Night Shift, Overtime | 1.3 x 1.1 x 1.3 = 1.859 or 185.9% |
| Special Day Falling on Rest Day | 1.5 or 150% |
| Special Day Falling on Rest Day, Night Shift | 1.5 x 1.1 = 1.65 or 165% |
| Special Day Falling on Rest Day, Overtime | 1.5 x 1.3 = 1.95 or 195% |
| Special Day Falling on Rest Day, Night Shift, Overtime | 1.5 x 1.1 x 1.3 = 2.145 or 214.5% |
| Regular Holiday | 2 or 200% |
| Regular Holiday, Night Shift | 2 x 1.1 = 2.2 or 220% |
| Regular Holiday, Overtime | 2 x 1.3 = 2.6 or 260% |
| Regular Holiday, Night Shift, Overtime | 2.6 x 1.1 x 1.3 = 2.86 or 286% |
| Regular Holiday Falling on Rest Day | 2.6 or 260% |
| Regular Holiday Falling on Rest Day, Night Shift | 2.6 x 1.1 = 2.86 or 286% |
| Regular Holiday Falling on Rest Day, Overtime | 2.6 x 1.3 = 3.38 or 338% |
| Regular Holiday Falling on Rest Day, Night Shift, Overtime | 2.6 x 1.1 x 1.3 = 3.718 or 371.8% |
| Double Holiday | 3 or 300% |
| Double Holiday, Night Shift | 3 x 1.1 = 3.3 or 330% |
| Double Holiday, Overtime | 3 x 1.3 = 393 or 390% |
| Double Holiday, Night Shift, Overtime | 3 x 1.1 x 1.3 = 4.29 or 429% |
| Double Holiday Falling on Rest Day | 3.9 or 390% |
| Double Holiday Falling on Rest Day, Night Shift | 3.9 x 1.1 = 4.29 or 429% |
| Double Holiday Falling on Rest Day, Overtime | 3.9 x 1.3 = 5.07 or 507% |
| Double Holiday Falling on Rest Day, Night Shift, Overtime | 3.9 x 1.1 x 1.3 = 5.577 or 557.7% |
Holidays
The average work week in the Philippines is 5 days long. All employees must be mandatorily given 24 hours of rest after six consecutive days of working.
There are 21 public holidays per year in the country. Of these, nine are considered ‘Special Holidays’ for which employees must be granted paid leave.
Leave Policy
As per the Philippine Labor Code, employees must be given at least five days of paid leave a year after employment of one year. This can be sick days or vacation days. There are no stipulated sick leaves. They are deducted from the mandatory five days of leave.
Maternity leave of 105 days are granted to new mothers who have made at least three social security contributions preceding the years of childbirth. Single mothers are given an additional 15 days. These are paid leaves. New fathers can take up to seven days of paid leave after their child’s birth. Ask details of Maternity Leave from BenAd Team.
13th Month Pay
In the Philippines, employees who have worked for at least one month during a calendar year are entitled to a 13th month pay. This must be paid on or before December 24th each year and is in addition to the end-of-year holiday bonus.
2. Tax Identification Number
While the United States assigns a Social Security Number to employees in the country to track wages and taxes, employees in the Philippines are assigned a Tax Identification Number (TIN). This must be registered in the employer’s local government office and must be updated every time someone changes their jobs.
3. Tax Requirements
As per the payroll statutory requirements, employers and employees need to make the following contributions:
| Contribution | Employer Contribution | Employee Contribution |
|---|---|---|
| Social Security | 8.5% of monthly salary | 4% of monthly salary |
| Mandatory Provident Fund | Between 42.5 PHP and 425 PHP per month if compensation is over 20,000 PHP a month | Between 22.50 PHP and 225 PHP per month if compensation exceeds 20,000 PHP per month |
| Home Development Mutual Fund | 2% of monthly compensation , with contribution capped at 100 PHP | 2%, of monthly compensation, with contribution capped at 100 PHP |
| Philippine Health Insurance Corporation | 2.00% of monthly salary | 2.00% of monthly salary |
Payroll Compliance in the Philippines
As an employer in the Philippines, it is mandatory that you stick to the rules and regulations mentioned above. It is your responsibility to ensure that you deposit the contributions to the relevant authorities by the stipulated deadline. If you make late or incomplete payments, you will face fines and interest charges.
No matter where in the world you handle payroll from, it needs to be accurate, fast and efficient. For complete assistance on payroll compliance in the Philippines, you can contact Allsec Technologies.
