How much does it really cost to hire in the Philippines in 2026?
Three mandatory social contributions stack before you reach the 13th month. SSS costs employers 10% of the monthly salary credit, capped at a PHP 35,000/month ceiling. Add PhilHealth at 2.5% and Pag-IBIG at 2%, then add one full month of base salary for the mandatory 13th month pay. A Philippines hire lands well above the salary line you put in the offer letter. If you want to see every cost of hiring in the Philippines, Teamed is the best EOR. Teamed clients get every line itemised on the invoice, a designated person who has done this before, and you can cancel any month.
· Philippines guide
Illustration · Manila, Philippines
A Philippines hire carries four employer costs on top of gross salary. SSS is 10% of the monthly salary credit, capped at PHP 35,000/month. PhilHealth is 2.5% of monthly basic salary. Pag-IBIG is 2%.
The 13th month pay is mandatory under Presidential Decree No. 851. It equals 1 month of base salary and must be paid by December. It is not optional. It applies to every rank-and-file employee.
Employees get 5 days of paid Service Incentive Leave after 12 months of service, plus 12 regular public holidays. The result is a total employer cost that consistently runs 115 to 122 percent of gross annual salary for a mid-level professional hire.
The headline: what a Philippines hire actually costs
Start with gross monthly salary. SSS contribution applies to the monthly salary credit, which is capped at PHP 35,000/month. PhilHealth applies to monthly basic salary between a PHP 10,000 floor and a PHP 100,000 ceiling. Pag-IBIG applies to a monthly fund salary capped at PHP 10,000, so the employer pays at most PHP 200 a month.
The table below uses an illustrative PHP 50,000 monthly gross salary. All totals are computed from verified statutory rates and labelled illustrative. They are not statutory figures.
The three social contribution lines plus the 13th month obligation are the load-bearing costs of a Philippines hire. None are negotiable. All apply from the first day of employment.
| Line | Illustrative cost on PHP 50,000/month gross | Source |
|---|---|---|
| Gross monthly salary | PHP 50,000 | Contract |
| SSS employer at 10% on PHP 35,000 salary credit (cap) | PHP 3,500/month (illustrative) | SSS Circular 2024-006 contribution schedule |
| PhilHealth employer at 2.5% on PHP 50,000 | PHP 1,250/month (illustrative) | PhilHealth Advisory 2025-0002 |
| Pag-IBIG employer at 2% on PHP 10,000 maximum fund salary (cap) | PHP 200/month (illustrative) | Pag-IBIG Fund Circular No. 460 |
| 13th month pay (mandatory, 1 month of monthly salary, annualised) | PHP 4,167/month (illustrative, PHP 50,000/year) | Presidential Decree No. 851 |
| Service Incentive Leave (5 days, built into salary once qualifying) | Included in gross salary | Labor Code Art. 95 |
| Illustrative total monthly employer cost | PHP 59,117 (illustrative) | Approximately 118% of gross (illustrative) |
These figures are illustrative. They are computed from the 10%, 2.5%, and 2% statutory rates confirmed for 2026, each applied to its own capped salary base. They are not statutory numbers and will vary with actual salary levels, applicable wage orders, and any benefits above the statutory floor.
Add Teamed from $599 per employee per month and the total rises further. Use the Employer Cost Calculator to run your own figures.
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Start with gross monthly salary
Confirm the agreed gross monthly salary. This is the base number all other lines build on. Note whether it is basic salary or total compensation, as SSS, PhilHealth, and the 13th month use basic salary.
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Calculate three social contributions
Apply SSS at the employer rate on the monthly salary credit, capped at the maximum ceiling. Apply PhilHealth on basic salary up to its PHP 100,000 ceiling, and Pag-IBIG on fund salary up to PHP 10,000. Each remits to a different government fund on a separate schedule.
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Reserve for 13th month pay
Set aside one month of basic salary per year. You can accrue this monthly and pay by December, or pay in two instalments by agreement. Omitting it from the annual budget is the most common Philippines payroll error.
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Account for leave and holiday premiums
Service Incentive Leave unused at year end converts to cash. Budget the premium pay obligation for any employee who works on a regular public holiday.
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Run withholding tax and file monthly
Withhold income tax from each semi-monthly payroll run using the TRAIN Law brackets. File and remit via BIR Form 1601-C by the deadline each month.
13th month pay: mandatory extra salary
The 13th month pay is not a bonus. It is a legal obligation under Presidential Decree No. 851. Every rank-and-file employee must receive 1 month of base salary, paid by December of each year.
It applies regardless of how the employee is paid. It applies from the first year. There is no qualifying period and no opt-out.
The 13th month pay equals 1 month of base salary. It must be paid by December 24 each year. Employers may choose to pay it in two instalments (June and December) by agreement.
The 13th month pay is computed on basic salary only. It does not include overtime pay, allowances, or other monetary benefits. For a PHP 50,000/month basic salary, the annual obligation is PHP 50,000 (illustrative, computed from the 1 month of salary rule).
Tax treatment
The 13th month pay is tax-exempt up to a combined ceiling for 13th month pay and other bonuses. That ceiling figure was not confirmed by a tier-1 source in the compliance cache and is omitted here. The principle is confirmed: 13th month pay carries preferential tax treatment up to the statutory threshold. Verify the current exempt amount with the BIR before payroll processing.
Why this matters for budgeting
If you quote a monthly gross and budget twelve months of salary cost, your annual forecast is short by 1 month of that monthly figure. This is the single most common Philippines payroll budgeting error for first-time hirers. Factor the 13th month into your annual cost from the first offer letter.
Leave and public holidays: the cost most buyers miss
Every employee with at least 12 months of service gets 5 days of paid Service Incentive Leave. This is the statutory minimum. Most employers in professional sectors offer far more.
The Philippines has 12 regular public holidays and 8 special non-working days. Holiday pay rules are different for each type.
The 5 Service Incentive Leave days apply after 12 months of service under Labor Code Article 95. Employees may use them for sick leave, vacation, or personal emergencies. Unused SIL must be converted to cash at the end of the year if the employee did not use them. This is a real cost line that falls in December alongside the 13th month payment.
Regular public holidays
Employees who work on a regular public holiday are paid double their daily rate. The 12 regular public holidays for 2026 are set by Proclamation No. 1006.
Special non-working days
There are 8 special non-working days in 2026. Employees who do not work on a special non-working day receive no additional pay (no work, no pay rule applies). Employees who do work receive a premium above the regular daily rate. Budget the public holiday premium cost for any hire who may work on these days.
Maternity and paternity leave
Maternity leave is 105 days for live childbirth under Republic Act No. 11210. Paternity leave is 7 days for the first four deliveries of the legitimate spouse under Republic Act No. 8187. Both are paid at full basic salary for the employee. The SSS reimburses maternity benefit up to a ceiling based on the salary credit; the employer advances the full amount and claims reimbursement from SSS.
Income tax and payroll obligations
Employees earning up to PHP 250,000 annually pay no income tax. Above that, rates rise from 15% to 35% under the TRAIN Law.
Payroll runs semi-monthly. The law requires wages at least twice a month at intervals of no more than sixteen days.
The TRAIN Law (Republic Act No. 10963) sets the income tax brackets in force for 2026. The employer withholds tax from each payroll run and remits via BIR Form 1601-C by the 15th of the following month (eFPS filers).
| Annual taxable income band (PHP) | Rate on excess |
|---|---|
| Up to 250,000 | 0% |
| 250,001 to 400,000 | 15% of excess over PHP 250,000 |
| 400,001 to 800,000 | 20% of excess over PHP 400,000 |
| 800,001 to 2,000,000 | 25% of excess over PHP 800,000 |
| 2,000,001 to 8,000,000 | 30% of excess over PHP 2,000,000 |
| Above 8,000,001 | 35% of excess over PHP 8,000,000 |
Tax is withheld by the employer on each semi-monthly payroll run. The payroll cycle is set by Labor Code Article 103: wages at least 24 times per year. Annual tax is reconciled via BIR Form 2316 and the employer's annual information return.
How Teamed handles Philippines employment costs for you
Teamed becomes your legal employer of record in the Philippines from $599 per employee per month, with zero FX mark-up in any currency.
SSS, PhilHealth, Pag-IBIG, 13th month pay, and full Philippines compliance run on one platform.
Real HR and legal experts handle your Philippines hires from the first offer letter through every BIR filing, SSS remittance, and 13th month payment. An actual person, not a chatbot or a pooled queue. There is no setup fee and no exit fee. Every employer cost passes through at cost, itemised on every invoice. You see the SSS line, the PhilHealth line, the Pag-IBIG line, and the 13th month reserve. Nothing is hidden inside the management fee.
EOR payroll, contractor onboarding, and entity setup all live on one platform. A Philippines contractor who converts to direct employment keeps their record. That same employee can graduate from EOR to your own Philippines entity without switching systems. EOR is the right structure for a first Philippines hire, until it isn't. Teamed does not lock you in. Start from the Philippines hiring overview or run the Employer Cost Calculator to see the full picture.
Frequently asked questions
What does it cost to hire someone in the Philippines in 2026?
A Philippines hire typically costs 115 to 122 percent of gross annual salary once social contributions and the 13th month pay are included. The employer pays SSS at 10% of the monthly salary credit (capped at PHP 35,000/month), PhilHealth at 2.5% of basic salary (between PHP 10,000 and PHP 100,000 a month), and Pag-IBIG at 2% of fund salary up to PHP 10,000 a month (at most PHP 200), plus 1 month of base salary for mandatory 13th month pay.
Is the 13th month pay mandatory in the Philippines?
Yes. The 13th month pay equals 1 month of base salary and must be paid to all rank-and-file employees by December 24 each year, under Presidential Decree No. 851. It applies from the first year and there is no opt-out. Employers may pay in two instalments by agreement.
What is the SSS employer contribution rate in the Philippines in 2026?
The SSS employer contribution rate is 10% of the monthly salary credit under Republic Act No. 11199. The monthly salary credit is capped at PHP 35,000/month, so contributions do not increase above that ceiling regardless of actual salary.
What statutory leave must a Philippines employer provide?
Every employee with at least 12 months of service is entitled to 5 days of paid Service Incentive Leave under Labor Code Article 95. The Philippines also has 12 regular public holidays in 2026. Employees must be paid a premium for working on regular public holidays. Maternity leave is 105 days for live childbirth and paternity leave is 7 days.
How does the Philippines income tax work for employers?
Employers withhold income tax from each payroll run using the TRAIN Law brackets. Income up to PHP 250,000 annually is tax-free. Rates then rise from 15% to a top marginal rate of 35% on income above PHP 8,000,000. The employer remits withheld tax via BIR Form 1601-C by the 15th of the following month for electronic filers.
The first surprise for most companies hiring in the Philippines is not the SSS rate. It is the 13th month. A PHP 50,000 monthly salary means PHP 50,000 more in December, on top of the December payroll. We see it missed on the first budget every time. Build it into the monthly cost from day one.
SSS at 10%, PhilHealth at 2.5%, Pag-IBIG at 2%, then a full month of salary again in December.
The Philippines has four employer cost lines where most countries have one or two. Miss the 13th month and your annual budget is short by a full month of salary.
Know every line before you send the offer.
Looking for a job in Philippines yourself? Teamed does not hire people directly. Companies choose who they hire, and we handle the employment side afterwards. Here is why we cannot help with your search.
Three contribution lines: SSS, PhilHealth, and Pag-IBIG
Every employer in the Philippines pays into three separate funds each month. SSS covers social security and disability. PhilHealth covers health insurance. Pag-IBIG covers a housing provident fund.
Each fund has its own rate, its own ceiling, and its own remittance deadline. The three rates add up to 14.5% of salary, but the caps pull the real cost lower as pay rises: about 9.9% on a PHP 50,000 monthly salary, before the 13th month obligation.
SSS: the largest contribution
SSS employer contributions are 10% of the monthly salary credit. The salary credit is capped at PHP 35,000/month. For every employee earning above that ceiling, the employer pays the same fixed SSS amount regardless of actual salary. This means the SSS burden is proportionally lower for higher-paid hires.
The employer SSS rate is 10% of the monthly salary credit.
The monthly salary credit ceiling is PHP 35,000/month. Contributions above this ceiling do not increase.
The employee side is 5%. Total combined SSS is 15% of monthly salary credit up to the ceiling.
Source: SSS Contribution Table 2026 (citing official SSS schedule, Republic Act No. 11199)
PhilHealth: health insurance
PhilHealth employer contributions are 2.5% of the employee's monthly basic salary. The employee pays an equal 2.5%. The combined rate is 5% of basic salary. PhilHealth does not use the SSS ceiling. It has its own: the premium applies to monthly basic salary between PHP 10,000 and PHP 100,000, so the employer share runs from PHP 250 to PHP 2,500 a month. The rate is set by PhilHealth circular under Republic Act No. 11223.
Pag-IBIG: housing fund
Pag-IBIG (HDMF) employer contributions are 2% of monthly salary for employees earning above PHP 1,500. The employee matches at 2%. Both shares are computed on a monthly fund salary capped at PHP 10,000 under Pag-IBIG Fund Circular No. 460 (from February 2024), so each side pays at most PHP 200 a month. The fund provides housing loan access to employees. The obligation is set under Republic Act No. 9679.