How does Philippines payroll tax work in 2026?
Every Philippines employer runs three separate contribution stacks on each payslip: SSS at 10.5%, PhilHealth at 2.5%, and Pag-IBIG at 2%. That combined employer burden sits on top of mandatory 13th month pay and a semi-monthly payroll cycle. The TRAIN Law income tax brackets have been unchanged since January 2023, with a zero-rate band up to PHP 250,000.
· Philippines guide
Illustration · Manila, Philippines
Philippines employer payroll cost has three mandatory contribution stacks. You pay SSS at 10.5%, PhilHealth at 2.5%, and Pag-IBIG at 2% on top of gross salary.
The employee pays SSS at 4.5%, PhilHealth at 2.5%, and Pag-IBIG at 2%. SSS contributions apply up to a maximum monthly salary credit of PHP 30,000/month.
Income tax follows the TRAIN Law brackets. Annual income up to PHP 250,000 is tax-free. The top rate is 35% on income above PHP 8,000,000. Employers must also pay one month of 13th month pay each year. Payroll runs semi-monthly and withholding tax is filed monthly with the BIR.
What does an employer pay in Philippines social contributions?
Philippines employers pay three mandatory contributions per employee. SSS is 10.5%, PhilHealth is 2.5%, and Pag-IBIG is 2%.
SSS contributions apply only up to the maximum monthly salary credit of PHP 30,000/month. PhilHealth and Pag-IBIG rates apply to the full basic salary.
| Contribution | Employer rate | Basis / ceiling |
|---|---|---|
| SSS (Social Security System) | 10.5% | Monthly salary credit, max PHP 30,000/month |
| PhilHealth (health insurance) | 2.5% | Monthly basic salary |
| Pag-IBIG / HDMF (housing fund) | 2% | Monthly salary above PHP 1,500 |
13th month pay
Every employer in the Philippines must pay a mandatory 13th month bonus equal to one month of basic salary per year of service. This is required by Presidential Decree No. 851 and is not discretionary. It must be paid on or before 24 December each year. Employees who have worked at least one month in a calendar year are entitled to a pro-rated amount.
The 13th month pay is separate from any contractual performance bonus or Christmas gratuity. It is also separate from the SSS, PhilHealth, and Pag-IBIG contribution stacks above.
NCR daily minimum wage
The daily minimum wage in the National Capital Region under Wage Order No. NCR-26 is PHP 695. Minimum wage rates differ by region and are set by Regional Tripartite Wages and Productivity Boards. Employers operating outside NCR must check the applicable regional wage order.
What does an employee pay in Philippines social contributions?
Employees pay three matching contributions. SSS is 4.5%, PhilHealth is 2.5%, and Pag-IBIG is 2%.
These are deducted from gross pay each payroll period. The SSS deduction is capped at the same maximum monthly salary credit that applies to the employer.
| Contribution | Employee rate | Basis / ceiling |
|---|---|---|
| SSS (Social Security System) | 4.5% | Monthly salary credit, max PHP 30,000/month |
| PhilHealth (health insurance) | 2.5% | Monthly basic salary |
| Pag-IBIG / HDMF (housing fund) | 2% | Monthly salary above PHP 1,500 |
SSS benefits include sickness pay at 90% of the average daily salary credit, for up to 120 days per calendar year. PhilHealth provides hospitalisation and outpatient coverage. Pag-IBIG supports housing loans and short-term savings.
All three programmes are administrated separately. The employer is responsible for registering each new hire with SSS, PhilHealth, and Pag-IBIG at the start of employment and for remitting both the employer and employee shares each month.
Philippines TRAIN Law income tax bands for 2026
Income tax in the Philippines follows six bands under the TRAIN Law. Annual income up to PHP 250,000 is tax-free. The top rate is 35% on income above PHP 8,000,000.
The TRAIN brackets have not changed since January 2023. All six rates and thresholds below are in effect for 2026.
| Annual income band | Rate |
|---|---|
| Up to PHP 250,000 (zero-rate band) | 0% |
| PHP 250,001 to PHP 400,000 | 15% of excess over PHP 250,000 |
| PHP 400,001 to PHP 800,000 | 20% of excess over PHP 400,000 |
| PHP 800,001 to PHP 2,000,000 | 25% of excess over PHP 800,000 |
| PHP 2,000,001 to PHP 8,000,000 | 30% of excess over PHP 2,000,000 |
| Above PHP 8,000,001 | 35% of excess over PHP 8,000,000 |
Withholding tax and the annual tax reconciliation
Employers withhold income tax from each payslip using the BIR Revised Withholding Tax Table. The table is designed so that if an employee earns a regular salary all year, the total withheld equals the annual tax due. At year-end the employer issues BIR Form 2316 to each employee, listing total compensation and total tax withheld for the calendar year. Employees whose only income is from their employer are considered substitution-filed and do not need to file a separate income tax return.
13th month pay tax treatment
The 13th month bonus is exempt from income tax up to a combined ceiling for 13th month and other bonuses. This ceiling was reported in secondary sources at PHP 90,000 but has not been confirmed from a BIR primary circular in this research run. Treat this ceiling as indicative and verify with BIR Revenue Regulations before withholding decisions. The exemption is provided by law and is applied at payroll level.
How does Philippines BIR payroll filing work?
Philippines employers file and remit withheld income tax monthly using BIR Form 1601-C. Electronic filers submit by the 15th of the month following the pay period.
Payroll itself runs semi-monthly. Wages must be paid at least twice a month, at intervals not exceeding 16 days, under the Labor Code.
Employers must file BIR Form 1601-C monthly, reporting all compensation paid and tax withheld for employed individuals. Electronic filers using the eFPS system submit by the 15th of the following month. Manual filers submit by the 10th. Employers also issue BIR Form 2316 to each employee by 31 January after the close of each calendar year.
The main payroll filing obligations employers manage:
- BIR Form 1601-C, monthly withholding tax on compensation, filed and paid by the 15th (eFPS) or 10th (manual) of the following month
- BIR Form 1604-C, annual information return of income taxes withheld on compensation, filed by 31 January of the following year
- BIR Form 2316, individual certificate of compensation payment and tax withheld, issued to each employee by 31 January
- SSS monthly contribution reports, filed and remitted to SSS by the applicable deadline based on employer classification
- PhilHealth Statement of Premium Account and Pag-IBIG remittance forms, filed and paid monthly
Philippine employers effectively run five separate monthly filings: BIR, SSS, PhilHealth, Pag-IBIG, and the semi-monthly payroll cycle itself. Missing a deadline for any of the three social agencies attracts its own penalty regime, separate from BIR late-payment penalties.
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Collect pay data
Gather salary, variable pay, and any allowances for both halves of the semi-monthly cycle. Confirm the correct monthly salary credit for SSS capping.
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Calculate gross pay
Total all earnings for the period. Include regular salary, overtime, and taxable allowances. Separate the 13th month accrual if tracking it monthly.
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Deduct employee contributions
Apply the employee SSS, PhilHealth, and Pag-IBIG rates to each payslip. All three deductions come from gross pay before the income tax withholding step.
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Withhold income tax
Apply the BIR withholding tax table to the net taxable compensation after mandatory deductions. Use the employee’s tax status and exemptions from their BIR Form 2305.
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File BIR Form 1601-C
Submit the monthly withholding tax return by the filing deadline. eFPS filers submit by the 15th; manual filers by the 10th of the following month.
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Remit all contributions and tax
Pay BIR the withheld income tax, and separately remit the employer and employee shares of SSS, PhilHealth, and Pag-IBIG to each agency by their respective deadlines.
Social security and benefit contributions in the payroll stack
The Philippines does not have a standalone pension auto-enrolment system like the UK. SSS is the social insurance programme covering retirement, sickness, maternity, disability, and death.
Employer SSS contributions are 10.5% and employee SSS contributions are 4.5%, both capped at the maximum monthly salary credit of PHP 30,000/month.
SSS provides long-term retirement benefits as well as short-term cash benefits. Workers build up credits over their contributing years. The sickness benefit pays 90% of the average daily salary credit for up to 120 days in a calendar year.
Maternity and paternity leave
Female employees are entitled to 105 days of fully paid maternity leave for live childbirth under Republic Act No. 11210. SSS reimburses the employer for this cost, provided the employee has the required SSS contribution history. Male employees are entitled to 7 days of paid paternity leave for the first four deliveries of their legitimate spouse under Republic Act No. 8187.
Pag-IBIG as a savings programme
Pag-IBIG, run by the Home Development Mutual Fund, serves a dual purpose: it is a mandatory housing savings programme and a source of short-term loans. The employer and employee each contribute 2% of the monthly salary for salaries above PHP 1,500. Workers can apply for multi-purpose loans and housing loans from their accumulated Pag-IBIG fund.
PhilHealth health coverage
PhilHealth provides inpatient and outpatient coverage through a network of accredited hospitals and clinics. The total premium is 2.5% employer plus 2.5% employee, applied to the full monthly basic salary. PhilHealth benefits apply from the first month of SSS/PhilHealth enrolment.
How does Teamed handle Philippines payroll for you?
Teamed becomes your legal employer of record in the Philippines for from $599 per employee per month, with zero FX mark-up in any currency.
All five monthly filing obligations run on one platform: BIR, SSS, PhilHealth, Pag-IBIG, and payroll.
Real HR and legal experts handle your Philippines hires, from offer letter through every BIR, SSS, PhilHealth, and Pag-IBIG remittance. An actual person, not a chatbot or a pooled queue. There is no setup fee and no exit fee. Employer cost passes through at cost, itemised on every invoice.
The Philippines payroll stack is one of the most administratively intensive in Southeast Asia. Five separate agencies, five separate filing calendars, three mandatory social contributions, and a mandatory 13th month pay. Teamed absorbs all of that. You see a single consolidated employer cost. A Philippines contractor who converts to payroll keeps their record. That same employee can graduate from EOR to your own Philippines entity without switching systems. Start from there, until it isn't the right model. Run the Employer Cost Calculator to see the SSS, PhilHealth, Pag-IBIG, and 13th month load on a specific salary. Start from the Philippines hiring overview.
Key sources: Social Security System (SSS), PhilHealth, Pag-IBIG Fund (HDMF), and TRAIN Law (RA 10963).
Frequently asked questions
What are the employer contribution rates in the Philippines in 2026?
Philippines employers pay three mandatory contributions. SSS is 10.5% of the monthly salary credit, up to a maximum credit of PHP 30,000/month. PhilHealth is 2.5% of the monthly basic salary. Pag-IBIG is 2% of the monthly salary for salaries above PHP 1,500. Employers must also pay one month of basic salary as 13th month pay by 24 December each year.
What does a Philippines employee pay in social contributions?
Employees pay three contributions matching the employer stacks. SSS is 4.5% up to the maximum monthly salary credit of PHP 30,000/month. PhilHealth is 2.5% of monthly basic salary. Pag-IBIG is 2% for salaries above PHP 1,500. All three are deducted from gross pay before income tax withholding.
What are the Philippines income tax brackets in 2026?
The TRAIN Law brackets apply unchanged since January 2023. Annual income up to PHP 250,000 is tax-free. From PHP 250,001 to PHP 400,000 the rate is 15%. From PHP 400,001 to PHP 800,000 the rate is 20%. From PHP 800,001 to PHP 2,000,000 the rate is 25%. From PHP 2,000,001 to PHP 8,000,000 the rate is 30%. Above PHP 8,000,000 the top rate is 35%.
How does Philippines payroll filing work?
Employers file monthly withholding tax using BIR Form 1601-C, due by the 15th of the following month for eFPS filers, or the 10th for manual filers. Wages are paid at least twice a month under the Labor Code semi-monthly rule. Employers also separately remit SSS, PhilHealth, and Pag-IBIG contributions to each agency on their own monthly schedules.
What is 13th month pay in the Philippines?
13th month pay is a mandatory annual bonus equal to one month of basic salary, required by Presidential Decree No. 851. It applies to all rank-and-file employees who have worked at least one month in a calendar year. Pro-rated amounts apply for shorter service periods. The bonus must be paid on or before 24 December. It is exempt from income tax up to a combined bonus ceiling set by BIR regulations.
The Philippines payroll trap is not the income tax. It is the five separate filing calendars running in parallel. Miss the SSS remittance deadline and you get one penalty. Miss the PhilHealth deadline and you get another. Miss BIR Form 1601-C and you get a third. None of these agencies talk to each other. First-time Philippines employers almost always set up payroll software and forget to set up four more compliance calendars alongside it.
Philippines employers carry three contribution stacks: SSS at 10.5%, PhilHealth at 2.5%, Pag-IBIG at 2%.
Add mandatory 13th month pay, a semi-monthly payroll cycle, and five separate agency filing deadlines every month.
Structure it once. Run it clean from day one.
