Managing employees and payroll in the Philippines can be challenging, with unique tax and payroll regulations that can cause issues with compliance if not managed properly.

The corporate tax rate liability in the Philippines is determined on the residency status and net income during the business year. New companies need to register with the Social Security System, the Philippine Health Insurance Corporation, and the Bureau of Internal Revenue to get started.

Payroll and Tax Considerations:

  • The minimum wage is PHP 500-537
  • Any work after 8 hours per day is considered overtime. Employees are paid additional 25% overtime premium
  • Workers are paid 30% additional for work on holidays
  • Severance is paid according to the reason for dismissal and can vary up to half a month’s salary for every year of service
  • Minimum severance pay is 1 month salary
  • Tax rates range from 20-35%
  • Self-employed residents, professionals, or business people whose income does not exceed PHP 3,000,000 can choose to be taxed at a flat rate of 8% on gross receipts over PHP 2,500,000 or at progressive rates. Income above PHP 3,000,000 is taxed at progressive rates
  • Employees who earn minimum wage are not required to pay income tax
  • Non-residents pay a flat tax rate of 15%

HR and Statutory Requirements:

  • Employees who have one year of service receive 5 days of paid annual leave
  • There are no provisions concerning sick leave
  • Female employees receive 105 days of paid maternity leave. If the mother is a single parent, she is eligible for 120 days
  • Maternity leave must begin 2 weeks before childbirth
  • The law provides for 7 days of paternity leave to all married male employees working in the private sector
  • employees may retire upon reaching retirement age established in the employment contract, collective bargaining agreement or company policy. If there is no set agreement, an employee may retire at age 60 but not after 65 years of age
  • Employees become eligible for pension if they have paid at least 120 monthly social security contributions
  • Both employees and employers pay contributions to the social security system

Holidays in the Philippines:

  • January 1 – New Year’s Day
  • February 1 – Chinese Lunar New Year’s Day
  • February 25 – People Power Anniversary
  • April 9 – The Day of Valor
  • April 14 – Maundy Thursday
  • April 15 – Good Friday
  • April 16 – Black Saturday
  • May 1 – Labor Day
  • May 3 – Eidul-Fitar
  • June 12 – Independence Day
  • July 10 – Eid al-Adha (Feast of the Sacrifice)
  • August 21 – Ninoy Aquino Day
  • August 29 – National Heroes Day
  • November 1 – All Saints’ Day
  • November 30 – Bonifacio Day
  • December 25 – Christmas Day
  • December 30 – Rizal Day
  • December 31 – New Year’s Eve

If you are just getting started in the Philippines, or need to get payroll and compliance under control, we can help. Our cloud-based payroll platform gives you real-time access to your payroll across all countries and currencies, customized, aggregated reporting, and in-country experts to help when questions come up. Talk to us about simplifying your payroll and operations in the Philippines – click here to get started