Introduction
Payroll in the Philippines requires employers to withhold income tax under the Bureau of Internal Revenue (BIR) system and remit mandatory contributions to SSS, PhilHealth, and Pag-IBIG. Employers must also calculate statutory benefits such as the 13th-month pay, process payroll at least twice a month, and comply with region-based minimum wage rules.
The complexity comes from multiple government agencies, each with different rules, rates, and deadlines that change frequently. Late or incorrect remittances can lead to penalties, interest, and compliance risks, including employee misclassification issues.
This guide covers wages, working hours, overtime, minimum wage, the 13th-month pay, statutory contributions, income tax bands, leave entitlements, and outsourcing options for payroll in the Philippines.
What do you need to know about payroll in the Philippines?
A few payroll basics for the Philippines
The currency in the Philippines is the Philippine peso (₱, PHP). According to the exchange rate at the time of writing, 1 USD is equivalent to around 60 PHP.
Wages in the Philippines are usually paid every two weeks, with no longer than 16 days between payments.
Working hours in the Philippines
The standard workday is eight hours. Weekly hours can run up to 48 across five or six days, so schedules vary by employer. Some companies run a 40-hour, five-day work week, while a six-day work week is also common. If an employee works six consecutive days, their employer has to allow a 24-hour break before they return to work.
Overtime rules in the Philippines
Employees who work beyond eight (8) hours per day are entitled to overtime pay. Overtime work must be compensated at the employee’s regular hourly rate plus an additional premium of at least 25% of that rate.
Minimum wage requirements in the Philippines
Minimum wage requirements vary across the Philippines. The rate an employer has to pay depends on the region of the country in which their employee is based.
In the National Capital Region, which covers Metro Manila, employees are entitled to a minimum wage of 695 PHP per day for non-agriculture work. In a more rural region like Ilocos, the rate is lower, at 505 PHP per day for non-agriculture establishments with 10 or more employees. The average wage in the Philippines is around 21,544 PHP per month, according to the Philippine Statistics Authority.
In the Philippines, employers have to award “rank and file” employees a 13th-month bonus. To be eligible, employees can’t be managers, and they must have worked at least one month during the year.
The 13-month payment has to be at least 1/12 of the employee’s annual salary, and this sum is paid to the employee no later than December 24 each year.
Severance pay in the Philippines
In the Philippines, severance pay (separation pay) may be paid at one month's pay or one-half month's pay for every year of service, depending on the reason for termination. It generally applies to authorized terminations such as redundancy, retrenchment, business closure, or illness.
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Talk to an expertWhat are the tax and payroll deductions in the Philippines?
Employers in the Philippines must withhold income tax and make statutory payroll contributions for social security, health insurance, and housing benefits. The key employer and employee payroll deductions, along with applicable income tax rates, are outlined below.
Payroll tax in the Philippines is charged at a progressive rate. There are five tax bands, with annual earnings up to 250,000 PHP (approximately 4,900 USD) exempt:
To estimate total hiring and payroll expenses more accurately, businesses can use an employee cost calculator. It helps calculate total employer costs, including salary, taxes, and statutory contributions. This makes budgeting easier and improves workforce cost planning across the Philippines.
What are the employee leave entitlements in the Philippines?
Employees in the Philippines are entitled to several statutory leave benefits that support personal, family, health, and caregiving needs. These leave entitlements vary based on eligibility requirements and employment circumstances.
Paid leave
According to Filipino labor law, employees are entitled to a minimum of five days’ paid leave per year after one year of employment. This leave can be used as vacation or sick days.
Sick days
There is no statutory sick leave in the Philippines. Sick days are deducted from an employee’s five-day leave allowance.
Maternity/paternity leave
Mothers get up to 105 days of paid leave as long as they have made at least three Social Security contributions in the year before their child’s birth.
Single mothers are entitled to an extra 15 days’ paid leave. Any mother can claim an additional 30 days’ leave, although this will be unpaid.
Fathers can take up to seven days’ paid leave after the birth of a child.
Single parent leave
Single parents in the Philippines can take up to seven days’ leave per year to take care of their child.
Leave for victims of VAWC
Workers who are victims of violence against women and children (VAWC) can take up to 10 days' leave per year to receive medical treatment or fulfill legal obligations.
Special leave for women
Female employees can take up to two months’ leave after undergoing gynecological surgery.
How many public holidays are there in the Philippines?
Employees in the Philippines are entitled to public holiday benefits in accordance with applicable labor regulations. The public holidays observed in the Philippines are listed below.
How is payroll compliance regulated in the Philippines?
If you employ workers in the Philippines, it’s important that you stick to the rules and regulations listed above. It’s also the responsibility of the employer to ensure contributions reach the relevant authorities by the required deadlines.
Businesses that make late or incomplete payments or fail to keep appropriate tax records face interest payments and fines.
A compliant payroll system powered by Skuad helps ensure accurate payroll processing, timely statutory contributions, and proper record-keeping in the Philippines while reducing compliance risks. Here is what Skuad helps with:
- Supports payroll processing in 70+ currencies, with tax withholding and statutory deductions applied each cycle
- Supports statutory contribution workflows across supported markets, covering applicable social insurance, health, and provident fund obligations
- Helps maintain payroll and contribution records for each pay period, available for audit and review
- Acts as the legal employer across 160+ countries, so your company can run compliant payroll without setting up a local entity
- Helps keep your team aligned with regulatory changes as contribution rates and filing rules are updated
Book a demo to see how Skuad supports payroll and contribution compliance for your Philippines team.
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Talk to an expertWhat are the ways to outsource payroll in the Philippines?
If running payroll in the Philippines yourself seems like a tall order, it’s time to outsource. Luckily, there are a number of payroll solutions in the Philippines. You just need to decide which type of payroll service best suits your business.
Here are the two primary options:
Work with a local payroll service for the Philippines
Pick a payroll company in this category, and they will take care of payroll for your Filipino employees. However, you will continue to run payroll for any employees back home.
This can create problems. By running two payroll systems simultaneously, the process can become disjointed and time-consuming.
In addition, if you want to employ talent in other countries around the world, you could end up working with multiple payroll companies. This increases the chance of human error and the risk of non-compliance.
Work with a global HR and payroll solution
Outsourcing payroll through a unified global payroll solution helps businesses simplify multi-country payroll management, ensure consistent compliance, and reduce administrative complexity. It allows companies to manage payroll, onboarding, and statutory requirements across different regions from a single system, improving efficiency and reducing the risk of errors.
Skuad supports your payroll operations and facilitates compliance with local requirements in the Philippines and across global markets, including payroll processing in 70+ currencies, helping keep your payroll process compliant.
Customer story: How did VRP Consulting build a Philippines operations hub?
VRP Consulting, a San Francisco-based IT consulting firm with more than 450 staff across 10 countries, set out to make the Philippines a strategic operations hub but ran into incorrect salary calculations, payment delays, and limited payroll transparency.
After partnering with Skuad in 2022, the firm onboarded and paid 38 employees and contractors across the Philippines and India, with accurate, on-time payments, correct social security contributions, and proper worker classification. Skuad supported localized onboarding, multi-currency payroll, and compliance across both markets.
"Skuad's solutions empowered us to scale our workforce globally with ease, ensuring timely payroll, compliance, and a seamless onboarding experience, all on one powerful platform."
- VRP Consulting
Looking for payroll support in the Philippines?
You now have a clear overview of payroll in the Philippines, including wages, working hours, overtime rules, benefits, tax bands, contributions, leave entitlements, public holidays, and compliance requirements. Payroll includes salary processing, tax withholding, mandatory contributions to SSS, PhilHealth, and Pag-IBIG, and regulatory reporting.
Managing this manually increases administrative effort and compliance risks. Skuad supports payroll management in the Philippines through a single platform for payroll processing, statutory deductions, tax withholding, and compliance reporting across global markets.
Run compliant payroll in the Philippines without setting up an entity. Book a demo.
FAQs
1. What do employers need to register for to run payroll in the Philippines?
Employers must register with the Bureau of Internal Revenue (BIR) for tax withholding and with SSS, PhilHealth, and Pag-IBIG for statutory contributions. Employees are enrolled from the start, and payroll records must be kept for at least three years to ensure compliance and accurate reporting.
2. How much does it cost to outsource payroll in the Philippines?
Outsourced payroll services typically cost around 200 to 800 PHP per employee per month, depending on service scope. Employer of Record services are higher, usually 200 to 600 USD per employee monthly, as they include compliance, filings, and legal employer responsibilities.
3. Can a foreign company run payroll in the Philippines without a local entity?
Many foreign companies run payroll in the Philippines without establishing a local entity by partnering with an Employer of Record. The EOR acts as the legal employer and manages registrations with BIR, SSS, PhilHealth, and Pag-IBIG, along with payroll processing, statutory deductions, and compliance requirements.
4. What are the penalties for late payroll contributions in the Philippines?
Late payroll contributions in the Philippines can lead to penalties, interest, and surcharges. Under RA 11199, SSS late payments accrue penalties, while the Bureau of Internal Revenue may also impose surcharges and interest on delayed or incomplete tax remittances, increasing overall compliance costs for employers.
5. Is it better to run payroll in-house or outsource it in the Philippines?
In-house payroll offers greater control but requires strong compliance expertise, continuous monitoring of BIR, SSS, PhilHealth, and Pag-IBIG updates, and dedicated resources. Outsourcing reduces administrative burden by shifting payroll processing, statutory deductions, and regulatory compliance to a provider for a predictable per-employee cost, improving efficiency and reducing compliance risk.
6. How long does it take to set up compliant payroll in the Philippines?
Setting up compliant payroll in the Philippines through a local entity can take several months due to registrations with BIR, SSS, PhilHealth, and Pag-IBIG. Using an Employer of Record significantly speeds up the process, with payroll setup often completed within one to two weeks, depending on documentation and onboarding requirements.
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