What government contributions must Philippine employers withhold?

Employers must withhold and remit contributions to four agencies: BIR (income tax), SSS (social security), PhilHealth (health insurance), and Pag-IBIG/HDMF (housing fund). Each has its own brackets, rates, and filing schedules.

When is the deadline for 13th month pay in the Philippines?

Under Presidential Decree No. 851, employers must pay 13th month pay on or before December 24 of each year. The first P90,000 is tax-exempt.

What is tax annualization and when is it required?

Tax annualization reconciles the total income tax withheld throughout the year with the annual tax due based on TRAIN Law brackets. Employers must perform it in December or upon employee separation. Over-withholding is refunded; under-withholding is collected.

What are the SSS contribution rates for 2026?

The total SSS contribution rate is 14% of the Monthly Salary Credit (MSC) — 9.5% employer share and 4.5% employee share. The employer also pays an additional 1% for Employees' Compensation (EC). The maximum MSC is P30,000.

How do I avoid common payroll compliance mistakes?

The most common mistakes are using outdated contribution tables, incorrect tax annualization, missing the 13th month deadline, not pro-rating for mid-year hires, and manual computation errors. Using a dedicated payroll system like TalinoHR automates all of these.

Philippine Payroll Compliance Guide for 2026

Running payroll in the Philippines involves more than just computing salaries. Employers must withhold and remit contributions to four government agencies — BIR, SSS, PhilHealth, and Pag-IBIG — each with their own schedules, brackets, and filing requirements.

This guide covers everything you need to know for 2026.

BIR Withholding Tax (TRAIN Law)

The Tax Reform for Acceleration and Inclusion (TRAIN) Law governs income tax brackets in the Philippines. For 2023 onwards, the annual tax brackets are:

Taxable Income (Annual)	Tax Rate
Up to ₱250,000	0%
₱250,001 – ₱400,000	15% of excess over ₱250,000
₱400,001 – ₱800,000	₱22,500 + 20% of excess over ₱400,000
₱800,001 – ₱2,000,000	₱102,500 + 25% of excess over ₱800,000
₱2,000,001 – ₱8,000,000	₱402,500 + 30% of excess over ₱2,000,000
Over ₱8,000,000	₱2,202,500 + 35% of excess over ₱8,000,000

Year-End Annualization

Employers are required to perform tax annualization in December (or upon employee separation). This reconciles the total tax withheld throughout the year with the annual tax due. Any over-withholding is refunded to the employee; under-withholding is collected.

BIR 2316

After annualization, employers must issue BIR Form 2316 (Certificate of Compensation Payment / Tax Withheld) to each employee. This serves as the employee's annual tax certificate.

SSS Contributions

The Social Security System requires monthly contributions based on the employee's Monthly Salary Credit (MSC). Key points for 2026:

Contribution rate: 14% (employer 9.5%, employee 4.5%)
Minimum MSC: ₱4,000
Maximum MSC: ₱30,000
EC (Employees' Compensation): Additional 1% employer share

Employers must remit SSS contributions by the 10th of the following month (for household employers) or follow the SSS payment schedule based on the employer's SSS number.

PhilHealth Contributions

Philippine Health Insurance Corporation premiums are income-based:

Premium rate: 5% of monthly basic salary
Shared equally between employer and employee (2.5% each)
Monthly floor: ₱500 (₱10,000 salary)
Monthly ceiling: ₱5,000 (₱100,000 salary)

PhilHealth contributions are due on or before the 25th of the month following the applicable month.

Pag-IBIG (HDMF) Contributions

The Home Development Mutual Fund requires monthly contributions:

Monthly Compensation	Employee Share	Employer Share
₱1,500 and below	1%	2%
Over ₱1,500	2%	2%

Maximum monthly compensation for computation: ₱10,000
Maximum employee share: ₱200/month
Maximum employer share: ₱200/month

13th Month Pay

Under Presidential Decree No. 851, all rank-and-file employees are entitled to 13th month pay, computed as:

Total Basic Salary Earned During the Year ÷ 12

Key rules:

Must be paid on or before December 24
The first ₱90,000 of 13th month pay is tax-exempt
Pro-rated for employees who worked less than 12 months
Based on basic salary only (excludes allowances, overtime, etc.)

Common Payroll Mistakes to Avoid

Using outdated contribution tables — SSS and PhilHealth update brackets periodically. Always verify you're using the current year's tables.
Incorrect tax annualization — Failing to annualize, or annualizing incorrectly, leads to BIR penalties and employee complaints.
Missing the 13th month deadline — Late payment triggers DOLE penalties.
Not accounting for mid-year hires — 13th month pay and annualization must be pro-rated for employees who didn't work the full year.
Manual computation errors — Spreadsheet-based payroll is error-prone. A dedicated payroll system eliminates bracket lookup mistakes and arithmetic errors.

How TalinoHR Helps

TalinoHR automates all Philippine payroll compliance:

Built-in contribution tables for SSS, PhilHealth, Pag-IBIG, and BIR — auto-updated when regulations change
Automatic tax annualization with one-click BIR 2316 generation
13th month pay computation following PD 851 rules
Loan deduction tracking for SSS and Pag-IBIG salary loans
Government report generation for monthly and annual filings

No more spreadsheets. No more manual bracket lookups. Book a demo to see it in action.