TL;DR, Hiring in Philippines
- Fully-loaded employer cost: ~10–12% on top of gross salary
- 13th-month pay (Presidential Decree 851) due by 24 December, mandatory, not discretionary
- SSS, PhilHealth, Pag-IBIG are the three statutory employer contributions
- Probation max 6 months; regularization after triggers strong dismissal protection
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Statutory employer costs in Philippines
In the Philippines, employers contribute roughly 10–12% on top of gross salary: 10% SSS social security (employer share, on salary up to ₱35,000/mo), 2.5% PhilHealth health insurance (split with employee, on salary up to ₱100,000/mo), and ₱100–200/month Pag-IBIG housing fund. The mandatory 13th-month pay (one extra month's salary) effectively adds another 8.3%.
| Contribution | Employer rate | Notes |
|---|---|---|
| SSS (Social Security System) | 10% | Employer share; capped at ₱35,000/mo Monthly Salary Credit. Rate increased Jan 2025. |
| PhilHealth | 2.5% | Half of 5% total split with employee; capped at ₱100,000/mo salary |
| Pag-IBIG (HDMF) | 2.0% | On monthly comp up to ₱5,000; effectively ₱100/mo employer share |
| Employees' Compensation (EC) | ₱10–30/mo | Flat employer-only contribution via SSS |
Mandatory employee benefits
Beyond statutory contributions, Philippines law requires the following benefits the employer must fund.
- 13th-month pay
- 1/12 of basic salary earned in the year, paid by 24 December. Tax-free up to ₱90,000.
- Service Incentive Leave (SIL)
- 5 paid leave days/year after 1 year of service. Most employers grant 15+ days vacation + 15 sick leave.
- Maternity leave
- 105 days fully paid (RA 11210, 2019); SSS reimburses employer.
- Paternity leave
- 7 days fully paid for first 4 deliveries of spouse.
Termination, notice and severance
Probation
Maximum 6 months; after that the employee is 'regularized' and gains tenure protection.
Notice period
30 days minimum written notice for authorized causes (redundancy, retrenchment, closure). For just causes (misconduct), two-notice rule, notice to explain + notice of decision.
Severance
Authorized cause termination: 1 month or 0.5 month per year of service (whichever higher) for redundancy/retrenchment; 1 month or 1 month per year for closure. Just cause: no separation pay unless company policy provides it.
Common compliance pitfalls
- 13th-month pay is computed on basic salary only, but many employers misclassify regular allowances as 'bonuses' to reduce the base. The DOLE audits this; mistakes trigger back-pay claims.
- Probationary employees can only be terminated for failing pre-disclosed performance standards. 'Did not work out' is not a legal cause and creates an illegal dismissal claim.
- Tax-free 13th-month cap is ₱90,000, anything above is taxable. Year-end bonuses pushed above this threshold surprise employees with withholding.
- Independent contractor classification is heavily scrutinized post-DOLE Department Order 174. Repeat engagement of the same freelancer for >6 months risks regularization claim.
Frequently asked questions
Sources
Statutory rates and rules verified against the following authorities. We update this page when rates change.