The salary is the number people ask about. It is not the number that matters.
Employing someone in the Philippines carries statutory obligations on top of pay, and if you budget on salary alone you will be roughly a fifth short. This article sets out what those obligations are, what they cost, and what it adds up to for a real salary.
If you are still working out how to employ someone there at all, start with our guide to employing someone in the Philippines from an Australian business.
The four things every Philippine employer pays
Three monthly contributions and one annual entitlement. All four are statutory, none are optional, and the employer share is separate from what comes out of the employee’s pay.
Figures below are current as at September 2026. Rates are set by circular and do change, so confirm before you budget.
Social Security System (SSS)
The pension, sickness, maternity and disability scheme, governed by the Social Security Act of 2018 (Republic Act 11199).
The rate is 15 per cent of the monthly salary credit, split 10 per cent employer and 5 per cent employee. The salary credit runs in brackets up to a ceiling of ₱35,000, so the employer share tops out at ₱3,500 a month regardless of how much more the person earns.
Employers also pay an Employees’ Compensation premium of ₱10 or ₱30 a month depending on the salary credit. That one is entirely employer-funded.
PhilHealth
National health insurance, under the Universal Health Care Act (Republic Act 11223).
The premium is 5 per cent of basic monthly salary, split evenly, so 2.5 per cent each. It applies between a floor of ₱10,000 and a ceiling of ₱100,000, which puts the employer share between ₱250 and ₱2,500 a month.
Pag-IBIG Fund
The national housing and savings fund.
Two per cent from each side, calculated on a fund salary capped at ₱10,000. In practice that means ₱200 from the employer and ₱200 from the employee for anyone earning ₱10,000 or more. It is the smallest of the three and the easiest to forget.
13th month pay
Required under Presidential Decree No. 851, and the one that surprises Australian employers most.
It is one twelfth of the basic salary the employee earned during the calendar year, paid by 24 December. It is not a bonus and not discretionary. If someone works a partial year, they receive a proportionate amount.
The sensible approach is to accrue it monthly rather than finding it in December.
What it adds up to
Take a staff member on ₱35,000 a month, which sits at the top of the SSS salary credit range.
| Employer obligation | Monthly cost |
|---|---|
| SSS, 10 per cent of ₱35,000 | ₱3,500 |
| Employees’ Compensation premium | ₱30 |
| PhilHealth, 2.5 per cent of ₱35,000 | ₱875 |
| Pag-IBIG, capped | ₱200 |
| 13th month pay, accrued monthly | ₱2,917 |
| Total on top of salary | ₱7,522 |
That is roughly 21 per cent on top of basic pay. So a ₱35,000 salary is really a ₱42,500 commitment before you count equipment, software or recruitment.
One quirk worth knowing: because SSS, PhilHealth and Pag-IBIG all have caps, the percentage falls as salaries rise. On a high salary the statutory contributions flatten out and only the 13th month accrual keeps scaling. Budgeting on a flat percentage will overstate the cost of senior roles and understate junior ones.
The obligations behind the numbers
The employee share is deducted from pay and held in trust until it is remitted, which is why late or missing remittances are treated seriously. Penalties apply per agency, and responsible officers can be personally liable.
Each agency has its own deadline, its own remittance system and its own registration process. There is no single monthly payment that covers all three.
Article 4 of the Labor Code of the Philippines also directs that doubts in interpreting the Code be resolved in favour of labour, which is worth remembering if you are ever tempted to read an obligation narrowly.
This is general information rather than legal or tax advice. Confirm your position with an adviser before acting on it.
What this looks like under an Employer of Record
Under our Employer of Record service, Digitek Operations Inc. is the legal employer, so the registrations, the monthly remittances, the deadlines and the 13th month accrual sit with us.
You get a single monthly figure covering salary, statutory contributions and our fee, rather than four separate obligations on four different schedules in a currency you do not hold.
That is most of what businesses are actually buying when they choose an EOR over setting up their own entity.
Frequently asked questions
How much do statutory contributions add to a Philippine salary?
For a staff member on ₱35,000 a month, the employer pays roughly ₱7,522 on top: ₱3,500 to SSS plus a ₱30 Employees’ Compensation premium, ₱875 to PhilHealth, ₱200 to Pag-IBIG, and ₱2,917 accrued towards 13th month pay. That is about 21 per cent above basic salary. The proportion falls at higher salaries because the three contributions are capped.
What is 13th month pay and is it compulsory?
Yes, it is compulsory under Presidential Decree No. 851. It is one twelfth of the basic salary an employee earned during the calendar year, payable by 24 December, and it is proportionate for anyone who worked part of the year. It is a statutory entitlement rather than a discretionary bonus, so it should be accrued monthly rather than treated as a year-end decision.
Who pays SSS, PhilHealth and Pag-IBIG, the employer or the employee?
Both, in different proportions. SSS is 15 per cent of the monthly salary credit, split 10 per cent employer and 5 per cent employee. PhilHealth is 5 per cent of basic salary split evenly. Pag-IBIG is 2 per cent from each, capped at ₱200 each. The employer deducts the employee share, adds its own, and remits the combined amount to each agency separately.
Do these rates change?
Yes. Rates are set by circular and have moved several times in recent years, with SSS reaching 15 per cent under a legislated schedule and PhilHealth reaching 5 per cent under the Universal Health Care Act. Always confirm the current figures against the relevant agency circular before budgeting or processing payroll.
Does an Employer of Record handle these payments?
Yes. Under an Employer of Record arrangement the provider is the legal employer, so registration with each agency, the monthly remittances, the deadlines and the 13th month accrual all sit with them. You receive one monthly invoice rather than managing four separate obligations across three agencies and a foreign currency.
Working out your real number
If you are budgeting for an offshore hire, work from the total cost rather than the salary. Salary, statutory contributions, 13th month accrual, equipment and software.
Tell us the role and the hours and we will give you the full monthly figure, with nothing sitting underneath it.
