A Comprehensive Legal Overview

I. Introduction

In the Philippines, social legislation mandates that employers act as withholding and remitting agents for workers’ social insurance and health coverage. Two of the most important systems are:

Social Security System (SSS) – social insurance for private-sector workers under the Social Security Act of 2018 (Republic Act No. 11199, which amended RA 8282).
PhilHealth – national health insurance under the National Health Insurance Act (RA 7875, as amended by RA 9241, RA 10606) and the Universal Health Care Act (RA 11223).

When an employer fails to remit contributions—especially when contributions have already been deducted from employees’ salaries—it is not just a labor issue. It can be:

A statutory violation (breach of special laws)
A labor standards violation
A potential criminal offense (similar to estafa or misappropriation)
A basis for civil liability, including surcharges, interest, and damages

This article walks through the full legal landscape: obligations, forms of non-compliance, penalties, remedies, and practical steps for both employees and employers.

II. Legal Framework

A. Social Security System (SSS)

Governing law
- Republic Act No. 11199 (Social Security Act of 2018) and its implementing rules and regulations (IRR).
- It mandates compulsory coverage for almost all private sector employees (with limited exceptions, e.g., certain casual or self-employed arrangements, but many of those are now also covered as voluntary or mandatory).
Nature of SSS contributions
- Shared by employer and employee, with specific contribution rates and salary brackets.
- The employer is responsible for:
  - Registering as an employer
  - Reporting employees
  - Deducting the employee’s share
  - Paying the employer’s share
  - Remitting both shares to the SSS on time
Public policy character
- SSS obligations are statutory and mandatory, not subject to waiver, quitclaim, or private contract.
- Even if an employee signs a waiver or “quitclaim,” this does not bar the SSS or the State from enforcing contributions.

B. PhilHealth

Governing laws
- RA 7875 (National Health Insurance Act), as amended by RA 9241 and RA 10606
- RA 11223 (Universal Health Care Act), which significantly expanded coverage and funding mechanisms.
Nature of PhilHealth contributions
- Also generally shared by employer and employee for employed members.
- The employer must:
  - Register the business and its employees
  - Deduct the employee share of premiums
  - Add the employer share
  - Remit premiums to PhilHealth within prescribed deadlines
Public policy character
- Mandatory health insurance is treated as a matter of public welfare, and obligations are strictly enforced.
- Non-remittance can lead to both administrative and criminal liability.

III. Employer Obligations: SSS and PhilHealth

1. Registration and Reporting

For both systems, employers must:

Register as an employer with SSS and PhilHealth
Enroll employees upon hiring (or within the period required by regulations)
Submit required forms and reports (e.g., employment reports, monthly remittance lists, electronic submissions if applicable).

Failure to register or report employees is itself already a violation, even before discussing actual remittances.

2. Deduction and Remittance

Employers must:

Correctly compute contributions/premiums
- Based on prescribed rates and employee’s actual monthly compensation (subject to minimum and maximum caps).
Deduct the employee’s share from salary
- Usually done every payroll period.
Add the employer’s share
- This is a separate obligation of the employer and cannot be passed on to the employee.
Remit both shares
- To SSS and PhilHealth within the prescribed deadlines (often monthly or as otherwise scheduled).
- Payment is usually accompanied by remittance reports (with employee names and amounts).

3. Record-Keeping and Documentation

Employers must maintain:

Payroll records
Proof of remittances (official receipts, electronic confirmation)
Contribution lists/reports

These records are crucial during audits, inspections, and in disputes with employees or the agencies.

IV. Forms of Non-Compliance

Failure to remit SSS and PhilHealth contributions may take various forms, each with distinct legal implications.

A. Failure to Register as an Employer

Not registering with SSS or PhilHealth at all, despite having employees.
Consequences:
- Employees’ names do not appear in agency records.
- No contributions are posted.
- Employer may incur back contributions plus penalties, and penal sanctions.

B. Failure to Report Employees

Employer reports itself but fails to declare certain workers (e.g., probationary, casual, or even regular employees).
The law generally covers all employees, regardless of status (with few exceptions).
Effect:
- Employees may appear as “not covered” despite being legally entitled to coverage.

C. Non-Deduction of Contributions

Employer simply does not deduct SSS or PhilHealth from salaries at all.
Still a violation, because the employer is mandated to withhold the employee share.
Employer may be required to pay both employer and employee shares, plus penalties, especially if it cannot legally pass the unpaid employee share back to employees later (e.g., for past periods).

D. Deducting but Not Remitting

This is the most serious and common form of violation:

The employer deducts contributions/premiums from the employee’s salary.
But fails to remit them to SSS or PhilHealth.
Legally treated as:
- Misappropriation or conversion of funds
- Often likened to estafa under the Revised Penal Code because the employer holds funds in a fiduciary capacity for SSS/PhilHealth.

E. Under-Reporting of Wages or Contributions

Employer reports lower salaries or shorter employment periods to reduce contributions.
Consequences:
- Employees receive reduced benefits (lower pension, lower sickness/maternity benefits, lower PhilHealth coverage).
- Agencies can re-compute contributions and benefits and collect deficiencies plus penalties.

V. Legal Consequences Under SSS Law

A. Civil and Administrative Liabilities

An employer who fails to remit SSS contributions may be required to:

Pay all unpaid contributions
- Both the employer and employee shares.
Pay penalties and interest
- SSS imposes penalties (surcharges) and monthly interest on delayed payments, which can accumulate significantly.
Pay damages
- In certain cases, if an employee suffers loss (e.g., denial or reduction of benefits) due to non-remittance, the employer may be held civilly liable for damages.
Be subject to collection and enforcement measures
- SSS can:
  - Issue demand letters and billing statements
  - Resort to warrant of distraint and levy on the employer’s property
  - Coordinate with other agencies (e.g., for business permit or government bidding clearances)

B. Criminal Liability

Under the Social Security Act and related special laws:

Non-remittance, especially when contributions were already deducted, can amount to a criminal offense.
Typical elements include:
- Employer-employee relationship
- Deduction of SSS contributions from employees’ wages
- Failure to turn over these amounts to SSS within the prescribed period
Penalties generally involve:
- Imprisonment (measured in years)
- Fines (in the thousands to tens of thousands of pesos)
- Or both, at the court’s discretion.

Criminal liability is separate from the obligation to pay the contributions and penalties; paying later does not automatically extinguish criminal liability (though it may be considered in sentencing or settlement of the case).

C. Personal Liability of Corporate Officers

In case of corporations or partnerships:

Responsible officers (e.g., president, general manager, managing partner, treasurer, finance head) can be held personally liable and prosecuted.
The rationale: SSS obligations are non-delegable duties of those managing the employer entity; they cannot hide behind the corporate veil to escape liability.

D. Effect on Employees’ SSS Benefits

A key principle: Employees should not be penalized for their employer’s fault.

SSS may still grant benefits (e.g., sickness, maternity, disability, pension) based on:
- Proof of actual employment
- Actual wages
- Actual contributions (even if not remitted)
After paying the employee, SSS can then go after the employer for:
- Unremitted contributions
- Penalties
- Reimbursement of benefits paid

In practice, however, delays and disputes may occur while SSS verifies records and computes entitlements, especially if the employer never reported or remitted at all.

VI. Legal Consequences Under PhilHealth Law

A. Civil and Administrative Liabilities

For PhilHealth, employers who fail to remit premiums may be required to:

Pay unpaid premiums (employer and employee shares)
Pay surcharges and interest for delayed remittances
Settle claims PhilHealth paid to hospitals or members where employer non-remittance caused issues
Face investigations, audits, and administrative sanctions

PhilHealth, like SSS, has authority to assess contributions and enforce collection.

B. Penal Provisions

The National Health Insurance Act and its amendments provide that:

Employers who fail to:
- Register employees,
- Deduct premiums, or
- Remit deducted premiums within prescribed periods can face:
- Fines, often computed:
  - As a per-employee rate (e.g., thousands of pesos per affected employee), and/or
- Imprisonment, typically measured in months to years, or
- Both, at the court’s discretion.

Again, these penal sanctions are in addition to the obligation to pay premiums, surcharges, and interest.

C. Personal Liability of Corporate Officers

As with SSS, corporate officers (e.g., president, general manager, managing partner) can be held personally responsible and criminally liable for PhilHealth violations.

D. Effect on Employees’ PhilHealth Benefits

In principle, employees’ PhilHealth coverage should not be entirely forfeited because of employer fault:

Employees may still avail of benefits if they can establish eligibility and actual employment, using:
- Employment contracts
- Payslips showing PhilHealth deductions
- IDs, certifications from other government agencies
If a hospital or member initially cannot avail of benefits due to apparent lack of remitted contributions, and it is shown that:
- The employer deducted premiums but did not remit them, PhilHealth can:
- Still process benefits for the employee; and
- Go after the employer for unpaid premiums plus penalties.

In practice, however, the employee may experience delays, disputes, or out-of-pocket expenses while the issue is resolved.

VII. Interaction with Labor Standards and Criminal Law

A. Labor Code and DOLE

Non-remittance of contributions may be treated as a labor standards violation:

The Department of Labor and Employment (DOLE) can:
- Conduct labor inspections
- Order employers to comply with statutory obligations, including SSS and PhilHealth
Findings during inspection can be shared with SSS and PhilHealth for collection and prosecution.

Although SSS and PhilHealth have their own charters, DOLE inspections often expose non-compliance with these systems.

B. Revised Penal Code (Estafa-Type Liability)

When the employer:

Deducts contributions from employees,
Holds these amounts in trust for SSS or PhilHealth, and
Fails or refuses to remit them,

this behavior closely resembles estafa (swindling) or malversation-type misappropriation, because the employer:

Received money in trust (for remittance), and
Used or diverted it for other purposes.

In some cases, prosecutors may invoke relevant provisions of:

The special law (SSS/PhilHealth statutes), and/or
Article 315 of the Revised Penal Code on estafa.

VIII. Prescriptive Periods

A. SSS Contributions and Offenses

Civil/administrative collection of contributions
- The SSS charter grants the System a long period (often many years) to collect unpaid contributions and penalties.
- Courts have upheld the principle that social security claims and contribution collections should not easily prescribe, given their public policy nature.
Criminal actions
- Special penal provisions under the Social Security Act may specify their own prescriptive periods; otherwise, general rules under the Revised Penal Code and special laws apply.
- Typically, the prescriptive period for crimes with penalties of several years is also measured in years, giving the State ample time to prosecute.

B. PhilHealth Premiums and Offenses

Collection of unpaid premiums
- PhilHealth, like SSS, has substantial time to collect contributions and surcharges, again reflecting public welfare considerations.
Criminal liability
- Penal provisions under the National Health Insurance Act and Universal Health Care Act will have corresponding prescriptive rules, directly or via the Revised Penal Code and special laws.

In all cases, the filing of complaints, issuance of demand letters, or initiation of suits can interrupt or toll prescription.

IX. Defenses, Mitigating Circumstances, and Settlements

From the employer’s perspective:

A. Common (but Weak) “Defenses”

Financial difficulties or business losses
- Generally not a valid legal excuse.
- The law treats SSS and PhilHealth contributions as priority obligations.
Ignorance of the law
- Never a valid defense.
- Employers are presumed to know the law.
Fault of the bookkeeper/accountant
- Responsibility remains with the employer and responsible corporate officers.
- Internal delegation does not absolve them.

B. Possible Mitigating Factors

While not complete defenses, the following may mitigate:

Voluntary disclosure and settlement before discovery or prosecution
Prompt payment of contributions plus penalties once notified
Cooperation with SSS/PhilHealth investigations

These may influence:

Administrative evaluation
Prosecutorial discretion
Sentencing (if criminal liability is established)

C. Condonation and Penalty Reduction Programs

From time to time, SSS and PhilHealth may offer:

Penalty condonation, restructuring, or amnesty programs
Allowing employers to:
- Settle principal contributions
- Have penalties waived or reduced
- Arrange installment payment schemes

These programs do not erase the original violation, but they can substantially reduce financial burden and encourage compliance. They are usually time-bound and subject to specific conditions.

X. Remedies and Options for Employees

If an employee suspects or discovers that the employer is not remitting SSS or PhilHealth contributions, these are practical steps and legal options:

1. Verify Contributions

For SSS:
- Check contribution records via:
  - SSS online portal
  - SSS app
  - SSS branch kiosks or member service
For PhilHealth:
- Check contributions through:
  - PhilHealth online services (if available)
  - PhilHealth branch/office

If contributions do not appear for periods where the employee was actually employed and had salary deductions, that is a red flag.

2. Keep Documentation

Essential documents include:

Payslips showing SSS and PhilHealth deductions
Employment contract or appointment letters
Company IDs, work schedules, and certifications
Any internal communications or evidence of complaints made to management

These support the employee’s case when filing complaints or claims.

3. File Complaints with SSS and PhilHealth

Employees may:

File a written complaint or report to:
- SSS branch or legal/collection office
- PhilHealth regional/prosecution office
Provide:
- Personal details
- Employer details
- Evidence of deductions and non-remittance

The agencies may then:

Investigate the employer
Assess unpaid contributions
Initiate administrative, civil, or criminal actions

4. Seek Assistance from DOLE and Other Agencies

Employees can also:

Report to DOLE for labor standards violation
Seek assistance from:
- Public Attorney’s Office (PAO)
- Labor NGOs, legal clinics, or unions

In some situations, workers may file:

Money claims (for unpaid wages, benefits, or reimbursement of losses)
Complaints with NLRC (National Labor Relations Commission), when appropriate

5. Claim Benefits Despite Non-Remittance

If an employee needs to claim SSS or PhilHealth benefits (e.g., sickness, maternity, hospitalization) but records show missing contributions:

Inform the SSS or PhilHealth that employer deductions were made but not remitted.
Present documentary proof (payslips, contracts, etc.).
Request the agency to:
- Recognize actual employment and wages, and
- Proceed with benefit processing while going after the employer for contributions.

XI. Best Practices for Employers

To avoid the serious consequences of non-remittance, employers should:

Prioritize statutory contributions
- Treat SSS and PhilHealth remittances as non-negotiable, priority obligations, even when cash flow is tight.
Maintain robust payroll systems
- Use reliable payroll software or systems that:
  - Correctly compute contributions
  - Flag deadlines
  - Generate accurate reports
Conduct internal audits
- Regularly cross-check:
  - Payroll records
  - Actual remittance receipts
  - SSS and PhilHealth online records
Designate responsible officers with clear accountability
- But ensure top management actively oversees compliance and does not rely blindly on subordinates.
Promptly correct errors
- If under-remittance or missed periods are discovered, immediately coordinate with SSS/PhilHealth for:
  - Back payments
  - Penalty computations
  - Possible condonation or restructuring

XII. Conclusion

In Philippine law, failure to remit SSS and PhilHealth contributions is far more than an administrative oversight. It is:

A breach of statutory duty
Potentially criminal, especially where deductions were made but not remitted
A violation of labor standards and public trust
A direct threat to workers’ social security and health protection

Employees have rights and remedies: they can verify records, keep evidence, and bring complaints to SSS, PhilHealth, DOLE, and other appropriate bodies. Employers, on the other hand, must recognize that social contributions are mandatory, prioritized, and strictly enforced—and should build systems that ensure full, timely, and accurate remittance.

Ultimately, strict compliance protects not only employees but also employers themselves, by avoiding heavy financial liabilities, criminal exposure, and reputational damage while contributing to a more secure and humane working environment.