Introduction

In the Philippine employment landscape, it is not uncommon for workers to begin rendering services to an employer prior to the formalization of their hiring through signed contracts or official onboarding processes. This situation may arise due to operational urgencies, such as immediate project needs or staffing shortages, where an individual starts working on a trial basis, during orientation, or informally before the "official hiring date." The official hiring date typically refers to the date specified in the employment contract, payroll records, or company registration with government agencies.

A critical aspect of this scenario involves payroll deductions—mandatory withholdings from an employee's wages for social security contributions, taxes, and other statutory obligations. Under Philippine labor laws, employers are required to implement these deductions from the very first day an employee performs work, regardless of whether that day precedes the official hiring date. Failure to do so can lead to legal liabilities, including penalties, back payments, and disputes before labor tribunals.

This article explores the legal framework governing such deductions, the obligations of employers, rights of employees, potential consequences of non-compliance, and practical considerations for handling pre-hiring work periods. It draws from key provisions of the Labor Code of the Philippines, social security laws, and related regulations issued by the Department of Labor and Employment (DOLE), Social Security System (SSS), Philippine Health Insurance Corporation (PhilHealth), and Home Development Mutual Fund (Pag-IBIG Fund).

Legal Framework for Employment Commencement and Payroll Deductions

Definition of Employment Relationship

The Labor Code of the Philippines (Presidential Decree No. 442, as amended) establishes that an employment relationship begins when an individual renders personal services to another in exchange for compensation, under the control or supervision of the latter. Article 280 defines regular employment, probationary employment, and other types, but crucially, the Code does not require a written contract for employment to exist. Instead, the actual performance of work creates the employer-employee bond.

If an individual works before the official hiring date—such as during a training period, apprenticeship, or informal trial—these days are considered part of the employment period. The Supreme Court has consistently ruled in cases like Lamb v. National Labor Relations Commission (G.R. No. 111042, 1994) that employment commences upon the employee's acceptance and start of duties, not merely upon contract signing. Thus, all labor rights, including wage payments and mandatory deductions, apply retroactively to the first day of service.

Mandatory Payroll Deductions Under Philippine Law

Philippine laws mandate specific deductions from employees' wages to fund social security programs and taxes. These must be withheld by the employer and remitted to the appropriate agencies. The key deductions include:

Social Security System (SSS) Contributions: Governed by Republic Act No. 11199 (Social Security Act of 2018). Both employer and employee share contributions based on the employee's monthly salary credit. For days worked before the official hiring date, contributions must be computed and deducted if the individual qualifies as an employee. SSS requires registration within 30 days of hiring, but contributions accrue from the start of employment.
PhilHealth Contributions: Under Republic Act No. 11223 (Universal Health Care Act), premiums are shared between employer and employee. Deductions are based on basic salary and must cover the entire employment period, including pre-hiring days.
Pag-IBIG Fund Contributions: Republic Act No. 9679 mandates monthly contributions for housing and savings. Like SSS and PhilHealth, these apply from the first day of work, with the employer responsible for remitting both shares.
Withholding Taxes on Compensation: As per the Tax Code (Republic Act No. 8424, as amended by Republic Act No. 10963 or TRAIN Law), employers must withhold income taxes based on the employee's gross compensation. This includes wages earned before the official hiring date, which are taxable income.
Other Authorized Deductions: Article 113 of the Labor Code prohibits deductions except for those authorized by law, such as union dues (if applicable), debts owed to the employer (with written consent), or court-ordered garnishments. Unauthorized deductions, including any attempt to offset costs for pre-hiring days (e.g., training expenses), are illegal and punishable.

Employers cannot arbitrarily deduct amounts to "adjust" for pre-hiring periods, such as claiming those days as unpaid training. DOLE Department Order No. 174-17 (Rules Implementing Articles 106 to 109 of the Labor Code on Contracting and Subcontracting) and related issuances emphasize that all work performed must be compensated, with corresponding deductions applied.

Employer Obligations for Pre-Hiring Work Periods

Registration and Remittance Requirements

Employers must register new employees with SSS, PhilHealth, and Pag-IBIG immediately upon commencement of work, even if it precedes the official hiring date. Delays in registration do not excuse the obligation to compute and remit contributions retroactively. For instance:

SSS Form R-1A must be filed, and contributions paid via SSS Form R-5, covering the full period.
PhilHealth requires updating the Member Data Record (MDR) to include pre-hiring days.
Pag-IBIG contributions are reported through the Membership Savings Remittance Form (MSRF).

If the pre-hiring period spans multiple payroll cycles, employers must adjust subsequent payrolls to include back deductions. Employees may consent to staggered deductions for their share to avoid financial strain, but this must be in writing and not coercive.

Documentation and Record-Keeping

Employers are required under Article 114 of the Labor Code to maintain accurate payroll records, including time sheets, for at least three years. For pre-hiring days, documentation such as attendance logs, emails confirming start dates, or witness statements can establish the actual commencement of work. Failure to document properly may lead to disputes where employees claim underpayment or non-remittance.

In probationary employment (limited to six months under Article 281), the probation period includes pre-hiring days if they involve actual duties. Employers cannot extend probation by excluding these days or deduct extra amounts.

Employee Rights and Remedies

Employees who work before their official hiring date are entitled to full wages (at least minimum wage per Republic Act No. 6727 and regional wage orders) minus only the statutory deductions. They cannot be subjected to additional withholdings without consent.

If an employer fails to make proper deductions or remits incorrectly:

Employees may file complaints with DOLE for underpayment or illegal deductions, leading to orders for restitution.
Non-remittance of contributions can result in employees losing benefits, such as SSS sickness or maternity pay, prompting claims against the employer.
Under the Labor Code, employees can seek separation pay or reinstatement if disputes lead to constructive dismissal.

Supreme Court decisions, such as in Millares v. NLRC (G.R. No. 110782, 1997), affirm that employers bear the burden of proving compliance with deduction and remittance obligations.

Consequences of Non-Compliance

Penalties for Employers

Violations attract administrative, civil, and criminal penalties:

DOLE Sanctions: Fines ranging from PHP 1,000 to PHP 10,000 per violation under DOLE orders, plus orders to pay back wages and contributions with interest (12% per annum).
SSS Penalties: Republic Act No. 11199 imposes fines up to PHP 20,000 and imprisonment for non-remittance, plus damages equivalent to unremitted amounts.
PhilHealth and Pag-IBIG: Similar penalties, including surcharges of 2% per month on overdue contributions.
BIR Penalties: For tax withholdings, fines up to PHP 50,000 and potential imprisonment under the Tax Code.
Civil Liabilities: Employees may sue for damages in regular courts if negligence is proven.

Repeated violations can lead to business closure or blacklisting by DOLE.

Common Pitfalls and Best Practices

Employers often err by treating pre-hiring days as "volunteer" or "observation" periods without pay or deductions, which is invalid if the individual performs productive work. To avoid issues:

Formalize hiring promptly with backdated contracts if necessary.
Use temporary or project-based contracts for short pre-hiring stints.
Conduct audits to ensure retroactive compliance.
Train HR personnel on labor laws to prevent disputes.

Employees should keep personal records of work start dates and request itemized payslips (mandatory under DOLE Department Order No. 131-13) to verify deductions.

Conclusion

Employer payroll deductions for days before the official hiring date in the Philippines are not optional but a legal imperative rooted in the principles of fair labor practices and social protection. By ensuring timely deductions and remittances from the actual start of employment, employers uphold the integrity of the social security system while protecting themselves from liabilities. Employees, in turn, benefit from uninterrupted access to benefits. In a dynamic job market, adherence to these rules fosters trust and compliance, underscoring the Philippine commitment to worker welfare as enshrined in the Constitution and labor statutes. For specific cases, consulting DOLE or legal experts is advisable to navigate nuances.