In the Philippine employment landscape, the relationship between an employer and an employee is governed not only by the employment contract but also by a robust framework of social legislation. Central to this framework is the mandate for employers to contribute to three primary social security institutions: the Social Security System (SSS), the Philippine Health Insurance Corporation (PhilHealth), and the Home Development Mutual Fund (Pag-IBIG Fund).
For employers, understanding these obligations is critical for legal compliance, financial planning, and upholding the welfare of their workforce.
I. The Social Security System (SSS)
Governed by Republic Act No. 11199, or the Social Security Act of 2018, the SSS provides private-sector employees with protection against the hazards of disability, sickness, maternity, old age, and death.
- The Contribution Structure: The current SSS contribution rate is 14% of the employee's Monthly Salary Credit (MSC).
- Employer Share: Of this 14%, the employer is responsible for 9.5%, while the employee covers the remaining 4.5%.
- Employees’ Compensation (EC) Program: In addition to the SSS contribution, employers are required to pay an EC contribution for every employee. This is purely an employer-funded benefit (PHP 10 for those with an MSC below PHP 15,000, and PHP 30 for those above).
- Mandatory Provident Fund (WISP): For employees with an MSC exceeding PHP 20,000, contributions to the Workers' Investment and Savings Program (WISP) are required, with the employer also shouldering a specific portion of this additional tier.
II. Philippine Health Insurance Corporation (PhilHealth)
PhilHealth provides health insurance coverage and ensures affordable, acceptable, and available health care services for all citizens. This is mandated by the Universal Health Care (UHC) Act (Republic Act No. 11223).
- The Contribution Structure: The UHC Act outlined a gradual increase in premium rates. As of 2024–2025, the rate has reached 5% of the employee's monthly basic salary.
- Employer Share: The premium is split equally (50/50) between the employer and the employee. Therefore, the employer’s share is 2.5% of the monthly basic salary.
- Salary Cap: There is a monthly salary floor and ceiling (currently capped at PHP 100,000) that determines the minimum and maximum contribution amounts.
III. Home Development Mutual Fund (Pag-IBIG)
Commonly known as the Pag-IBIG Fund, this institution focuses on national savings and providing affordable shelter financing for Filipino workers under Republic Act No. 9679.
- The Contribution Structure: After decades of stability, the mandatory monthly fund salary (MFS) used for contributions was adjusted in February 2024.
- Employer Share: The employer is required to contribute 2% of the employee’s monthly compensation.
- Contribution Limit: The maximum monthly compensation used for computing contributions is currently set at PHP 10,000. This means the standard employer share is capped at PHP 200 per month, matching the employee's PHP 200 contribution (totaling PHP 400).
Summary Table of Employer Obligations
| Agency | Total Rate (%) | Employer Share | Employee Share | Basis |
|---|---|---|---|---|
| SSS | 14% | 9.5% + EC | 4.5% | Monthly Salary Credit (MSC) |
| PhilHealth | 5% | 2.5% | 2.5% | Monthly Basic Salary |
| Pag-IBIG | 4% | 2% | 2% | Monthly Compensation (Cap of 10k) |
IV. Legal Consequences of Non-Compliance
Failure to remit these contributions is not merely an administrative oversight; it is a criminal offense under Philippine law.
- Criminal Liability: Employers who fail or refuse to remit contributions may face imprisonment and/or hefty fines. Under the SSS Law, for instance, the penalty can include imprisonment from 6 to 12 years.
- Civil Liability and Penalties: Late remittances incur monthly penalties (usually 1-3% per month).
- Liability for Benefits: If an employer fails to remit contributions and the employee becomes entitled to a benefit (like sickness or maternity), the employer may be held liable to pay the SSS or PhilHealth the equivalent value of the benefit the employee would have received.
- The "Trust Fund" Doctrine: Deducted employee shares are considered "trust funds." Misappropriating these funds (failing to remit what was deducted from the salary) constitutes Estafa.
V. Employer Administrative Responsibilities
Beyond the financial cost, employers must:
- Register the business and all employees with each agency.
- Deduct the employee's share from their payroll.
- Remit both the employer and employee shares to the respective agencies by the prescribed deadlines (usually based on the employer's ID number).
- Report new hires or separated employees monthly to ensure the records are up to date.
Would you like me to draft a sample computation for an employee at a specific salary level to see how these percentages apply in practice?