Despite Salary Deductions, Under Philippine Law

I. Overview

In the Philippines, it is unlawful for an employer to deduct contributions or “benefits” from an employee’s salary and then fail to remit them to the proper government agencies or to withhold benefits that are already due.

This typically involves:

Social Security System (SSS) contributions and loans
PhilHealth contributions
Pag-IBIG (HDMF) contributions and loans
Withholding taxes
Other statutory or company benefits deducted from pay but not actually provided

When this happens, the employee may pursue administrative, civil, and even criminal remedies against the employer and its responsible officers.

This article walks through the legal basis, typical violations, forums, procedures, timelines, and practical strategies for filing cases in the Philippine context.

Important: This is general information, not a substitute for personalized advice from a Philippine lawyer.

II. Legal Framework

1. Labor Code of the Philippines

Key concepts:

Wage: All remuneration for work, including the value of benefits that form part of compensation.
Unlawful deductions: Employers may only make deductions allowed by law or authorized in writing by the employee for a lawful purpose.

Relevant provisions (with renumbering under the Labor Code amendments):

On deductions from wages – The Labor Code generally prohibits unauthorized or unreasonable deductions and protects employees from being made to bear costs that should be for the employer’s account.
On money claims arising from employer–employee relations – Money claims (such as unpaid wages, underpayment, and certain benefits) generally prescribe in three (3) years from the time they fall due.

While SSS, PhilHealth, and Pag-IBIG are governed by special laws, DOLE and the NLRC may still have jurisdiction over related labor standards issues (e.g., unauthorized deductions).

2. SSS Law – Republic Act No. 11199 (Social Security Act of 2018)

Key points:

Employers are required to:
- Register themselves and their employees with SSS.
- Deduct the employee’s share of contributions from payroll.
- Add the employer’s share.
- Remit the total to SSS on or before the prescribed deadlines.

Violations:

Failure to register employees.
Failure to deduct or remit contributions.
Deducting employee contributions but not remitting them.
Deducting amounts for SSS loans but not forwarding them to SSS.

Liabilities may include:

Surcharges and interest on unpaid contributions.
Administrative penalties.
Criminal liability for responsible officers (e.g., fines and/or imprisonment) for willful failure to remit contributions or for misappropriation.

3. PhilHealth – National Health Insurance Act (RA 7875, as amended, including RA 10606)

Employers must:

Register employees as PhilHealth members.
Deduct the employee share.
Add the employer share.
Remit contributions on or before the deadline.

Non-remittance or misappropriation:

May result in administrative sanctions, penalties, surcharges, and possible criminal liability under the PhilHealth law and related regulations.

4. Pag-IBIG Fund – Home Development Mutual Fund Law (RA 9679)

Obligations of employers:

Register with Pag-IBIG.
Enroll employees.
Deduct Pag-IBIG contributions (and loan amortizations, if any).
Add the employer’s share.
Remit to Pag-IBIG.

Violations:

Non-registration.
Non-remittance of contributions and amortizations.
Employer’s use of deducted amounts for other purposes.

Liabilities:

Surcharges and interest.
Administrative and possible criminal sanctions against responsible officers.

5. Withholding Taxes – National Internal Revenue Code (NIRC)

Though primarily a BIR issue, similar principles apply:

Employers act as withholding agents.
They must deduct withholding taxes and remit them to the BIR.
Failure to remit can lead to:
- Deficiency tax assessments, surcharges, penalties, and interest.
- Possible criminal liability for responsible officers.

6. Other Statutory and Company Benefits

Aside from government-mandated contributions, an employer may illegally:

Deduct amounts for group health insurance or HMO but fail to enroll the employee.
Collect payments for company-sponsored cooperatives, savings plans, or loans but fail to remit.
Deduct for uniforms, tools, or damages in a manner prohibited by law or DOLE rules.

These can give rise to labor standards complaints, civil claims, and even criminal charges (e.g., estafa) depending on the facts.

III. What Counts as “Unpaid Benefits Despite Salary Deductions”?

Common scenarios:

Unremitted SSS/PhilHealth/Pag-IBIG Contributions
- Payslips show deductions.
- Government agency records show no or smaller contributions than what was deducted.
- Problems usually appear when the employee tries to claim benefits (sickness, maternity, retirement, loans, etc.) and discovers a “gap” in contributions.
Unremitted Loan Amortizations
- Employer deducts SSS or Pag-IBIG loan amortizations from pay.
- These amounts do not appear in the member’s loan records.
- The employee remains “in arrears” and may be charged penalties.
Unremitted Cooperative/HMO Deductions
- Employer deducts amounts supposedly for:
  - Cooperatives
  - Savings programs
  - Health insurance
- But the third-party provider never receives the payments.
Non-enrollment Despite Deductions
- Employer deducts “SSS/PhilHealth/Pag-IBIG” but:
  - Never registered the employee.
  - Used a wrong or fake number.
- Or claims: “You’re a contractor, not an employee,” despite control and regular employment indicators.
Non-payment or Underpayment of Statutory Benefits
- 13th month pay.
- Service incentive leave (SIL) conversion.
- Holiday pay, rest day pay, night shift differential, overtime.
- If the employer makes “offsetting” or “deductions” to avoid paying the full amounts contrary to law.

IV. Rights and Remedies of the Employee

When you discover your employer has been deducting benefits but not remitting them, you generally have multiple remedies, often simultaneously:

Internal Remedies
- Ask HR/payroll for:
  - Written explanation.
  - Contribution/remittance schedules.
  - Official receipts or proof of remittance (e.g., SSS RTPL records).
- Sometimes issues are due to delays or clerical errors and can be corrected without litigation.
However, if:
- Explanations are vague or inconsistent, or
- The employer refuses to correct the records,
you should consider escalating to external agencies.
Administrative Complaints with SSS, PhilHealth, Pag-IBIG

Each agency has its own procedures for:
- Receiving complaints or reports against delinquent employers.
- Auditing and assessing employer liabilities.
- Imposing surcharges, interest, and penalties.
- Filing or recommending criminal charges where appropriate.
These agencies can:
- Order or compel employers to pay delinquent contributions.
- Hold specific corporate officers personally liable.
- Coordinate with prosecutors for criminal action.
Labor Standards Complaints with DOLE / NLRC

You may raise issues involving:
- Unauthorized or illegal deductions.
- Non-payment of other monetary benefits (e.g., 13th month pay, SIL pay, wage differentials).
- Sometimes computation of the equivalent value of unremitted benefits as money claims.
Forums:
- DOLE Regional Offices (for labor standards complaints; typically if no reinstatement is involved and/or claims fall within certain monetary thresholds under DOLE rules).
- National Labor Relations Commission (NLRC) – for money claims beyond DOLE’s summary jurisdiction or combined with reinstatement, constructive dismissal, or illegal dismissal claims.
Criminal Actions

Depending on the facts, the following may apply:
- Violations of SSS/PhilHealth/Pag-IBIG laws where willful non-remittance is criminal.
- Estafa or related offenses under the Revised Penal Code in cases of misappropriation or conversion (e.g., employer collects from employees for a specific purpose and uses it for something else).
Usually:
- Complaints may be initiated before the Office of the City or Provincial Prosecutor.
- Government agencies (SSS, PhilHealth, Pag-IBIG, BIR) may also refer cases to prosecutors.
Civil Actions for Damages

In particularly serious cases, an employee may file a civil case for:
- Moral damages (e.g., anxiety caused by inability to claim benefits).
- Exemplary damages (to deter similar behavior).
- Attorney’s fees and costs of litigation.
These cases are usually filed before the regular courts (Regional Trial Courts), separate from administrative and labor cases.

V. Evidence: What You Need to Gather

The strength of your case often depends on documentation. Collect and preserve:

Payslips, Payroll Records, or Vouchers
- Show:
  - Dates of employment.
  - Exact amounts deducted for SSS, PhilHealth, Pag-IBIG, loans, insurance, etc.
- If no payslips were issued, other evidence:
  - Bank statements (if salary is through payroll account).
  - Any payroll summaries or text messages/emails showing pay and deductions.
Company IDs, Contracts, and HR Documents
- Employment contract or appointment letter.
- Company policies or handbooks mentioning benefits.
- Any memos or HR correspondence about contributions or loans.
Government Agency Records
- SSS:
  - Contribution printouts (Member Data/Static Info).
  - Loan statements of account.
- PhilHealth:
  - Contribution summaries.
- Pag-IBIG:
  - Contribution record and loan records.
Communications with Employer
- Emails, chat messages, or letters asking about missing contributions and the employer’s responses.
- These can prove knowledge, refusal, or bad faith.
Witnesses
- Co-workers with similar experiences.
- HR or payroll personnel willing to testify.
- Former employees with knowledge of company practices.

VI. Step-by-Step: How to Pursue a Case

Step 1: Confirm the Non-remittance

Get official records from SSS, PhilHealth, Pag-IBIG:
- Check contribution postings.
- Identify periods with no or insufficient contributions.
Compare with your:
- Actual dates of employment.
- Payslips showing deductions.

This gives you a timeline of delinquency.

Step 2: Raise the Issue Internally (Optional but Often Helpful)

Write a formal letter or email to HR/employer:
- Attach copies of your payslips and agency records.
- Identify specific months where deductions appear on payslips but not in agency records.
- Politely demand:
  - Immediate remittance and correction of records.
  - Written explanation within a reasonable period.
Keep proof that the employer received your letter (e.g., email acknowledgment, company stamp).

If they ignore or refuse, it strengthens the argument of bad faith.

Step 3: Decide Which Forum(s) to Use

You may proceed separately or in parallel, depending on your strategy and resources.

Typical combination:

For contribution issues → SSS / PhilHealth / Pag-IBIG complaint.
For wage and benefit issues, or illegal deductions → DOLE/NLRC complaint.
For egregious misappropriation → criminal complaint via prosecutor’s office.
For serious emotional and financial damage → possible civil action for damages.

Step 4: Filing with Government Agencies

A. Filing a Complaint with SSS

Go to the nearest SSS branch and inquire about employer delinquency complaints.
Present:
- Your SSS number and ID.
- Contribution printouts.
- Payslips showing deductions.
Request an audit or investigation of your employer.

SSS may:

Require the employer to submit records.
Compute delinquent contributions, surcharges, and interests.
Initiate collection from the employer and/or recommend criminal prosecution.

B. Filing with PhilHealth and Pag-IBIG

Process is similar:

Submit a written complaint or incident report.
Attach documentary proof (payslips, agency records).
Request enforcement against non-remitting employers.

They may:

Issue demand letters to the employer.
Conduct inspections and audits.
Impose administrative fines and refer cases for prosecution.

C. Filing a Labor Standards Case (DOLE) or NLRC Case

SEnA (Single-Entry Approach)
- Many labor matters must first go through SEnA, a mandatory 30-day conciliation-mediation process under DOLE.
- You file a Request for Assistance (RFA) at the DOLE regional office:
  - State your issues: unpaid benefits, illegal deductions, etc.
  - Attach relevant documents.
- DOLE facilitator arranges conferences with the employer to attempt a settlement.
If No Settlement: DOLE or NLRC
- If unresolved:
  - For purely labor standards claims that fall within DOLE’s jurisdiction, DOLE may proceed with inspection and order.
  - For larger money claims or those involving reinstatement or termination, you may file a formal complaint with the NLRC.
NLRC Formal Complaint
- Prepare a verified complaint stating:
  - Parties and employment relationship.
  - Facts: when you were hired, what deductions were made, and how they were not remitted.
  - Causes of action: illegal deductions, non-payment of benefits, etc.
  - Reliefs: payment of money claims, damages, attorney’s fees, etc.
- Attach your documents.
- The NLRC will:
  - Conduct mandatory conciliation/mediation.
  - If still unresolved, proceed to submission of position papers and eventual decision.

Step 5: Criminal Complaint (If Warranted)

When the employer intentionally withholds remittances and uses the deducted funds, this can be:

A violation of SSS/PhilHealth/Pag-IBIG penal provisions.
A form of estafa (swindling) or other crime, depending on the circumstances.

Typical flow:

File a criminal complaint with:
- City or Provincial Prosecutor’s Office, or
- With assistance from SSS/PhilHealth/Pag-IBIG’s legal or prosecution units.
Prosecutor conducts preliminary investigation.
If there is probable cause:
- Informations are filed in the proper court (usually Municipal Trial Court or Regional Trial Court, depending on penalty).

VII. Prescription (Time Limits) and Timing Considerations

1. Labor Money Claims

Under the Labor Code, money claims arising from employment generally must be filed within three (3) years from when the cause of action accrued (usually when each benefit or wage became due).

Examples:

13th month pay for a given year → 3-year period from when it should have been paid.
Unpaid overtime for a given month → 3-year period from that month.

2. Claims Under SSS, PhilHealth, Pag-IBIG Laws

These laws have their own prescriptive periods for:

Collection of contributions.
Benefit claims.
Criminal actions.

They are often longer than typical labor money claims, but the exact number of years can differ depending on the specific statute and its latest amendments.

Practical tip: Do not rely on “it’s probably still within time.” The safest approach is to act as soon as you discover the non-remittance and to confirm current prescriptive rules with the concerned agency or a lawyer.

3. Civil and Criminal Actions

Civil actions for damages usually follow Civil Code prescriptive periods (often four or more years, depending on the nature of the right violated).
Criminal cases follow the prescriptive periods under the Revised Penal Code or special laws.

Again, actual timelines can be technical, so early consultation is ideal.

VIII. Possible Outcomes and Reliefs

What you may gain from pursuing your case:

Payment and Posting of Contributions
- Employer is compelled to pay delinquent contributions, with surcharges and interest.
- Your member records (SSS, PhilHealth, Pag-IBIG) are updated, enabling you to qualify for:
  - Sickness, maternity, calamity, and salary loans (SSS/Pag-IBIG).
  - Retirement, disability, and death benefits (SSS).
  - Hospitalization and health benefits (PhilHealth).
  - Housing loans (Pag-IBIG).
Refund of Improper Deductions
- Reimbursement of amounts that the employer had no right to deduct (e.g., illegal or excessive deductions for shortages, damages, or “company expenses”).
Payment of Statutory Benefits
- 13th month pay, SIL, holiday pay, overtime pay, night shift differential, rest day pay, etc.
- Wage differentials if you were paid below minimum wage.
Penalties and Sanctions Against Employer
- Administrative fines, surcharges, and interest.
- Disqualification from government projects or incentives (in some cases).
- Adverse findings in DOLE inspections.
Criminal Liability for Responsible Officers
- Fines.
- Imprisonment, in severe or willful cases.
- Personal liability of corporate directors, officers, or partners who acted or failed to act.
Damages
- Moral and exemplary damages in appropriate cases.
- Attorney’s fees and cost of suit.

IX. Special Situations

1. Resigned, Retired, or Terminated Employees

You can still file complaints even if you have already left the company, as long as:

You are within applicable prescriptive periods.
You can still obtain or prove necessary records (payslips, etc.).

2. Company Closure or Bankruptcy

Closure does not erase liability for past violations.
You may still file complaints against the corporation and, depending on the law, hold responsible officers personally liable.
Practical recovery may be affected by the company’s assets and insolvency proceedings, but government agencies can still pursue collections and penalties where possible.

3. Contractual, Probationary, or Project-Based Workers

If, in reality, an employer–employee relationship exists (control test, etc.), you are usually still entitled to:
- SSS, PhilHealth, Pag-IBIG coverage.
- Statutory benefits under labor standards law (subject to legal exemptions and nature of work).

An employer cannot avoid contributions by simply labeling employees as “freelancers” or “independent contractors” if the actual relationship is one of employment.

4. Overseas Filipino Workers (OFWs)

Special rules exist for OFWs regarding SSS, PhilHealth, and Pag-IBIG.
If deductions were made by a Philippine recruitment agency or employer but not remitted, similar complaint mechanisms apply (often involving POEA/DMW and other agencies).

X. Practical Tips and Strategy

Act Quickly and Keep Records
- The earlier you act, the easier it is to gather documents, locate witnesses, and stay within prescriptive periods.
Check Records Regularly
- Even while still employed, periodically check your SSS, PhilHealth, and Pag-IBIG records (online or at their branches) to spot delinquency early.
Document Everything in Writing
- Whenever you raise issues with HR or management, follow up via email or written letters.
- Avoid purely verbal complaints that leave no trace.
Coordinate with Co-workers
- Group complaints may be stronger and more efficient.
- Multiple employees with the same issue can show a pattern or scheme of non-remittance.
Use Government Advisory and Legal Services
- DOLE, SSS, PhilHealth, and Pag-IBIG often provide free orientations and basic legal information.
- Public Attorney’s Office (PAO) may assist qualified individuals in certain cases.
Be Realistic but Firm
- Litigation takes time and effort.
- Conciliation or settlement (via SEnA or NLRC mediation) can be a practical route if the employer offers full or fair payment and fixes your contribution records.
- However, don’t accept a settlement that waives your rights without adequate compensation.
Consult a Lawyer for Complex or High-Stakes Cases
- For large amounts, long periods of delinquency, serious emotional or financial harm, or when you are considering filing criminal and civil cases, it is particularly important to obtain tailored legal advice.

XI. Conclusion

In Philippine law, an employer cannot lawfully deduct contributions or benefit payments from an employee’s salary and then keep or misuse those funds. Such acts violate:

Labor standards and wage protection provisions.
Mandatory social legislation (SSS, PhilHealth, Pag-IBIG).
Tax laws in the case of withholding taxes.
Potentially, the Revised Penal Code and other special laws.

Employees have strong tools at their disposal—administrative complaints, labor standards enforcement, NLRC cases, and even criminal and civil actions—to correct records, recover amounts, and hold employers and responsible officers liable.

If you suspect that your employer has been deducting benefits from your salary without properly remitting or granting them:

Verify your contribution records.
Gather documents showing deductions.
Raise the issue in writing with your employer.
If unresolved, escalate to SSS, PhilHealth, Pag-IBIG, DOLE, NLRC, and, if appropriate, the prosecutor’s office.

Taking action not only protects your own social security and benefits—it also helps ensure that employers honor their legal obligations to all workers.