When an employee says, “Do not deduct Pag-IBIG or PhilHealth from my salary,” the employer should not simply honor the request or ask the employee to sign a waiver. For a covered employee, these are statutory payroll obligations, not optional company benefits. The proper response is to verify coverage, explain the computation, correct any membership or classification problem, document the objection, and continue lawful deduction and remittance. Disciplinary action should be considered only when an employee deliberately obstructs a lawful reporting requirement—not merely because the employee asks questions or disagrees with the deduction.

Can an Employee Legally Refuse Pag-IBIG or PhilHealth Deductions?

Generally, no. A covered employee cannot unilaterally opt out of mandatory Pag-IBIG or PhilHealth contributions.

Under the Home Development Mutual Fund Law of 2009, or Republic Act No. 9679, Pag-IBIG coverage is mandatory for employees covered by the Social Security System or Government Service Insurance System and their employers. Section 6 expressly applies mandatory coverage despite any previous waiver. The law also requires employers to deduct and remit the proper employee savings and pay the employer counterpart. (Supreme Court E-Library)

Under the Universal Health Care Act, or Republic Act No. 11223, every Filipino is automatically included in the National Health Insurance Program. A person who is gainfully employed under an employer-employee relationship is ordinarily classified as a direct contributor whose premiums must be properly reported and paid through the employer. (Supreme Court E-Library)

A separate employee authorization is not required for a deduction that the law itself authorizes. Article 113 of the Labor Code allows wage deductions when authorized by law or by Department of Labor and Employment regulations. The Supreme Court discussed this distinction in Marby Food Ventures Corp. v. Dela Cruz: deductions authorized by law are different from optional third-party deductions, which ordinarily require written authorization. (Supreme Court E-Library)

Employee’s position	Legal effect	Correct employer response
“I do not consent.”	Consent does not create or remove mandatory coverage.	Explain the legal basis and continue the correct statutory deduction.
“I will sign a waiver.”	A waiver does not transfer the employer’s statutory liability.	Do not rely on the waiver. Keep a record of the employee’s objection instead.
“I have an HMO.”	An HMO complements PhilHealth; it does not replace formal-sector PhilHealth contributions.	Continue PhilHealth reporting and deduction.
“I will never apply for a housing loan.”	Pag-IBIG is also a provident savings system, not merely a housing-loan program.	Continue Pag-IBIG contributions if the employee is covered.
“The computation is wrong.”	This may be a legitimate payroll dispute.	Recheck the salary base, contribution ceiling, employee category, and prior records.
“I am a contractor or foreign national.”	Coverage may depend on the worker’s true status and applicable special rules.	Verify the classification before processing or stopping deductions.

Pag-IBIG and PhilHealth Contribution Rates in 2026

Pag-IBIG contribution

Pag-IBIG Fund Circular No. 460 increased the maximum monthly Fund Salary used in computing regular Pag-IBIG savings to ₱10,000, effective February 2024. The current basic rates are:

Monthly Fund Salary	Employee share	Employer share
₱1,500 or below	1%	2%
More than ₱1,500	2%	2%

The ₱10,000 ceiling means that an ordinary employee earning at least ₱10,000 generally has a maximum regular employee share of ₱200 per month, matched by an employer share of ₱200. An employee earning ₱25,000, for example, does not ordinarily pay 2% of the entire ₱25,000; the regular contribution is computed using the ₱10,000 ceiling. (UP Law Center)

PhilHealth contribution

For calendar year 2026, the PhilHealth premium remains 5% of monthly basic salary, subject to a ₱10,000 income floor and ₱100,000 income ceiling. For an ordinary employed member, the premium is generally shared equally by the employee and employer. (Philippine Information Agency)

Monthly basic salary	Total monthly premium	Employee share	Employer share
₱8,000	₱500, based on the floor	₱250	₱250
₱25,000	₱1,250	₱625	₱625
₱150,000	₱5,000, based on the ceiling	₱2,500	₱2,500

Special rules apply to certain workers, particularly kasambahays, persons with disabilities, and other categories covered by specific laws or PhilHealth issuances. Payroll should not automatically apply the ordinary 50-50 allocation without checking the employee’s category.

Step-by-Step: How Employers Should Handle a Refusal

1. Identify the real reason for the refusal

Do not treat every objection as insubordination. Ask the employee to state the concern in writing. Common reasons include:

The employee believes Pag-IBIG or PhilHealth is optional.
The employee already has an HMO or private insurance.
The employee cannot find an existing Pag-IBIG MID or PhilHealth PIN.
The employee fears that a second number will be created.
The employee disputes the salary used in the computation.
The employee is a foreign national claiming exemption.
The worker claims to be an independent contractor rather than an employee.
Previous deductions are not appearing in the member’s account.
The employee needs a higher take-home pay and is asking the employer to stop deductions.

This first step often reveals that the issue is not genuine refusal but a record, identity, or payroll problem.

2. Confirm that an employer-employee relationship exists

A contract labeled “consultancy,” “freelance,” or “service agreement” is not conclusive. Philippine labor law applies the four-fold test:

Who selected and engaged the worker?
Who pays the worker?
Who has the power to dismiss the worker?
Who controls the manner and means by which the work is performed?

The power of control is ordinarily the most important factor. A business should not reclassify an employee as an independent contractor merely to avoid statutory contributions. (Supreme Court E-Library)

Probationary, project, fixed-term, temporary, and part-time status does not by itself remove statutory coverage. If there is a genuine employer-employee relationship, the employee will generally remain covered even if employment is expected to last only a few months.

3. Verify the employee’s existing membership numbers

Before creating a new record, ask the employee for:

Pag-IBIG Membership Identification Number or MID;
PhilHealth Identification Number or PIN;
PhilHealth Member Data Record, if available;
Valid government-issued identification;
PSA birth or marriage certificate when there is a name or birth-date discrepancy; and
Records from a former employer showing the number previously used.

A missing card is not the same as having no membership. Pag-IBIG and PhilHealth identification numbers are generally permanent. Creating duplicate records can delay contribution posting, loan applications, claims, and correction requests.

If the employee genuinely does not have a number, complete the applicable registration process. PhilHealth requires newly hired employees to be reported through the ER2 within 30 days from assumption of employment. (PhilHealth)

4. Give the employee a written explanation—not an “opt-out form”

The written notice should contain:

The law requiring coverage;
The applicable salary base;
The employee and employer shares;
The first payroll period affected;
The membership information or documents still needed;
A deadline for reporting errors; and
The person responsible for payroll corrections.

A practical notice may read:

Your position is covered by the mandatory Pag-IBIG and PhilHealth contribution rules. Beginning with the payroll for [period], the company will deduct only the statutory employee share and will separately pay the required employer share. Please submit your existing MID, PIN, or correction documents by [date]. Any signature requested is only an acknowledgment of receipt and is not an authorization to create or waive statutory coverage.

If the employee refuses to sign an acknowledgment, have two authorized representatives record when and how the notice was served. Do not falsely describe the signature as necessary “consent.”

5. Correct the payroll calculation before arguing about refusal

Show the employee the actual computation. Many disputes disappear when payroll explains:

Why the Pag-IBIG Fund Salary is capped;
Why PhilHealth uses monthly basic salary rather than take-home pay;
How the employee and employer shares are separated;
Whether the employee belongs to a special category; and
Whether an allowance, commission, unpaid absence, or mid-month hiring affected the calculation.

The employer’s share must never be hidden inside the employee’s deduction. Both RA 9679 and RA 11223 prohibit an employer from recovering its own required share from the worker. (Supreme Court E-Library)

6. Continue deduction and remittance when coverage is clear

Once the employer confirms that the employee is covered and the calculation is correct, payroll should process the deduction even without the employee’s agreement.

Do not:

Keep the money while waiting for the employee to “approve” the remittance;
Deduct now but postpone reporting;
Pay the employee in cash without a payslip to conceal the deduction;
Report a lower salary than the employee actually receives; or
Stop contributions for one employee merely because that employee complained.

PhilHealth instructs employers to deduct the employee share, add the employer share, and remit through the Electronic Premium Remittance System. Employers with PhilHealth Employer Numbers ending in 0–4 generally pay from the 11th to the 15th day of the following month, while those ending in 5–9 generally pay from the 16th to the 20th. (PhilHealth)

Pag-IBIG employers may prepare and submit monthly remittance schedules through Virtual Pag-IBIG for Employers and its eSRS facility. The employee’s objection should not be allowed to cause the employer to miss its applicable remittance deadline. (Pag-IBIG Fund Services)

7. Maintain an audit-ready file

For every disputed deduction, retain:

Employment contract or appointment;
Job description and employment classification;
Employee’s written objection;
Employer’s written explanation;
Proof that the notice was received or served;
Payroll register and payslips;
EPRS and eSRS remittance schedules;
Payment confirmations and official receipts;
Contribution-posting or reconciliation reports; and
Communications with the Pag-IBIG branch or PhilHealth Local Health Insurance Office.

A payment receipt showing only a lump-sum amount may not prove that a particular employee was included. Keep the corresponding employee-level remittance schedule.

8. Refer genuine exceptions to the proper agency

Do not decide a doubtful exception based solely on the employee’s statement.

For example, Pag-IBIG Circular No. 421 instructed employers to stop deducting mandatory Pag-IBIG contributions from expatriates. PhilHealth’s foreign-citizen rules, however, distinguish individually enrolled foreign residents from foreign citizens working under formal contracts whose premiums are shared with their employers. A foreign employee may therefore be treated differently under Pag-IBIG and PhilHealth. (KPMG Assets)

For a foreign employee, review the passport, citizenship, Alien Certificate of Registration Identity Card, work visa, employment contract, and any proof of naturalization or dual citizenship. Obtain written confirmation from the relevant Pag-IBIG branch or PhilHealth office before treating the worker as exempt.

Routine payroll deductions do not require notarized or apostilled consent. Apostille or authentication issues usually arise only when a document is executed abroad for a refund, claim, or transaction through an authorized representative.

Can an Employee Be Disciplined or Terminated for Refusing?

A verbal objection alone is usually not a sensible basis for dismissal. The employer can process a lawful deduction without making agreement a condition of continued employment.

Discipline becomes a possible issue when the employee deliberately obstructs compliance—for example, by repeatedly refusing to provide available identification information, submitting false membership details, or disobeying a lawful and clearly explained instruction needed for statutory reporting.

Under DOLE Department Order No. 147-15, willful disobedience or insubordination may justify termination only when:

There is actual disobedience;
The conduct is willful or intentional and demonstrates a wrongful and perverse attitude;
The instruction is reasonable, lawful, and made known to the employee; and
The instruction relates to the employee’s duties. (Supreme Court E-Library)

The penalty must also be proportionate. Where the employer can solve the issue through registration, witnessed service of a notice, or a records correction, immediate dismissal may be difficult to justify.

Before imposing termination for a just cause, the employer must observe the twin-notice procedure:

Issue a detailed first notice identifying the charge, relevant facts, and policy or legal duty involved.
Give the employee at least five calendar days to submit an explanation.
Provide a meaningful opportunity to be heard. A formal hearing is required in circumstances such as a written request by the employee or a substantial factual dispute.
Evaluate the evidence objectively.
Issue a written decision explaining the findings and penalty. (Supreme Court E-Library)

Do not manufacture an insubordination charge by ordering the employee to sign a legally unnecessary waiver or consent form.

Common Situations and the Correct Response

Situation	Correct response
Employee has an HMO or private health insurance	Continue PhilHealth. Private coverage complements rather than replaces social health insurance.
Employee is already a dependent of a spouse	Once the person becomes formally employed, verify and update the person’s direct-contributor status instead of relying solely on dependent coverage.
Employee has no Pag-IBIG or PhilHealth card	Search or verify the permanent MID or PIN. Lack of a physical card is not an exemption.
Employee’s name differs across records	Use the same membership number and process a data correction with supporting PSA or government records.
Employee refuses to sign payroll authorization	Serve a written explanation and document receipt. Separate authorization is not required for deductions mandated by law.
Worker is called a “consultant” but works regular hours under company supervision	Apply the four-fold and control tests. The contractual label does not necessarily remove employer obligations.
Employee is probationary or project-based	Register and remit when an employer-employee relationship exists; do not wait for regularization.
Employee says previous deductions were not posted	Reconcile using payslips, employee-level remittance schedules, payment references, and agency records. Do not deduct the same amount again.
Foreign employee claims complete exemption	Check Pag-IBIG and PhilHealth separately because the coverage rules are not identical.
Kasambahay earns below the statutory threshold for sharing	Apply the special employer-shouldered rules instead of the ordinary 50-50 allocation.

What If the Employer Previously Failed to Deduct or Remit?

The employer should immediately determine whether the problem is:

Contributions were neither deducted nor remitted;
Contributions were deducted but not remitted;
Contributions were paid but reported under the wrong MID or PIN;
The correct employee was omitted from the remittance schedule;
The wrong salary base was used; or
A duplicate membership record received the payment.

These situations require different corrections.

If money was already deducted from the employee but not remitted, the employer must not deduct it again. The employer must remit the withheld amount and settle the applicable employer share, interest, penalties, and reporting deficiencies.

RA 9679 makes the employer liable for Pag-IBIG contributions and provides statutory consequences for nonpayment, including penalties and possible civil or criminal liability. RA 11223 imposes serious sanctions when an employer deliberately or through inexcusable negligence fails to register employees or accurately and timely deduct, report, or remit PhilHealth contributions. Failure to remit deducted PhilHealth contributions within 30 days from the due date creates a prima facie presumption of misappropriation under the law. (Supreme Court E-Library)

The employer must not charge the employee for:

The employer’s statutory share;
Penalties caused by late employer remittance;
Interest arising from the employer’s noncompliance; or
A second deduction for money already withheld.

Where the employee share was never deducted, payroll should first obtain the agency’s assessment and prepare a written reconciliation. Avoid an unexplained lump-sum deduction from one salary payment. Any recovery arrangement should clearly separate the employee’s lawful historical share from amounts that are exclusively the employer’s responsibility.

What Employees Should Do When a Deduction Appears Wrong

An employee who believes the deduction is incorrect or unremitted should:

Compare the payslip with the official contribution rate and salary base.
Check the contribution history through the official Pag-IBIG or PhilHealth member facility.
Ask HR or payroll for a written computation and the employee-level remittance reference.
Submit copies of payslips, identification, employment records, and prior membership records for reconciliation.
Report a Pag-IBIG posting problem to the maintaining Pag-IBIG branch.
Report a PhilHealth registration or remittance problem to the appropriate Local Health Insurance Office.
Use DOLE’s Single Entry Approach, or SEnA, when the issue involves an illegal wage deduction, retaliation, or termination dispute.

An employee should preserve original payslips and communications. A missing online posting does not always mean no payment was made, but an employer should be able to produce more than a general assurance that “the company already paid.”

Frequently Asked Questions

Can an employee legally opt out of Pag-IBIG and PhilHealth?

A covered employee generally cannot opt out. Pag-IBIG coverage is mandatory for the employees identified by RA 9679, while employed persons under an employer-employee relationship are direct contributors under the Universal Health Care Act. (Supreme Court E-Library)

Is a signed or notarized waiver valid?

It does not relieve the employer from registration, deduction, reporting, or remittance duties. Notarization proves that a document was acknowledged; it does not make an arrangement valid when it contradicts a mandatory law.

Does payroll need the employee’s written consent before making the deduction?

No separate consent is ordinarily required for a deduction expressly authorized by law. The employer may request an acknowledgment that the computation was explained, but that acknowledgment is not the source of the employer’s authority. (Supreme Court E-Library)

Can an HMO replace PhilHealth contributions?

No. An HMO or private health insurance may provide additional coverage, but it does not ordinarily cancel an employed member’s PhilHealth contribution obligation.

Can the employer dismiss an employee who refuses the deductions?

Not automatically. A simple objection is different from willful disobedience. Dismissal would require a valid just cause, evidence satisfying the legal elements of insubordination or another recognized ground, a proportionate penalty, and proper notice and opportunity to be heard. (Supreme Court E-Library)

What if the employee refuses to provide a Pag-IBIG MID or PhilHealth PIN?

Give a written direction, explain why the information is needed, and provide a reasonable deadline. Help the employee retrieve or correct the existing number. If the employee continues to obstruct registration without a legitimate reason, apply the company’s disciplinary procedure fairly and document every step.

What if the company failed to make deductions for several months?

The employer should request an official assessment, settle the required contributions, and correct the reports. It should not transfer the employer share, penalties, or interest to the employee. Any proposed recovery of a previously undeducted employee share should be fully explained and handled through a lawful payroll arrangement.

Are probationary, project, temporary, or part-time employees covered?

They are generally covered when a true employer-employee relationship exists and the applicable statute includes them. Employment status alone is not a reliable basis for withholding registration. PhilHealth’s penalty provision expressly addresses failure to register employees regardless of employment status. (Supreme Court E-Library)

Are foreign employees exempt?

Not automatically from both programs. Pag-IBIG Circular No. 421 generally stopped mandatory Pag-IBIG deductions from expatriates, while PhilHealth rules recognize employer-shared contributions for foreign citizens working under formal contracts. Citizenship, immigration status, and the actual employment arrangement should be verified separately for each agency. (KPMG Assets)

Can the employer deduct its own contribution or late-payment penalties from the employee?

No. The employer’s counterpart contribution and liabilities caused by its own late or defective remittance cannot be passed on to the employee. The payslip should clearly distinguish the employee’s lawful share from the employer’s separate obligation. (Supreme Court E-Library)

Key Takeaways

Pag-IBIG and PhilHealth deductions are generally mandatory for covered employees and do not depend on individual consent.
A waiver—even a notarized one—does not protect an employer that fails to register, deduct, report, or remit.
Verify genuine disputes involving salary calculations, duplicate records, contractor status, kasambahays, or foreign employees.
Continue timely remittance when coverage is clear, and maintain employee-level proof of payment and reporting.
Do not charge the employee for the employer share, penalties, interest, or money already deducted.
Use disciplinary procedures only for genuine, willful obstruction of a lawful instruction, with proportionality and full due process.