In the Philippines, the Home Development Mutual Fund (HDMF), commonly known as the Pag-IBIG Fund, is a mandatory provident scheme. Under Republic Act No. 9679 (the Home Development Mutual Fund Law of 2009), employers are legally obligated to deduct employee contributions and remit them, along with the employer’s counterpart share, to the Fund.
When an employer fails to remit these contributions despite deducting them from the employee's wages, it constitutes a serious violation of labor laws and social legislation.
1. Statutory Obligations of the Employer
The law is explicit regarding the duties of the employer:
- Mandatory Coverage: Coverage is mandatory for all employees covered by the SSS and GSIS.
- Deduction and Remittance: The employer must deduct the employee share and remit it, together with the employer's contribution, within the first fifteen (15) days of the succeeding month, or as prescribed by the Fund.
- Trust Fund Doctrine: Collected contributions are held in trust by the employer. Failure to remit is seen not just as a labor violation, but as a breach of trust.
2. Legal Remedies for Employees
Employees discovered to have unremitted contributions have several avenues for redress:
Administrative Complaint via Pag-IBIG Fund
The first step is usually reporting the non-remittance to the Pag-IBIG Fund’s Legal Department or Member Services Office.
- The Fund has the authority to conduct inspections of payroll records.
- The Fund can issue a Letter of Demand to the employer to settle the arrears, including penalties and interest.
Filing a Case with the National Labor Relations Commission (NLRC)
Non-remittance of mandatory benefits is a labor dispute.
- Employees may file a complaint for underpayment of benefits or violation of labor standards.
- This is often included in a broader complaint if the employee was also illegally dismissed or is owed backwages.
Criminal Prosecution under R.A. 9679
Section 25 of the HDMF Law provides for criminal liability.
- Penalty: Refusal or failure to comply with the law carries a fine of not less than twice the amount involved or imprisonment of not more than six (6) years, or both.
- Presumption of Fraud: The failure of the employer to remit the contributions after they have been deducted is prima facie evidence of deceit and misappropriation (Estafa).
3. Penalties for the Employer
Employers who fail to remit face escalating financial and legal consequences:
| Type of Penalty | Description |
|---|---|
| Interest/Penalty | A penalty of 1% per month is typically assessed on the unremitted amount from the date the contribution fell due until paid. |
| Criminal Liability | Officers of the corporation (President, Manager, or Directors) can be held personally liable and face imprisonment. |
| Business Permit Risks | Proof of compliance with SSS, PhilHealth, and Pag-IBIG is often a prerequisite for the renewal of business permits at the local government level. |
4. Impact on Employee Benefits
Unremitted contributions directly harm the employee in the following ways:
- Loan Eligibility: Eligibility for Multi-Purpose Loans (MPL) or Housing Loans requires a specific number of monthly contributions. Gaps in remittance can lead to loan denials.
- Dividend Earnings: Since Pag-IBIG is a provident fund, employees lose out on the annual dividends that would have accrued on the unremitted funds.
- Death and Retirement Benefits: The total accumulated value (TAV) will be lower than what the employee is entitled to, affecting their ultimate payout.
5. Procedural Steps for Redress
- Verification: Obtain a Contribution Printout from any Pag-IBIG branch or via the Virtual Pag-IBIG portal to confirm the missing months.
- Internal Demand: Send a formal written demand to the employer (HR or Accounting) requesting the immediate remittance of the missing contributions.
- Formal Report: If the employer fails to act, file a formal complaint with the Pag-IBIG Fund Task Force on Delinquent Employers.
- Legal Action: If the delinquency persists, engage the services of a lawyer or visit the Public Attorney’s Office (PAO) to initiate a formal complaint with the NLRC or the Prosecutor's Office.