SSS Salary Loan Deduction from Final Pay in the Philippines
A comprehensive legal-practical guide
Updated: 7 July 2025
1. Quick-n-Dirty Take-away
When an employee with an outstanding Social Security System (SSS) salary loan leaves a Philippine employer, the law obliges the employer to withhold the unpaid balance (plus accrued interest and penalties) from the employee’s final pay and remit it to the SSS within 30 days. Failure to do so makes the employer—not the worker—liable to the SSS, and it can trigger both financial assessments and criminal prosecution.
2. Legal & Regulatory Framework
| Source | Key Provisions Relevant to Final-Pay Deduction |
|---|---|
| Republic Act (RA) No. 11199 (Social Security Act of 2018, superseding RA 8282) | • § 19–22 & 42: authorise salary-loan program & payroll deduction. • § 28(e): employer penalties—₱5 000 – ₱20 000 fine and/or 6 yrs 1 day – 12 yrs imprisonment for failure to remit contributions or loan amortisations. |
| SSS Circulars & Manuals (most recently SSS Circular No. 2019-014, superseding 2016-004 & 2012-007) |
• ¶ 6: employer must deduct entire outstanding loan from separation/retirement benefits “immediately upon computation of final pay.” • ¶ 7: remittance deadline—30 calendar days from date of separation. • Annex B: “Employer’s Certification of Separation/Loan Balance” (EC-6 form) required. |
| Labor Code of the Philippines (PD 442) | • Art. 113: deductions from wages are generally prohibited unless (i) authorised by law or (ii) with written worker consent. SSS salary-loan deduction falls under the “authorised by law” exception. |
| DOLE Labor Advisory No. 06-20 (Final Pay Rules) | • Requires employers to release all monetary entitlements—including amounts deducted for statutory obligations—within 30 days from date of separation. |
| BIR Regulations (for tax) | • Final pay is still subject to withholding tax after statutory deductions (SSS, Pag-IBIG, PhilHealth, BIR garnishments). |
3. How the SSS Salary Loan Works (Refresher)
Eligibility – Currently employed SSS members with:
- at least 36 posted monthly contributions (6 of which within the 12-month period preceding the loan);
- no “final benefit” claim filed (retirement, disability, death).
Loan amount – Up to the 1-month or 2-month average salary credit (ASC), depending on total contributions.
Tenor & Interest – 24 monthly amortisations at 10 % p.a. on a diminishing balance (plus 1 % p.m. penalty on delayed payments).
Normal repayment – Payroll deduction; employer must remit on or before every 10th day of the following month (or the next working day).
4. What Happens at Separation
4.1 Employer’s Immediate Obligations
| Step | What to Do | Source |
|---|---|---|
| 1. Verify the outstanding balance | Request/download the latest Statement of Account (SOA) via My.SSS or SSS-employer portal. | SSS Circular 2019-014 ¶ 6(a) |
| 2. Compute up-to-separation interest & penalties | Interest accrues until the month immediately preceding remittance. Penalty (1 % per month) stops only when SSS receives the payment. | SSS charter & circulars |
| 3. Deduct from final pay | Apply the full outstanding amount against: ☑ back wages, ☑ unused leave conversion, ☑ 13th-month differential, ☑ separation/retirement pay, etc. | RA 11199 §§ 19-22; DOLE LA 06-20 |
| 4. Remit & report | Within 30 calendar days from separation: • Remit the amount using SS Form ML-1 (Salary-Loan Amortisation) or SSS-accredited collecting banks/e-channels. • Submit EC-6 (Employer’s Certification of Separation/Loan Balance). |
SSS Circular 2019-014 ¶ 7–8 |
| 5. Issue clearance documents to employee | Furnish the worker with copies of: • EC-6, showing zero or residual loan balance; • BIR Form 2316 (if applicable); • Certificate of Employment/FCOE. |
DOLE LA 06-20 |
If the Final Pay is Insufficient: Deduct what you can, remit it, and still file EC-6 stating the residual balance. The employee then continues paying directly to the SSS; the employer’s obligation ends as long as it has reported truthfully.
4.2 Written Employee Consent?
Not required. Article 113 of the Labor Code bars unauthorised deductions except those “required by law,” and RA 11199/circulars expressly require this deduction.
4.3 Priority of Deductions
Statutory deductions outrank contractual ones. Order of priority commonly applied in practice:
- Tax deficiency/wage garnishments (BIR, court orders)
- SSS, PhilHealth, Pag-IBIG contributions & salary-loan balance
- Other government-mandated liabilities (e.g., GSIS, LBP loans for GOCC employees)
- Company-authorised deductions (e.g., cash advances)
5. Penalties for Non-Compliance
| Failure | Consequence under RA 11199 § 28(e) & SSS rules |
|---|---|
| Not deducting when funds were available | Employer personally liable for entire unpaid balance + 3 % per month interest + 2 % penalty from due date until paid. |
| Deducting but not remitting | Same as above, plus money-claim recovery action by SSS; SSS may garnish bank accounts or file criminal charges (“failure to remit”). |
| Late remittance | Interest + penalty computed from original due date to actual receipt date. |
| Falsified EC-6 certificate | Possible estafa or falsification charges, aside from RA 11199 penalties. |
6. Employee’s Continuing Liability & Options
- Direct Payment – If residual balance remains, the separated member may pay at any SSS branch, Bayad Center, G-Cash, Maya, or PESONet partner bank.
- Salary-Loan Restructuring or Condonation Programs – Periodically offered (e.g., 2016 & 2019 condonation windows) allowing waiver of penalties upon lump-sum or restructured payment.
- Offset vs. Final Benefits – Upon eventual retirement, disability, or death claim, any unpaid salary-loan balance (plus penalties) is automatically offset against the benefit.
7. Illustrative Computation
Scenario: Employee A resigns effective 30 June 2025. Latest SOA shows a remaining principal of ₱18 000, plus unposted interest of ₱150. The employee’s final pay (after tax) is ₱25 000.
Outstanding as of 30 June 2025:
- Principal ₱18 000
- Interest (June) ₱150
- Total ₱18 150
Employer deducts ₱18 150 from the ₱25 000 final pay.
Employer remits ₱18 150 on 15 July 2025 (within 30 days). No penalty accrues because payment is on time; interest for July is not charged as the loan is deemed settled in June once paid within the 30-day window.
Employer issues EC-6 marked “Loan Fully Settled.” Employee receives net final pay of ₱6 850.
8. Interactions with Other Laws
| Issue | Take-away |
|---|---|
| Data Privacy (RA 10173) | Employers may transmit loan balance data to SSS without separate consent; it is a “required by law” data processing. |
| Insolvent Employers | Separation benefits may not be available. SSS still pursues the employer; employees avoid liability unless they later claim benefits. |
| Company Policy | Employer’s internal clearance procedure ≠ SSS compliance. You can’t withhold EC-6 or delay remittance pending asset clearances. |
| Retrenchment vs. Just-Cause Dismissal | Deduction rules are identical. Separation-pay entitlement under Art. 299 vs. none under Art. 297 has no impact on SSS loan liability. |
9. Best-Practice Checklist for HR/Finance
- ☐ Integrate SSS SOA retrieval into off-boarding checklist.
- ☐ Cut final-pay payroll run early to meet 30-day remittance window.
- ☐ Use SSS PRN (Payment Reference Number) system to avoid posting delays.
- ☐ File EC-6 online; keep documentary proof for 10 years.
- ☐ Train payroll staff on Art. 113 legal-deduction hierarchy to fend off illegal-deduction complaints.
- ☐ Clearly disclose deduction to employee in Release & Quitclaim to reduce disputes.
10. Key Take-aways for Employees
- Track your loan in My.SSS so you know the exact balance before resigning.
- If possible, pre-pay remaining amortisations to maximise the cash you receive in your final pay.
- Retain a copy of your EC-6; you’ll need it if SSS later shows a balance.
- Don’t ignore residual balances—penalties grow at 1 % per month.
11. Frequently Asked Questions
| Question | Short Answer |
|---|---|
| Can an employee refuse the deduction? | No. It is mandated by law; consent is unnecessary. |
| Is the employer allowed to deduct more than the balance? | No. Over-deduction can be challenged under Art. 116 (non-payment of wages). |
| What if the employer misses the 30-day deadline? | SSS assesses interest & penalties against the employer, not the employee. |
| Does the rule apply to job contracting/sub-contracting? | Yes. The principal and contractor are solidarily liable under Art. 109 of the Labor Code. |
| How long can SSS sue the employer? | RA 11199’s penal actions prescribe in 20 years (§ 24), far longer than the usual 3-year labor money-claim prescriptive period. |
12. Conclusion
The deduction of an SSS salary-loan balance from an employee’s final pay is a statutory, non-negotiable obligation. Employers must be meticulous: verify the loan balance, deduct it correctly, remit on time, and file the required EC-6 certification. Non-compliance risks stiff monetary assessments and even jail time. Employees, on the other hand, should monitor their loan status to avoid unpleasant surprises and keep their social-security records clean.
This article is for general information only and is not a substitute for formal legal advice. For case-specific guidance, consult a qualified Philippine labor-law or social-security practitioner.