Voluntary Termination of SSS, PhilHealth, and Pag-IBIG Coverage Before an Employee’s Last Working Day in the Philippines (A Philippine legal primer for HR managers, departing workers, and counsel)
Executive Summary
In Philippine labor practice an employee may ask that statutory deductions to the Social Security System (SSS), PhilHealth, and the Home Development Mutual Fund (Pag-IBIG) stop before his or her last working day—e.g., to maximize take-home pay during a resignation notice period. While employers often comply informally, the governing statutes and implementing rules reveal that:
- Membership itself cannot be “terminated” on demand; it is permanent or at least continuing beyond the employment relationship.
- The obligation to pay premiums is tied to compensation actually earned up to the final day of service. An early cut-off exposes the employer to surcharges, interest, and criminal penalties.
- Post-employment, a worker may (and in some cases must) re-classify as a voluntary, self-employed, or Overseas Filipino Worker (OFW) member—but not expunge the account.
- Refund or withdrawal of regular contributions is never available merely because of resignation. The law reserves withdrawals for retirement, permanent disability, critical illness, death, or Pag-IBIG housing-linked events.
What follows is an exhaustive, statute-based discussion of the rules, compliance mechanics, and frequently-asked questions.
I. Statutory Foundations
| Scheme | Principal Law | Key Implementing Issuances |
|---|---|---|
| SSS | Republic Act No. 8282 (1997 Social Security Law, as amended) | SSS Circular No. 2013-010 (2013 R-3 Guidelines); SSS Circular No. 2019-012 (Electronic Collection) |
| PhilHealth | R.A. 7875 (National Health Insurance Act) as amended by R.A. 10606 & the Universal Health Care Act (R.A. 11223) | PhilHealth Circular No. 2020-005 (Premium Contribution Schedule); PhilHealth Circular No. 2020-037 (Employer Remittance Extension) |
| Pag-IBIG | R.A. 9679 (Home Development Mutual Fund Law of 2009) | HDMF Circular No. 432 (2014 Rules on Membership); HDMF Circular No. 450 (2019 Electronic Collection & Reporting) |
II. Social Security System (SSS)
A. Irrevocability of Coverage
Compulsory Membership Sec. 9-A, R.A. 8282 makes membership compulsory for all private-sector employees under 60 years old earning at least ₱1,000/month. The account—identified by the SSS number—never lapses even after resignation or migration.
Separation From Employment vs. Termination of Coverage Sec. 18 states that separation “shall not bar” entitlement to benefits, provided the contribution requirement for a given contingency is met. There is no statutory mechanism to cancel membership voluntarily.
B. When Do Payroll Contributions Cease?
Rule: SSS premiums are “due and demandable” on the first day of the calendar month following the applicable month (SSS Circular 2019-012). They must cover all compensation up to the employee’s actual last working day.
Illustration – An employee resigns effective 15 June but asks HR to stop SSS deductions on the May payroll:
- Legally impermissible. Wages earned from 1–15 June are still “compensation” under Sec. 8(e) and attract mandatory SSS contributions.
C. Post-Employment Options
| Scenario | Action by Member | Remarks |
|---|---|---|
| Joins another local employer | Notify new employer of SSS number | Contributions switch back to “employed” classification. |
| Becomes self-employed/freelancer | File SS Form RS-1 (Self-Employed Data Record) | Member chooses monthly salary credit (MSC) and pays quarterly. |
| Leaves the country as OFW | File SS Form OW-1; pay OFW schedule rates | Coverage becomes portable worldwide. |
D. Refunds and Benefit Qualification
- No refund of contributions on resignation – Sec. 14 limits refunds to erroneous payments only.
- Qualification for contingencies – Example, sickness benefit requires 3 of last 12 months posted; unemployment benefit (R.A. 11199) requires 36 months total, 12 in the last 18.
III. PhilHealth
A. Coverage Under the Universal Health Care (UHC) Act
UHC shifted PhilHealth from an insurance membership model to a population-based approach. Every Filipino is automatically covered, though contribution payment remains mandatory for those with capacity to pay (Sec. 4, R.A. 11223).
B. Employer Contribution Cut-off
- Legal Basis: Sec. 15(b), R.A. 7875 imposes on employers the duty to remit “on behalf of all employees” the contributions corresponding to their “actual basic monthly salary.”
- Effect of Early Cessation: Failure or under-remittance triggers a 3% per month interest plus a 3% surcharge (PhilHealth Circular 32-2010), plus criminal liability under Sec. 44, R.A. 11223.
C. Continuity of Benefits After Resignation
Even if the resigned worker stops paying, PhilHealth’s “benefit portability” rule (Sec. 20, Implementing Rules) allows availment for a grace period (previously three months; extended under various pandemic circulars). Under UHC, availment is now largely delinked from contribution status, but unpaid premiums accrue and may be collected later.
D. Changing Category
| From | To | Form / Online Menu |
|---|---|---|
| Employed | Individually-Paying / Self-Employed | PhilHealth Member Registration Form (PMRF) – tick “Updating” |
| Employed | OFW | PMRF or online POEA e-registration |
| Employed | Sponsored (LGU indigent) | Requires proof of sponsorship; premiums subsidized |
IV. Pag-IBIG Fund (HDMF)
A. Nature of Membership and Savings
Dual Character: Every member holds (a) Mandatory Regular Savings (MRS) and (b) an equity share in the Fund (Sec. 4, R.A. 9679).
Non-withdrawable on Resignation: The employee cannot “terminate” membership to encash savings; Sec. 10 permits early withdrawal only upon:
- Retirement (age 60 or 15 years of service);
- Permanent total disability or insanity;
- Separation due to health risk as certified by DOLE;
- Death (paid to heirs);
- Critical illness of member or immediate family;
- Permanent departure from the country.
B. Employer’s Final Obligations
Pag-IBIG contributions equal 2% employee + 2% employer of monthly compensation, capped at ₱5,000. They are due on the 10th day of the following month (or next working day). Non-remittance incurs HDMF penalty of 1/10 of 1% per day and criminal sanctions (Sec. 24, R.A. 9679).
C. Continuing/Voluntary Savings Options
After separation the member may:
- Continue MRS by enrolling as “voluntary member” through the Virtual Pag-IBIG portal;
- Open an MP2 account (five-year voluntary savings earning higher dividends) while abroad or self-employed.
V. Employer Compliance Workflow
| Step | Responsible | Statutory / Documentary Reference |
|---|---|---|
| 1. Compute final pay including last-day wages, overtime, unused leave | HR & Payroll | Art. 102, Labor Code |
| 2. Apply statutory deductions (SSS, PhilHealth, Pag-IBIG, BIR) up to last actual working day | Payroll | SSS R-3 File; PhilHealth RF-1; Pag-IBIG Monthly Remittance File |
| 3. Generate electronic collection lists and pay within statutory deadline | Accounting | SSS Circular 2019-012; PhilHealth Circular 2020-005; HDMF Circular 450 |
| 4. Issue Certificate of Employment & Contribution summaries | Employer | DOLE Labor Advisory 06-20 |
| 5. Provide the employee with instructions and forms for voluntary continuation | HR | SSS RS-1 / OW-1; PMRF; Virtual Pag-IBIG Guide |
VI. Common Questions
“Can the employee sign a waiver so we stop deductions early?”
No. Statutory contributions are matters of public policy; waivers are void under Art. 6, Civil Code and Art. 1704, Labor Code.
“What if the employee has no more payable salary because he is on leave without pay?”
The obligation to withhold ends when there is no compensation base, but the employee remains covered. He may pay as a voluntary member to avoid contribution gaps.
“May we refund SSS or Pag-IBIG deductions if the resignation is effective mid-month?”
Not legally. Once deducted, they must be remitted. Erroneous over-deductions may be applied as employer credit in the next cycle but should not be handed back to the employee.
“Does PhilHealth still cover the resigned worker next month if he hasn’t paid?”
Yes, under UHC benefits are immediately available, but the unpaid premium is a collectible obligation that may be deducted from future benefits or enforced by PhilHealth.
“How long should HR keep the contribution records?”
At least 10 years for SSS (Sec. 24, R.A. 8282), 5 years for Pag-IBIG (HDMF Circular 432), and lifetime for PhilHealth electronic filings under the Data Privacy Act.
VII. Penalties for Non-Compliance
| Agency | Monetary Penalty | Criminal Liability |
|---|---|---|
| SSS | 2% per month of unpaid contribution (Sec. 22(a)) | Fine ₱5,000–₱20,000 and/or imprisonment 6 yrs 1 day–12 yrs |
| PhilHealth | 3% per month interest + 3% surcharge (Sec. 44, R.A. 11223) | Fine ₱20,000–₱50,000 and/or imprisonment 6 mos–1 yr |
| Pag-IBIG | 0.1% per day penalty (Sec. 22, R.A. 9679) | Fine ₱10,000–₱20,000 and/or imprisonment 6 yrs 1 day–12 yrs |
VIII. Key Take-Aways
- No Philippine law permits an employee to terminate SSS, PhilHealth, or Pag-IBIG membership at will.
- Payroll deductions must run until the actual final day worked; any shortcut invites penalties.
- After separation, a worker’s route is not termination but conversion to voluntary, self-employed, or OFW status.
- Refund of regular contributions is unavailable except on statutory grounds like retirement or permanent disability.
- HR should build an off-boarding checklist that includes final remittances, issuance of contribution certificates, and employee orientation on voluntary continuation.
Disclaimer
This article is for general informational and educational purposes only and does not constitute legal advice. Consult qualified Philippine counsel or the respective agencies for formal opinions on specific situations.