Running a business is often painted out to be easy-breezy, but, it is a mean undertaking, especially amid today’s ever evolving business landscape. Apart from rises in technology, even laws that function as the framework for ethical business operations change over time too. With that said, one aspect of the law that is germane to running a business in the Philippines is the labor laws, in particular, mandatory employee benefits.
You have to pour over your accounting books and assign benefits on top of the usual payroll services for your regular staff. Mandatory employee benefits are those that are required by the government to be paid to workers and / or their families. This may include retirement funds and healthcare funds, among others. These benefits work to safeguard employee welfare, especially during times of economic hardship. Below is a list of some of the employee benefits that the Philippine government requires all employers to shoulder.
1. Healthcare benefits
Healthcare benefits are part of the mandated benefits program in the Philippines. All employees must be registered to the Philippine Health Insurance Corporation (PhilHealth). A percentage of employee contributions is shouldered by the employer. In addition, PhilHealth provides discounts to employees to help cover the costs of hospitalization and illness.
2. Social Security benefits
Philippine Social Security System (SSS) contributions are also a mandatory employee benefit. The SSS can be seen as an overall benefit, as it covers illness, maternity costs and needs, retirement, disability, death, and pensions. The SSS contribution rates are fixed at 11% of monthly salary, not exceeding P 16,000. Employers are required to contribute 7.37% of the 11%, while employees cover only 3.63%.
3. Employee wages and compensation
The Philippine labor code provides that all regularized employees must be compensated for their work. Such compensation includes:
– Regular Wages:
– Workers tendering 40 hours of work per week are entitled to earn at least the daily minimum wage. The minimum wages may vary across regions.
– Overtime pay:
– Employees who render work beyond regular working or office hours are entitled to receive overtime pay, which, on regular working days, is the equivalent of the regular wage plus, at least, a 25% premium.
– Premium or Holiday pay:
– Premium pay is granted to employees who work on rest days and regular or special non-working holidays. The wage for these days is equivalent to at least 130% of the employee’s daily wage.
– Night shift differentials
– The NSD is a 10% of daily wage premium added on top of daily wage for each hour of work rendered between the hours of 10 p.m. and 6 a.m.
– 13th-month pay
– The 13th-month pay is given at the end of every year and is equivalent to the salary of one month out of the year. Do not conflate it with a Christmas bonus. (Notably, some employers split this with half given in June and the rest at year-end.)
– Separation pay
– Separation pay can be claimed by employees if their tenure with the company has ended under reasonable conditions. However, if the employee is terminated due to improper conduct, breach of contract, or illegal activity, they are automatically ineligible to receive this.
– Retirement pay
– Employees aged 60 to 65 and have served the company for 5 years or more will receive compensation upon reaching retirement age. The amount should equal to half a month’s salary for every year of service.
4. Home development mutual fund
The Pag-IBIG home development fund provides employees with calamity, housing, and multipurpose loan assistance. The contributions are P 100, and this is deducted from the employees’ salary every month.
A business may seem like a walk in the park. Who would not want to pursue their passion, take charge of their schedule, and run the show as they’d like? It may seem glamorous, but with that comes the responsibility of having to look out for all your staff and ensure that they are properly compensated.
This is no easy task and is just one of the many things you will have to consider when getting into your own business. You need to pour over your accounting books and do proper bookkeeping to make room for these benefits in your budget. But it should not be a herculean task. With the right team, mindset, and grit, you can make it happen!
If you need help computing the proper benefits for all your employees, give our team of CPAs a call. We offer free 30-minute consultations to ascertain you are paying the right amount. Remember, failure to pay the right benefits can result in a case with DOLE or the Department of Labor and Employment. Save yourself from the stress and hassle with the guidance of professionals.