Payroll and Taxation in the Philippines: A Guide for International Employers
- Danhilson O. Vivo, CPA, REB, REA
- Feb 11
- 4 min read
Updated: Feb 13
As remote work expands worldwide, more employers are turning to the Philippines for talent. With its large English-speaking workforce and strong cultural ties to Western countries, the Philippines is an appealing choice for international businesses.
For foreign employers hiring remote workers in the Philippines, understanding payroll and taxation is essential. It helps ensure compliance with local laws while also building strong relationships with Filipino employees. This guide offers key insights into the country’s payroll system and tax regulations.
Essential Elements of a Payroll System in the Philippines
Managing payroll is a key responsibility when hiring Filipino remote workers. The payroll system in the Philippines follows a structured framework to ensure accurate salary computation and distribution, in compliance with regulations set by the Department of Labor and Employment (DOLE) and the Bureau of Internal Revenue (BIR).
A standard payroll system in the Philippines includes:
Gross Pay – Total salary before any deductions.
Net Pay – Final amount received by employees after deductions.
Withholding Tax – Income tax deducted based on a progressive tax rate.
Mandatory Contributions – Payments to government agencies like the Social Security System (SSS), PhilHealth, and Pag-IBIG Fund.
Deductions – Additional withholdings such as loan payments, insurance, and voluntary contributions.
Filipino employees are usually paid twice a month, either on the 15th and 30th/31st or through a bi-weekly schedule, such as every other Friday.
No matter the chosen payroll cycle, it's essential to inform your remote staff about payment dates and notify them of any schedule changes in advance.
Tax Responsibilities for Foreign Employers in the Philippines
Withholding and Remitting Income Tax for Filipino Employees
The taxation of Filipino workers follows the Tax Reform for Acceleration and Inclusion (TRAIN) Law, which introduced major reforms to the Philippine tax system. As of 2025, individual income tax rates are structured as follows:
Income tax rate | Salary range |
|---|---|
0% (exempt from income tax) | Below PHP 250,000 |
15% | Over PHP 250,000 to PHP 400,000 |
20% | Over PHP 400,000 to PHP 800,000 |
25% | Over PHP 800,000 to PHP 2 million |
30% | Over PHP 2 million to 8 million |
35% | Over PHP 8 million |
Taxable income is determined by subtracting allowable deductions, such as social security contributions and other benefits, from gross compensation. Minimum wage earners are exempt from income tax on their basic pay, as well as certain additional earnings like holiday pay and overtime. Under the TRAIN Law, the tax-exempt threshold for benefits, including 13th-month pay, has been raised to PHP 90,000.
Required Employee Benefits
Employers in the Philippines must provide certain mandatory contributions for remote workers to comply with local labor regulations. These include:
Mandatory Employee Benefits | Details | Employer Contribution | Employee Contribution |
SSS | Provides benefits for sickness, maternity leave, disability, retirement, and death. | 10% (of the applicable monthly salary credit base amount) | 5% (of the applicable monthly salary credit base amount) |
PhilHealth | Provides healthcare insurance and risk protection against high medical costs. The salary bracket for Philhealth contribution is between PHP10,000 – PHP100,000. This means the minimum monthly contribution is PHP500 and the maximum is PHP5,000. | 2.5% | 2.5% |
Pag-IBIG | Access to government-backed housing benefits, loans, and programs. | 2.0% | 1.0% (salary at or below PHP1,500) 2.0% (salary above PHP1,500) |
RecruitGo streamlines payroll management for remote workers by ensuring precise calculations of employee benefit contributions and compliance with Philippine labor regulations. We also assist in wage computation, statutory deductions, and prompt salary disbursement for your remote team in the Philippines.
Payroll Compliance & Reporting Obligations
Monthly Payroll Reporting
Ensuring payroll compliance in the Philippines is essential for international employers. Non-compliance with wage regulations can lead to fines of at least PHP 5,000 per employee, along with reputational risks and possible legal action.
Employers must remit SSS, PhilHealth, and Pag-IBIG contributions by the 15th of each month, while withholding tax payments, including BIR Form 1601-C, are due by the 10th.
Annual Reporting & Filing Deadlines
Foreign employers with remote employees in the Philippines must also submit annual reports, including:
BIR Form 2316 – Employee annual tax declaration (due by January 31)
BIR Form 1702 – Corporate income tax return (due by April 15)
Failure to file payroll reports on time can result in fines and penalties from government agencies.
Common Challenges in Payroll Management
Effective payroll management is crucial for employee satisfaction and compliance with local labor laws. However, handling payroll for remote workers, especially as a foreign employer, can be complex if you're unfamiliar with local regulations. Here are some common challenges to watch out for:
Complex Tax and Contribution System – Managing contributions to SSS, PhilHealth, and Pag-IBIG can be overwhelming, especially for large remote teams in the Philippines. With one of the most complex payroll systems in Southeast Asia, a strong understanding of local payroll regulations is necessary.
Strict Compliance Deadlines – As an international employer, you must accurately calculate and remit contributions to SSS, PhilHealth, and Pag-IBIG by the 10th to 15th of the following month to avoid penalties.
Regional Variations in Minimum Wage – Minimum wage rates differ by region. For example, Manila's minimum wage is PHP 610 per day, while in Davao, it ranges from PHP 476 to PHP 481.
Frequent Law Changes – Updates in tax rates and labor laws can affect payroll calculations. Keeping track of these changes is essential to avoid non-compliance and penalties. For example, SSS contributions increased from 14% to 15% starting in January 2025, and there are ongoing discussions about raising the minimum wage. Missing such changes could lead to payroll errors and accountability.
To overcome these challenges, you can collaborate with local experts like RecruitGo, who can handle payroll and other employee-related tasks for you.
Streamline Payroll in the Philippines with RecruitGo
RecruitGo provides complete solutions for foreign employers overseeing payroll and taxation for remote workers in the Philippines. As an Employer of Record (EOR), we can assist with employment management, precise wage calculations, and staff administration, all in compliance with the Labor Code of the Philippines.
Connect with our local experts to discuss your remote team in the Philippines, and let us know how we can assist. Simply fill out the form below, and one of our specialists will reach out to you!
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