Payroll in the Philippines: Employer costs, taxes & more in 2026

Payroll in the Philippines runs on a semi-monthly cycle, and employers withhold income tax plus contributions for the Social Security System (SSS), PhilHealth, and Pag-IBIG before remitting each to the right agency. On top of base salary, you also handle minimum wage rules, overtime, and a mandatory 13th-month bonus. Getting all of this right is what keeps you compliant.

If you hire in the Philippines without a local entity, a workforce management platform can run payroll on your behalf. Payoneer Workforce Management runs compliant peso payroll, withholds statutory deductions and taxes, and files with each agency. 

Book a demo today to learn how we can support you with employee onboarding, payroll in the Philippines, and more.

How does payroll work in the Philippines?

Payroll in the Philippines must run at least twice a month. Most employers pay on the 15th and the last working day. On top of base pay, you handle minimum wage rules, overtime, and the mandatory 13th-month bonus.

Payroll cycle

The Labor Code of the Philippines requires that salaries be paid in legal tender, that payments fall no more than 16 days apart, and that the employer may choose which days to run payroll as long as that interval holds.

2026 Minimum wage 

The current minimum wage in the Philippines is set regionally, based on the employer’s location rather than the employee’s, and it varies by region and type of work. 

Cost of living allowance (COLA)

Employees receiving the legal minimum wage are also entitled to a cost-of-living allowance (COLA), which helps lower-wage workers offset living expenses such as food, housing, and clothing. COLA amounts are based on economic conditions and the Consumer Price Index (CPI).

Overtime pay

Employers must pay overtime to workers asked to exceed eight hours a day. Overtime is calculated at 125% of the daily wage on a normal working day, 130% on rest days, and 200% on holidays, as set by the Labor Code.

13th-month pay

All employees are entitled to 13th-month pay, whether full-time or still on probation. It equals one-twelfth of the basic annual salary and must be paid on or before December 24 each year, under Presidential Decree 851, which is administered by the Department of Labor and Employment (DOLE).

Sick pay

Employers are not legally required to offer paid sick leave. If an employee is ill, they draw on their Service Incentive Leave (SIL), which is five days after one year of service. 

Philippine law is strict on payroll cycles but lighter on sick pay. However, most employers still offer 12 to 15 days of sick leave to protect the wider team’s health. Our leave policy guide for the Philippines covers maternity, paternity, and statutory leave in full.

Maternity pay

New mothers can take up to 105 days of paid maternity leave, with the option to extend by 30 unpaid days and an additional 15 days for solo parents. This is initially paid for by the employer, who can then claim reimbursement from the Social Security System (SSS).

Eligibility for maternity pay is based on sufficient SSS contributions, not tenure with the employer. There is no legal requirement for one year of service or continuous employment to qualify.

Severance pay

An employee’s contract cannot be terminated without just or authorized cause, and severance is mandatory in certain cases. Under Article 298 of the Labor Code (formerly Article 283), employees let go due to redundancy or the installation of labor-saving devices are entitled to at least one month’s pay, or one month’s pay for every year of service, whichever is higher.

What payroll deductions and taxes apply in the Philippines?

Employers withhold income tax and three statutory contributions from each payroll run: SSS, PhilHealth, and Pag-IBIG. You also pay an employer share of each contribution. The table below shows the split, and the sections that follow give the details and the remittance deadlines.

Income tax

Income tax depends on salary and can vary by nationality and residency. Non-resident aliens are taxed at a flat 25% on Philippine-source income. Resident aliens and Filipino employees follow the same graduated brackets, set by the Bureau of Internal Revenue (BIR):

Social Security System (SSS)

The SSS fund pays out to help cover an employee’s parental leave and pension. It can also be used to support workers in the event of sickness or disability, or a worker’s family in the unlikely event of a work-related death.

SSS contributions are based on salary brackets; the combined rate is approximately 15%, with employer contributions capped at PHP 3,530 and employee contributions capped at PHP 1,750 per month.

Philippine Health Insurance Corporation (PhilHealth)

PhilHealth is the health insurance system of the Philippines. Employers and employees split a total contribution of 5% of the employee’s wage.

If an employee earns less than PHP 10,000 ($178) per month, they must make payments as if they were earning PHP 10,000 per month. If an employee earns more than PHP 100,000 ($1,775) per month, they must only make payments as if their monthly wage were PHP 100,000.

Home Development Mutual Fund (Pag-IBIG)

The Home Development Mutual Fund, also known as Pag-IBIG, is a government-guaranteed savings fund to help employees finance new homes. Employers contribute 2% of a worker’s wage, while employees contribute 1% on salaries lower than PHP 1,500 ($27) per month and 2% on salaries over this amount. 

What does payroll cost an employer in the Philippines?

Beyond gross salary, budget for employer contributions to SSS, PhilHealth, and Pag-IBIG, which together add a few thousand pesos per employee each month. The example below shows a worker earning PHP 50,000 a month, with employer cost on one side and employee take-home pay on the other.

How do you stay compliant with payroll in the Philippines?

Staying compliant means paying on the legal cycle, withholding and remitting the right contributions and taxes on time, and keeping pace with changing rates, since the SSS, PhilHealth, and Pag-IBIG figures have all moved in recent years. 

In practice, that comes down to four habits.

1. Keep up to date with tax law changes, labor laws, and statutory requirements.
2. Conduct occasional payroll audits to identify and resolve errors promptly.
3. Provide ongoing payroll training to staff.
4. Or, use a global workforce management platform that supports payroll (like Payoneer Workforce Management) to help manage compliantly.

For the wider rules on contracts, working hours, and termination, see our employment laws guide for the Philippines.

How do you pay employees in the Philippines?

You can engage and pay employees in the Philippines through three main channels: your own local entity, independent contractors, or a workforce management platform. Each differs in setup effort, cost, and how much compliance work sits with you, and most companies paying a team without a local entity use the third route.

1. Via a local legal entity: Your organization registers and opens an office in the Philippines. It’s not possible to hire local workers (Filipino or non-Filipino) without a local legal entity, but this can be a time-consuming and expensive process for international businesses.  
2. Hire contractors: You don’t necessarily need to have a local legal entity to hire and pay contract workers. There are still numerous labor laws to comply with, and misclassifying employees as contractors can result in severe penalties.
3. By partnering with a workforce management platform: A workforce management platform is a third-party organization that helps hire and pay employees in countries across the world, even if your business is based elsewhere. Managing payroll compliance is essential, and a platform like Payoneer Workforce Management can support with the responsibility of setting up onboarding, contracts, and running payroll for a global team.

For more on the route, see how to hire in the Philippines without a local entity.

How can Payoneer Workforce Management help with payroll in the Philippines?

Payoneer Workforce Management helps businesses engage, manage, and pay talent across 160+ countries. Whether you hire full-time employees or independent contractors, the platform helps you to:

• Run global payroll in 70+ currencies, including Philippine pesos
• Withhold and remit SSS, PhilHealth, Pag-IBIG, and income tax
• Manage benefits, contracts, compliance, and documentation in one place

Workforce management platform services start at $199 per employee per month, with final pricing depending on headcount and contract structure. 

Pay your Philippine team with Payoneer Workforce Management. Book a demo today for support with compliant hiring, payroll, contributions, and benefits in the Philippines.