Frequently Asked Questions About Payroll Services in the Philippines

To give you a better understanding of Payroll Services in the Philippines, we provide a list of frequently asked questions (FAQs) to address general inquiries about the service. 

Q: What kind of services do payroll service providers offer?

Generally, payroll service providers offer the following: 

• Collate data such as timesheets, employee databases, and other payroll instructions to obtain accurate gross salaries for employees
• Compute necessary withholding taxes on compensation and statutory deductions such as SSS, PhilHealth, and HDMF based on the latest government regulations
• Finalize payroll computation including bank filed for salary disbursement and sending of individual payslips
• Monthly and annual submission of mandatory reports to appropriate government agencies on behalf of the client

Q: How can payroll service providers assist my company?

Payroll service providers can help simplify your payroll procedures and ensure that your company complies with the necessary requirements from corresponding government agencies.

Q: What kind of documents do I need to provide when availing of payroll services in the Philippines?

Payroll service providers will require you to submit the following to assist you properly:

• Employee details and a copy of the Contract of Employment for each employee
• BIR Form 2316 from the previous employer
• Monthly timesheet details, including the number of hours worked, overtime hours, tardiness, and absences
• Payroll register from January to present (if engaged in the middle of the year)

Q: How long is the turnover time for payroll processing services?

After the client submits all required documents for computation, payroll processing in the Philippines usually takes 3-6 business days.

Q: What benefits are employees entitled to under Philippine laws?

Under the Philippine Labor Code, employers are mandated to provide the following benefits to their employees: 

• 13th Month Pay
• Overtime, Holiday, Rest day, and Night Differential Pay
• Paid Leave Incentives (minimum of 5 days for every year of service)
• Weekly Rest Day (Minimum of 24 hours)
• Maternity, Paternity Leave, and Parental Leave
• SSS, Pag-Ibig, and Philhealth Contributions

Q: What is 13th Month Pay?

A 13th month pay is a form of additional compensation or bonus given to employees by employers as mandated by Philippine laws. Depending on the setup of your company, your 13th month pay may be disbursed at the end of the year (on or before December 24) or on a quarterly basis.

Q: Who is entitled to 13th Month Pay?

Rank-and-file employees are entitled to receive a 13th month pay as mandated by Philippine laws. However, employees must work at least one month for the company to be eligible for 13th month pay.

Q: Is 13th Month Pay Taxable?

13th Month pay is exempt from tax up to a maximum of ₱90,000. Amount in excess will be subject to withholding tax on compensation.

Q: What is Holiday Pay?

Holiday pay is a form of compensation an employer offers its employees when requiring them to render work during regular, special, and special non-working holidays.

Q: Who is entitled to Holiday Pay?

In general, all employees who work on regular workdays are entitled to receive holiday pay as mandated by Philippine laws. However, there are several employees who are exempted from receiving holiday pay benefits, such as:

• Employees for retail and service companies with less than ten (10) regular employees
• Managerial employees
• Managerial staff members and officers
• Government employees
• Domestic helpers
• Employees engaged on task, contract, or purely commission basis

Employees covered under the holiday pay rule should receive at least 100% of their salary, regardless if they reported to work or not. 

Q: What are the pros and cons of outsourced payroll compared to in-house payroll?

When compared to in-house payroll, outsourced payroll is more cost-effective. It raises the bar for business continuity while providing highly-trained payroll professionals to take charge of a company’s payroll needs.