PAYROLL DEDUCTIONS

• An employee’s gross earnings are not what he or she takes home. The take-home pay of an employee
is his or her gross earnings less certain payroll deductions. In short, he or she takes home less than his or
her gross earnings.

• An employee generally does not receive his or her gross earnings intact every payday. There are
certain deductions from gross earnings to arrive at or compute for an employee’s net pay or take-home
pay. These deductions may include, among others, the following:

1. Employee’s SSS contribution for private employees

2. Employee’s GSIS contribution for government employees
3. PhilHealth contribution for all employees
4. WithHolding taxes for all employees
5. Salary advances or temporary vales (IOU’s)
6. Union dues

Rate Contributions to SSS

• All employees of private enterprises are covered by the Social Security Service. Self-employed
individuals can also become members. The monthly contributions are based on the compensation of
members. The current SSS contributions rate is 11% of the monthly salary credit not exceeding
₱16,000.00 and this is being shared by the employer (7.37%) and the employee (3.36%).

• Self-employed and voluntary members pay the 11% of the monthly salary credit (MSC) based on the
monthly earnings declared at the time of registration. For OFW’s, the minimum monthly salary credit is
pegged at ₱500.00. For the non-working spouse, the contribution will be based on 50% of the working
spouses last posted monthly salary credit but in no case shall it be lower than ₱1,000.00.

Rate of Contribution to PhilHealth

• All employees, whether of private entities or government entities, are to be members of PhilHealth.
This is basically intended to cover them and their beneficiaries help in time of sickness.

Salary Salary Base Total MO. Employee Employer

Premium
1. 8,999.99** 8,000.00 200.00 100.00 100.00
and below
2. 9,000.00 – 9,000.00 225.00 112.50 112.50
9,999.99
3. 10,000.00 0 10,000.00 250.00 125.00 125.00
10,999.99

Rate of Contributions to GSIS

• All government employees holding permanent and non-permanent positions are members of the GSIS.
Premium contributions are based on monthly compensation.
There are two types of insurance coverage.

1. Regular – refers to compulsory premium payments on life insurance and retirement benefits.
2. Employees Compensation Fund – refers to premium paid by your government agency so you get
full coverage in case of a work-related accident.

Rate of premium contributions are as follows:

Type of insurance Personal Share Personal Share Government Government

coverage Share Share
Life Retirement Life Retirement
Regular 2% 7% 2% 10%
Employees none 0% none 1% not to exceed
Compensation Fund ₱100

Withholding Taxes

• Withholding tax on compensation is the tax withheld from income payments to individuals arising
from an employer-employee relationship. Withholding tax table is also available from BIR and in the
internet.

How to Compute Your Philippine BIR Withholding Tax

 To be able to compute your BIR Withholding Tax for the month, the following information is
needed. You may want to check out your payslips for the other information.
• Your BIR Tax Status (Single/Married)
• Do you have any dependents and how many?
• How much is your SSS/PhilHealth and PagIBig contributions?
• Allowances and other benefits (if any)
• Copy of the latest BIR Withholding Tax Table

Let us assume the following

• Basic Salary ₱15,000.00

• Status: Single (No dependent)
• Overtime Pay: ₱2,500.00
• Late/Undertime deduction: ₱500.00
• SSS Contribution: ₱500.00
• PhilHealth Contributions: ₱250.00
• PagIbig Contributions: ₱100.00
•
 To get your taxable income, add the following: basic salary and overtime pay then deduct the
late/undertime deduction, SSS, PhilHealth, and PagIbig Contributions.

Your taxable income for the month is ₱16,150

The would be the result of ₱15,000 + ₱2,500 - ₱500 - ₱500 - ₱250 - ₱100

 Your tax will be computed based on your taxable income. The tax can be computed with the
help of the BIR Withholding Tax Table.
  Using the BIR Withholding Tax Table, look for the nearest amount to your taxable income which
is ₱16,150. Look under the monthly category.

MONTHLY 1 2 3 4 5 6 7 8
Exemption 0.00 0.00 41.67 208.33 708.3 1.875.00 4.166.67 10.416.67
Status +0% over +5% over +10% over +15% over +20 over +25% over +30% over +32% over

1. Z 0.0 1 0 833 2,500 5,833 16,667 20,833 41,667

2. S/ME 50.0 1 4.167 5.000 6.667 10.000 15.833 25.000 45.833

1. ME1/S1 75.0 1 6,250 7,083 8,750 12,083 17,917 27,083 27,917

2. ME2/S2 100.0 1 8,333 9,167 10,833 12,167 20,000 29,167 50,000
3. ME3/S3 125.0 1 10,417 11,250 12,917 16,250 22,083 31,250 52,083
4. ME4/S4 150.0 1 12,500 13,333 15,000 18,333 24,167 33,333 54,167

 In this case, the nearest value is the ₱15,833. Take note of the tax rates above and the amount
about it. Now, we got three important factors in computing your BIR Withholding Tax Table:
₱15,833, ₱1,875 and lastly the +25% over.
 The tax computation would be:
₱16,150.00 (Taxable Income) - ₱15,833.00 (Tax Base) = ₱317.00
₱317.00 × 25% = ₱79.25
₱79.25 + ₱1,875.00 = ₱1,954.25 your BIR Withholding Tax for the month

Pag-Ibig Fund Contributions

• The Home Development Mutual Fund (HDMF), more popularly known as the Pag-Ibig Fund, was
established to provide a national savings program and affordable shelter financing for the Filipino
workers. The fund offers its members short-term loans and access to housing programs. It is
mandatory for all SSS and GSIS-covered employees; uniformed members of AFP, BFP, BJMP, and PNP;
as well as Filipinos employed by foreign-based employers. With the signing of Republic Act. No. 9679,
membership to the Fund shall be mandatory for the following.

a) All employees, workers, professionals, officers, and companies who are compulsorily covered by
the SSS and GSIS;
b) Uniformed members of the Armed Forces of the Philippines, the Bureau of Fire Protection, the
Bureau of Jail Management and Penology, and the Philippine National Police;
c) Overseas Filipino Workers (OFW’s); and
d) Filipinos employed by foreign-based employers, whether deployed locally or abroad.

The monthly contribution is shown below:

The Percentage of Monthly Compensation

Monthly Compensation Employee Share Employer Share

₱1,500 and below 1% 2%

Over ₱1,500 2% 2%
Therefore, a person who earns ₱12,000.00 per month will contribute 2% of such salary of ₱240.00 to the
Pag-Ibig Fund.

How to Compute for Net Pay

To compute for NET PAY:

Net Pay = Gross Earning – Deductions

Example: Joy receives a basic pay of ₱8,500.00 a month and a 1% commission on her sales. She sold
₱65,000.00 for the month. Her deductions are: 4% for SSS based on her basic monthly pay; ₱100.00 for
PhilHealth; Pag-Ibig 2% and 10% Withholding Tax based on gross earnings. Compute for her net pay.

Solution: Step one. Compute for her gross earnings.

Gross earnings = Monthly pay = Commission

= ₱8,500 +1% (65,000)

= ₱8,500 + ₱650

= ₱9,150

Step two. Compute for her deductions.

SSS = 4% × Basic monthly pay

= 4% (₱8,500) = ₱340

PhilHealth = ₱100 (given)

Pag-Ibig = 2% × ₱9,150 = ₱183

Withholding Tax = 10% × Gross earnings

=10% × ₱9,150 = ₱915

Step three. Compute for her net pay.

Net Pay = Gross earnings – Deductions

= ₱9,150 – (SSS + Medicare + WTax)

= ₱9,150 – (₱340 + ₱100 + ₱183 +₱915)

= ₱9,150 - ₱ 1,538

=₱7,612

There are tables available to facilitate computation of SSS contributions, GSIS contributions, PhilHealth
contributions, and Withholding Taxes as shown in our previous discussions and which are with
appendices of this book. Withholding taxes are based not only on gross earnings of employees but also
on their civil status (single, married, head of the family) as well. SSS, GSIS, and Medicare contributions
are based on salary brackets of employees.
Salary Graph

We can graphically present details of a person’s gross earnings. This is best shown using a pie graph.
We simply have to compute the corresponding percent of the deductions and the net pay with the gross
earnings representing 100%. For our example above regarding Joy’s earnings, les us summarize the data:

Gross earnings ₱9,150 (100%)

SSS ₱340 (4%)

PhilHealth ₱100 (1%)

Pag-Ibig ₱183 (2%)

Withholding Tax ₱ 915 (10%) (1.538)(17%)

Net pay/ earnings ₱7,612 (83%)

Sales

PhilHealth
Pag-ibig
Wtax
Net Pay
  PHILHEALTH

Premium Contribution Table

Salary Total Monthly Employee Employer

Salary Bracket Salary Range
Base Premium Share* Share

*Employee share represents half of the total monthly premium

while the other half is shouldered by the employer.

**For Kasambahay helper receiving a wage of less than Five Thousand Pesos (P5,000.00) per month,
the employer will shoulder both the employee and employer share based on the premium schedule.

8,999.99** and
1 8,000.00 200.00 100.00 100.00
below

2 9,000.00 - 9,999.99 9,000.00 225.00 112.50 112.50

10,000.00 -
3 10,000.00 250.00 125.00 125.00
10,999.99

11,000.00 -
4 11,000.00 275.00 137.50 137.50
11,999.99

12,000.00 -
5 12,000.00 300.00 150.00 150.00
12,999.99

13,000.00 -
6 13,000.00 325.00 162.50 162.50
13,999.99

14,000.00 -
7 14,000.00 350.00 175.00 175.00
14,999.99

15,000.00 -
8 15,000.00 375.00 187.50 187.50
15,999.99

16,000.00 -
9 16,000.00 400.00 200.00 200.00
16,999.99

17,000.00 -
10 17,000.00 425.00 212.50 212.50
17,999.99

18,000.00 -
11 18,000.00 450.00 225.00 225.00
18,999.99
 Salary Total Monthly Employee Employer
Salary Bracket Salary Range
Base Premium Share* Share

19,000.00 -
12 19,000.00 475.00 237.50 237.50
19,999.99

20,000.00 -
13 20,000.00 500.00 250.00 250.00
20,999.99

21,000.00 -
14 21,000.00 525.00 262.50 262.50
21,999.99

22,000.00 -
15 22,000.00 550.00 275.00 275.00
22,999.99

23,000.00 -
16 23,000.00 575.00 287.50 287.50
23,999.99

24,000.00 -
17 24,000.00 600.00 300.00 300.00
24,999.99

25,000.00 -
18 25,000.00 625.00 312.50 312.50
25,999.99

26,000.00 -
19 26,000.00 650.00 325.00 325.00
26,999.99

27,000.00 -
20 27,000.00 675.00 337.50 337.50
27,999.99

28,000.00 -
21 28,000.00 700.00 350.00 350.00
28,999.99

29,000.00 -
22 29,000.00 725.00 362.50 362.50
29,999.99

30,000.00 -
23 30,000.00 750.00 375.00 375.00
30,999.99

31,000.00 -
24 31,000.00 775.00 387.50 387.50
31,999.99

32,000.00 -
25 32,000.00 800.00 400.00 400.00
32,999.99

26 33,000.00 - 33,000.00 825.00 412.50 412.50

 Salary Total Monthly Employee Employer
Salary Bracket Salary Range
Base Premium Share* Share

33,999.99

34,000.00 -
27 34,000.00 850.00 425.00 425.00
34,999.99

28 35,000.00 and up 35,000.00 875.00 437.50 437.50

 TAX