INCOME TAX WITHHELD

Employers are required under Bureau of Internal Revenue (BIR) Regulations to

make deductions from each employee’s earnings for income taxes. The amount which
the employer is required to withhold depends on the total number of exemptions which
the employee claims, the employee’s earnings and the frequency of the payroll period.
Upon being hired, the employee fills out BIR Form 2305 (Certificate of Update of
Exemption and of Employer’s and Employee’s Information – see appendix for a
sample) to indicate the number of exemptions claimed. A new form is filed when there
is a change in the number of exemptions.

SOCIAL SECURITY SYSTEM LAW

The law provides that employers in a covered industry deduct and withhold from
the employee’s monthly salary, wage, compensation, or earnings during the month in
accordance with the schedule of contributions (see appendix). The employer shall pay,
with respect to such covered employee, the employer’s contribution in accordance with
the same schedule. The Social Security Law specifically excludes employees in several
types of work, such as agricultural workers who are paid a regular wage or base pay,
and who do not work for an uninterrupted period of at least six months in a year,
domestic services with monthly earnings of less than P1,000 a month, government
employees, a variety of others.
The amount of employee’s and employer’s contribution is based on their monthly
earnings, that’s why such is deducted only from the last payroll for the month. In
determining the monthly SSS contributions, the following steps are taken:
1. Prepare an SSS contribution sheet
a. For weekly paid employees
Employee SSS Weekly Gross Gross SSS ECC** Total Total
no. Earnings earnings ER EE +
ER
1 st 2 nd 3 rd 4 th EE* ER* ER

*EE = EMPLOYEE; ER = EMPLOYER

** ECC – Employees Compensation Contribution (discussion on next section)

b. For monthly paid employees

Employee SSS Monthly Gross Gross SSS ECC Total Total
no. Earnings earnings ER EE +
1 half
st 2 half
nd EE ER ER ER

2. Compute the gross salary for the month for each worker or employee
a. For weekly paid employees, add the gross earnings for the inclusive
four or five weeks terminating nearest the end of the month
b. For monthly paid employees, add the gross earnings for the first half
and second half of the months payroll
3. Using the SSS table look for the appropriate salary bracket, pick up the
employee's and employer’s contribution, and post amount in the contribution
sheet.
4. Note that simultaneously, the employer’s contributions are also posted to
the contribution sheet
5. Total the contribution sheet
Employers are required to remit contributions to the nearest SSS branch or SSS-
accredited banks on or before the 10 day of the following month.
th
 THE NEW EMPLOYEES’ COMPENSATION CONTRIBUTION
The Labor Code of the Philippines provides for the promotion and development of a tax
exempt employees’ compensation program whereby employees and their dependents, in the
event of work-connected disability or death, may promptly secure adequate income
benefit, and medical or related benefits. The decree establishes a fund from compulsory
employers’ contributions for their employees’ compensation and state insurance. Coverage
is compulsory and automatic for all SSS- registered employers