AEC 45 - Regulatory Framework and Legal Issues in Business

BS in Accountancy - 3rd year | 1st Semester: SY 2022-2023

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SOCIAL SECURITY ACT OF 2018 (RA 11199) EMPLOYEE - Any person who performs
services for an employer in which either or both
mental or physical efforts are used and who
Social Security System (SSS) - a corporate
receives compensation for such services, where
body to function and operate as an independent
there is an employer-employee relationship,
and accountable government-owned and
provided that a self-employed person shall be
-controlled corporation (GOCC) mandated to
both employee and employer at the same time.
carry out the purposes of the Social Security Act
[Sec 8, (d)
Social Security Commission (the
As a general rule, the determination of the
Commission) - governing board and
existence or non-existence of an
policy-making body that directs and controls the
employer-employee relationship for the purpose
SSS.
of determining the coverage in the SSS shall be
within the sole jurisdiction of the Commission
Composition:
The Secretary of the Department of Finance as
DEPENDENTS - The dependents shall refer to
the ex-officio Chairperson;
the following:
ii. The President and CEO as the
i. The legal spouse entitled by law to receive
Vice-Chairperson. The SSS President
support from the member; (Sec 8, (e), (1))
and CEO shall automatically act as the
ii. The legitimate, legitimated or legally adopted
Chairperson of the Commission in the
and illegitimate child who is:
absence of the Secretary of Finance;
a) Unmarried,
ill. The Secretary of the Department of
b) Not gainfully employed, and
Labor and Employment (DOLE), as an
c) Has not reached twenty-one (21)
ex-officio Member, and;
years of age, or if over 21 years of age,
iv. Six (6) Appointive Members -
he/she is congenitally or while still a
a) Three (3) of whom shall
minor has been permanently
represent the workers' group, at
incapacitated and incapable of
least one (1) of whom shall be a
self-support, physically or mentally.
woman, and
d) A child who has entered in a
b) Three (3) representatives
common-law relationship and has not
from the employers' group, at
reached the age of eighteen (18) is still
least one (1) of whom shall be a
a dependent. However, upon reaching
woman.
the age of 18, the child is no longer
EMPLOYER - Any person, natural or juridical,
qualified as a dependent.
domestic or foreign, who carries on in the
ili. The parent who is receiving regular support
Philippines any trade, business, industry,
from the member.
undertaking, or activity of any kind and uses the
services of another person is under his/her
PRIMARY BENEFICIARIES
orders as regards the employment, except the
1. The dependent spouse until he or she
Philippine Government and any of its political
remarries;
subdivisions, branches or instrumentalities,
2. The dependent legitimate, legitimated or
including corporations owned or controlled by
legally adopted, and illegitimate children
Philippine Government, provided that a self
who are not yet 21 years of age.
employed person shall be both employee and
The dependent illegitimate children shall be
employer at the same time
entitled to 50% of the share of the legitimate,
legitimated or legally adopted children. However,
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BS in Accountancy - 3rd year | 1st Semester: SY 2022-2023
in the absence of the dependent legitimate,
legitimated children of the member, his/her
dependent illegitimate children shall be entitled
to 100% of the benefits
SECONDARY BENEFICIARIES
1. The dependent parents, in the absence
of the primary beneficiaries.
2. Any other person designated by the
member as his/her secondary
beneficiary, in the absence of all the
foregoing primary beneficiaries and
dependent parents.
CONTINGENCY - The retirement, death,
disability, injury or sickness, maternity and
unemployment or involuntary separation of the
member. contributions
rocompensatimbate ( benefits
MONTHLY SALARY CREDIT (MC) - The
compensation base for contributions and
benefits as indicated in the SSS Law. In the
computation of benefits, the maximum monthly
salary credit to be considered shall be
P20,000.00, increased to P25,000 as of 2021
AVERAGE MONTHLY SALARY CREDIT - The
result obtained by dividing the sum of the last
sixty (60) monthly salary credits immediately
preceding the semester of contingency by sixty
(60), or the result obtained by dividing the sum
of all the monthly salary credits paid prior to the
semester of contingency by the number of
monthly contributions paid in the same period,
whichever is greater: Provided, That injury or
sickness which caused the disability shall be
deemed as the permanent disability for the
purpose of computing the average monthly
salary credit.
AVERAGE DAILY SALARY CREDIT (ADSC) -
The result obtained by dividing the sum of the
six (6) highest MSCs in the twelve-month period
immediately preceding the semester of
contingency by one hundred eighty (180)
CREDITED YEARS OF SERVICE (CYS). - The
CYS shall be computed as follows:
i. For members covered prior to January
1985: CYS=A+B+C
ii. For members covered on or after
January 1985: CYS=B+C
Where:
A = number of calendar years from date of
coverage up to 1984
B = from 1985 to 2001, number of calendar
years with at least six (6) monthly contributions
C = from January 2002 up to the calendar years
containing the semester prior to the contingency,
the total number of contributions divided by 12
COVERAGE
Who are covered employers?
1. An employer or any person who uses
the services of another person in
business, trade, industry or any
undertaking.
2. A social, civic, professional, charitable
and other nonprofit organizations which
hire the services of employees are
considered “employers”.
3. A foreign government, international
organization or its wholly-owned
instrumentality such as an embassy in
the Philippines, may enter into an
administrative agreement with the SSS
for the coverage of its Filipino
employees.
Compulsory coverage for employees
a. A private employee, whether permanent,
temporary or provisional, who is not over 60
years old.
b. A domestic worker or kasambahay who has
rendered at least one (1) month of service.
c. A Filipino seafarer upon the signing of the
standard contract of employment between the
seafarer and the manning agency which,
together with the foreign ship owner, act as
employers.
d. An employee of a foreign government,
international organization or their wholly-owned
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BS in Accountancy - 3rd year | 1st Semester: SY 2022-2023
instrumentality based in the Philippines, which
entered into an administrative agreement with
the SSS for the coverage of its Filipino workers.
e. The parent, spouse or child below 21 years
old of the owner of a single proprietorship
business.
e. OFWs
f. Spouses who devote full time to managing the
household and family affairs
A self-employed person, regardless of trade,
business or occupation, with an income of at
least P1,000 a month and not over 60 years old,
should register with the SSS. Included, but not
limited to, are the following self-employed
persons:
a. Self-employed professionals;
b. Business partners, single proprietors
and board directors;
c. Actors, actresses, directors, scriptwriters
and news reporters who are not under
an employer-employee relationship;
d. Professional athletes, coaches, trainers
and jockeys;
e. Farmers and fisherfolks; and
f. Workers in the informal sector such as
cigarette vendors, watch-your-car boys,
hospitality girls, among others
Voluntary Coverage
1. Separated Members
A member who is separated from
employment or ceased to be
self-employed/OFW/non-working
spouse and would like to continue
contributing.
2. Overseas Filipino Workers (OFWs)
A Filipino recruited in the Philippines by
a foreign-based employer for
employment abroad or one who
legitimately entered a foreign country
(i.e., tourist, student) and is eventually
employed.
3. Non-working spouses of SSS members
A person legally married to a currently
employed and actively paying SSS
member who devotes full time in the
management of household and family
affairs may be covered on a voluntary
basis, provided there is the approval of
the working spouse.
The person should never have been a member
of the SSS. The contributions will be based on
50 percent (50%) of the working spouse's last
posted monthly salary credit but in no case shall
it be lower than P1,000.
Effective date of coverage
1. For employer - Compulsory coverage of the
employer shall take effect on the first day of his
operation or on the first day he hires
employee/s. The employer is given only 30 days
from the date of employment of employee to
report the person for coverage to the SSS.
2. For employee - Compulsory coverage of the
employee shall take effect on the first day of his
employment
.
3. For self-employed - The compulsory coverage
of the self-employed person shall take effect
upon his registration with the SSS or upon
payment of the first valid contribution, in case of
initial coverage.
For voluntary coverage:
1. For an OFW - upon first payment of
contribution, in case of initial coverage.
2. For a non-working spouse - upon first
payment of contribution.
3. For a separated member - on the month
he/she resumed payment of
contribution.
SSS BENEFITS
RETIREMENT BENEFITS
A member who has paid at least one hundred
twenty (120) monthly contributions prior to
the semester of retirement and who: (1) has
reached the age of sixty (60) years and is
already separated from employment or has
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BS in Accountancy - 3rd year | 1st Semester: SY 2022-2023
ceased to be self-employed; or (2) has reached
the age of sixty-five (65) years, shall be entitled
for as long as he lives to the monthly pension:
Provided, That he shall have the option to
receive his first eighteen (18) monthly pensions
in lump sum discounted at a preferential rate of
interest to be determined by the SSS.
PENSION
The monthly pension shall be the highest of the
following amounts:
(1) The sum of the following:
(i) Three hundred pesos (P300.00); plus
(ii) Twenty percent (20%) of the average
monthly salary credit; plus
(iii) Two percent (2%) of the average
monthly salary credit for each credited
year of service in excess of ten (10)
years; or
2) Forty percent (40%) of the average monthly
salary credit; or orent
(3) One thousand pesos (P1,000.00): Provided,
That the monthly pension shall in no case be
paid for an aggregate amount of less than sixty
(60) months.
● For members with at least 10 credited
years of service - minimum monthly
pension is 1,200 pesos
● For those with 20 credited years of
service - 2,400 pesos
Additional monthly benefit allowance of 1,000
pesos for retirement, death, and disability
pensioners receiving monthly pensions in or
after January two thousand seventeen (2017).
Dependents' Pension
Where monthly pension is payable on account of
death, permanent total disability or retirement,
dependents' pension equivalent to ten percent
(10%) of the monthly pension or Two hundred
fifty pesos (P250.00), whichever is higher, shall
also be paid for each dependent child conceived
on or before the date of the contingency but not
exceeding five (5), beginning with the youngest
and without substitution: Provided, That where
there are legitimate and illegitimate children, the
former shall be preferred.
DEATH BENEFITS
Upon the death of a member who has paid at
least thirty-six (36) monthly contributions
prior to the semester of death, his primary
beneficiaries shall be entitled to the monthly
pension: Provided, that if he has no primary
beneficiaries, his secondary beneficiaries shall
be entitled to a lump sum benefit equivalent to
thirty-six (36) times the monthly pension. If he
has not paid the required thirty-six (36) monthly
contributions, his primary or secondary
beneficiaries shall be entitled to a lump sum
benefit equivalent to the monthly pension times
the number of monthly contributions paid to the
SSS or twelve (12) times the monthly pension,
whichever is higher.
SICKNESS BENEFIT
• A daily cash allowance for the number of days
a member is unable to work due to sickness or
injury
Qualifying Conditions:
● The member is unable to work due to
sickness or injury and is confined
either in a hospital or at home for at
least four (4) days
● He/she has paid at least three months
of contributions within the 12-month
period immediately before the semester
of sickness or injury
● He/she has used up all company sick
leaves with pay for the current year
and has duly notified his/her employer
● He/she must notify the SSS directly by
filing a sickness benefit application if
he/she is separated from employment, a
self-employed or voluntary member,
including overseas Filipino
worker(OFW). member
Amount of Benefit
 AEC 45 - Regulatory Framework and Legal Issues in Business
BS in Accountancy - 3rd year | 1st Semester: SY 2022-2023
The amount of the member's daily sickness
benefit allowance is equivalent to 90% of
his/her averaqe daily salary credit
The sickness benefit is granted up to a
maximum of 120 days in 1 calendar year.
DISABILITY BENEFIT
A cash benefit granted either as a monthly
pension or a lump sum amount to a member
who becomes permanently disabled, either
partially or totally
Qualifying conditions:
● The member has paid at least one(1)
month contribution before the
semester of disability
● To qualify for a monthly disability
pension, he/she must have paid at least
36 monthly contributions prior to the
semester of disability
● If with less than 36 monthly
contributions, he/she is granted a lump
sum amount
Amount:
● The minimum monthly disability
pension is 1,000 if the member has
less than 10 credited years of service;
1,200 if with at least 10 CYS,; and
2,400 if with at least 20 CYS
● If qualified, the member is granted a
monthly disability pension, plus P500
monthly supplemental allowance
● Dependents' Pension (for total disability)
● Plus 1,000 additional benefit(effective
2017)
● 13th month pension
UNEMPLOYMENT INSURANCE/
INVOLUNTARY SEPARATION BENEFITS
Qualifying Conditions:
● not over sixty (60) years of age
● paid at least thirty-six (36) months
contributions twelve (12) months of
which should be in the eighteen-month
period immediately preceding the
involuntary unemployment or separation
● Involuntarily separated from
employment provided that such
separation did not arise from fault or
negligence of the employee
Amount:
● If qualified, the employee is granted an
amount that is equivalent to twice the
half of the member's average monthly
salary credit
● The benefit is granted thru a one-time
payment, and the claim must be filed
within a year from the date of
involuntary separation
● A covered employee who is
involuntarily unemployed can only
claim unemployment benefits once
every three (3) years starting from the
date of involuntary separation or
unemployment
● In case of concurrence of two (2) or
more contingencies within the same
compensable period, only the highest
benefit shall be paid
FUNERAL BENEFIT
A cash benefit given to whoever paid for the
funeral expenses of the deceased member
Qualifying conditions:
● The employee-member was reported for
coverage by his/her employer
● A self-employed
member/OFW/non-working spouse who
had at least one contribution payment
● A voluntary member who was previously
covered either as employed,
self-employed/OFW and had at least 1
contribution payment
● The employee-member was subject to
compulsory coverage but was not
reported for coverage by his/her
employer
Amount
- The funeral benefit is a variable amount
ranging from 20,000-40,000 depending on the
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BS in Accountancy - 3rd year | 1st Semester: SY 2022-2023
member's number of paid contributions and
average monthly salary credit
EXEMPTION FROM TAX, LEGAL PROCESS
AND LIEN.
All laws to the contrary notwithstanding, the SSS
and all its assets and properties, all contributions
collected and all accruals thereto and income or
investment earnings therefrom as well as all
supplies, equipment, papers or documents shall
be exempt from any tax, assessment, fee,
charge, or customs or import duty; and all
benefit payments made by the SSS shall
likewise be exempt from all kinds of taxes, fees
or charges, and shall not be liable to
attachments, garnishments, levy or seizure by or
under any legal or equitable process
whatsoever, either before or after receipt by the
person or persons entitled thereto, except to pay
any debt of the member to the SSS.
CONTRIBUTION
Beginning on the last day of the calendar month
when an employee's compulsory coverage takes
effect and every month thereafter during his
employment, the employer shall deduct and
withhold from such employee's monthly salary,
wage, compensation or earnings, the
employee's contribution in an amount
corresponding to his salary, wage, compensation
or earnings during the month in accordance with
the monthly salary credits, the schedule and the
rate of contributions as may be determined and
fixed by the Commission.
REMITTANCE
● The contribution shall be remitted to the
SSS within the first ten (10) days of
each calendar month following the
month for which they are applicable or
within such time as the Commission
may prescribe.
● If the employer does not deduct and
remit the required contribution, the
delinquent employer shall pay besides
the contribution a penalty thereon of
two percent (2%) per month from the
date the contribution falls due until paid.
● Failure or refusal of the employer to pay
or remit the contributions herein
prescribed shall not prejudice the right
of the covered employee to the benefits
of the coverage.
● The right to institute the necessary
action against the employer may be
commenced within twenty (20) years
from the time the delinquency is known
or the assessment is made by the SSS,
or from the time the benefit accrues, as
the ease may be.
● Self-employed members shall remit their
monthly contributions quarterly
METHOD OF COLLECTION AND PAYMENT
The SSS shall require a complete and proper
collection and payment of contributions and
proper identification of the employer and the
employee. Payment may be made in cash,
checks, stamps, coupons, tickets, or other
reasonable devices that the Commission may
adopt.
EMPLOYMENT RECORDS AND BENEFITS
● Each employer shall immediately report
to the SSS the names, ages, civil status,
occupations, salaries and dependents of
all his employees who are subject to
compulsory coverage
● If an employee subject to compulsory
coverage should die or become sick or
disabled or reach the age of sixty (60)
without the SSS having previously
received any report or written
communication about him from his
employer, the said employer shall pay to
the SSS damages equivalent to the
benefits to which said employee
member would have been entitled had
his name been reported on time by the
employer to the SSS, except that in
case of pension benefits, the employer
shall be liable to pay the SSS damages
equivalent to the accumulated pension
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BS in Accountancy - 3rd year | 1st Semester: SY 2022-2023

due as of the date of settlement of the

claim or to the five (5) years' pension,
whichever is higher, including
dependents' pension
● The employer shall pay to the SSS
damages equivalent to the difference
between the amount of benefit to which
the employee member or his beneficiary
is entitled had the proper contributions
been remitted to the SSS and the
amount payable on the basis of
contributions actually remitted, when:
○ The employer misrepresent the
true date of employment of the
employee member
○ Remit to the SSS contributions
less than those required
○ Fail to remit any contribution
due prior to the date of
contingency, resulting in a
reduction of benefits.

PENAL CLAUSE
The Social Security Law punishes the
following acts:
● False statement/misrepresentation as to
compensation or material fact
● Obtaining or receiving money or check
without being entitled thereto with intent
to defraud any member, employer or the
SSS
● Unlawful transaction with stamp,
coupon, ticket, book or other device,
prescribed under the SS Law
● Failure to comply with the provisions of
the SS Law
● Failure or refusal to register employees
or self-employed individuals
● Misappropriation of SSS funds
● Failure of the employer to remit monthly
contributions or loan amortizations