Why Payroll Still Feels Complicated
Filipino businesses — especially SMEs — often rely on spreadsheets or outdated systems to process payroll. The result? Errors, delays, and frustrated employees.
With varying government deductions, mandatory benefits, and shift-based work, Philippine payroll requires precision. This guide breaks it down.
Step-by-Step Payroll Computation in the Philippines
1. Determine the Employee’s Gross Pay
Gross pay includes:
- Basic salary
- Allowances (e.g., transport, meal)
- Overtime pay
- Holiday or rest day premiums
- Night differential
- Bonuses/commissions (if applicable)
📌 If paid hourly or daily, compute based on actual attendance or logged hours.
2. Deduct Government Contributions
For most private employees (under the SSS, PhilHealth, Pag-IBIG system):
| Contribution | Employee Share | Employer Share |
|---|---|---|
| SSS | 4.5% (of MSC) | 9.5% (of MSC) |
| PhilHealth | 2.5% | 2.5% |
| Pag-IBIG | 1-2% (min ₱100) | 2% (or higher) |
✅ Always refer to the latest circulars. Thresholds change periodically (e.g., new PhilHealth rates or contribution ceilings).
3. Apply Income Tax (if applicable)
The BIR's withholding tax table (based on TRAIN Law) is used for computing tax based on:
- Monthly taxable income after deductions
- Status (Single, Head of Family, etc.)
Use the latest BIR Withholding Tax Table (Revised 2023 or 2024) for accurate computation.
✳️ 13th-month pay and de minimis benefits up to ₱90,000 are tax-exempt.
4. Add Other Deductions or Adjustments
Other typical payroll deductions may include:
- Cash advances
- Absences/tardiness
- Company loans
- Uniform or meal deductions (if applicable and allowed)
5. Final Payroll Summary
Here’s a simplified sample:
| Description | Amount |
|---|---|
| Basic Salary | ₱25,000.00 |
| Allowance | ₱2,000.00 |
| Overtime Pay | ₱1,500.00 |
| Gross Pay | ₱28,500.00 |
| LESS: SSS | ₱1,125.00 |
| LESS: PhilHealth | ₱712.50 |
| LESS: Pag-IBIG | ₱100.00 |
| LESS: Tax | ₱2,400.00 |
| NET PAY | ₱24,162.50 |
Common Mistakes to Avoid
- ❌ Using outdated SSS or PhilHealth tables
- ❌ Forgetting to apply holiday pay rules
- ❌ Misclassifying employees (e.g., project-based vs regular)
- ❌ Missing late/undertime deductions
- ❌ Not backing up or documenting payroll adjustments
There’s an Easier Way: Let Tropa Do the Math
Tropa is an all-in-one cloud HR platform built for Philippine teams.
Our payroll module handles:
- Timekeeping sync with door logs
- Automatic calculation of SSS, PhilHealth, Pag-IBIG, and tax
- Shift-based and hourly rate support
- Payroll exports for BIR, banks, and payslips
💬 “Since switching to Tropa, our payroll is always on time, and I don’t stress about errors.” — Ricky P - HR Manager