Payroll is one of the most crucial aspects of your business. Semi monthly - or Monthly - payroll computation brings multiple people or departments together to come up with accurate computations. Small mistakes can quickly turn into pressing issues related to employee morale, company’s reputation, tax liabilities, etc.
This is why keeping your computations aligned with the latest rules and regulations is essential.
In the article, you will have all the information you need to understand the recent updates for payroll computation in the Philippines in 2023, including new tax rates and updated government deductions tables.
Updated Income Tax Rates in the Philippines in 2023
Under the Tax Reform for Acceleration and Inclusion (TRAIN) Law, the following tax rates are taking effect on January 1, 2023:
Annual Tax Table:
| Compensation | Withholding tax |
| Not over ₱ 250,000.00 | 0% |
| Over ₱ 250,000.00 but not over ₱ 400,000.00 | 15% of the excess over ₱ 250,000.00 |
| Over ₱ 400,000.00 but not over ₱ 800,000.00 | ₱ 22,500.00 + 20% of the excess over ₱ 400,000.00 |
| Over ₱ 800,000.00 but not over ₱ 2,000,000.00 | 102,500.00 + 25% of the excess over ₱ 800,000.00 |
| Over ₱ 2,000,000.00 but not over ₱ 8,000,000.00 | ₱ 402,500.00 + 30% of the excess over ₱ 2,000,000.00 |
| Over ₱ 8,000,000.00 | ₱ 2,202,500.00 + 35% of the excess over ₱ 8,000,000.00 |
Monthly Tax Table:
| Compensation | Withholding tax |
| Not over ₱20,833 | 0% |
| Over ₱20,833 but not over ₱33,332 | 15% of the excess over ₱20,833 |
| Over ₱33,333 but not over ₱66,666 | ₱1,875.00 + 20% of the excess over ₱33,333 |
| Over ₱66,667 but not over ₱166,666 | ₱8,541.80 + 25% of the excess over ₱66,667 |
| Over ₱166,667 but not over ₱666,666 | ₱33,541.80 + 30% of the excess over ₱166,667 |
| Over ₱666,667 | ₱183,541.80 + 35% of the excess over ₱666,667 |
Summary of the changes compared to the previous rates:
Employees earning up to ₱250,000 annually (or ₱20,833 monthly) are still exempt from paying income tax
Employees earning over ₱250,000 but not over ₱8,000,000 annually (or over ₱20,833 but not over ₱666,666 monthly) have lower tax rates ranging from 15% to 30%, from 20% to 32% previously.
Employees earning over ₱8,000,000 annually (or ₱666,667 monthly) have a higher tax rate of 35%, from 32% previously.
Updated Government Contributions Tables in the Philippines in 2023
Here are the latest tables for Social Security System (SSS), PhilHealth (PHIC), and Pag-IBIG Fund (HDMF) contributions:
Social Security System (SSS) Contribution
Republic Act No. 11199, known as the Social Security Act of 2018, includes an increase in the SSS contributions rate from 13% to 14% effective starting January 2023. Here is the updated simplified table (see complete table here) for SSS contributions:
| Monthly Compensation Min-Max | SSS Employer Contribution | SSS Employee Contribution | SSS Total Contribution |
| ₱24,750 - 25,249 | ₱2,405.00 | ₱1,125.00 | ₱3,530.00 |
| ₱25,250 - 25,749 | ₱2,452.50 | ₱1,147.50 | ₱3,600.00 |
| ₱25,750 - 26,249 | ₱2,500.00 | ₱1,170.00 | ₱3,670.00 |
| ₱26,250 - 26,749 | ₱2,547.50 | ₱1,192.50 | ₱ 3,740.00 |
| ₱26,750 - 27,249 | ₱2,595.00 | ₱1,215.00 | ₱3,810.00 |
| ₱27,250 - 27,749 | ₱2,642.50 | ₱1,237.50 | ₱3,880.00 |
| ₱27,750 - 28,249 | ₱2,690.00 | ₱1,260.00 | ₱3,950.00 |
| ₱28,250 - 28,749 | ₱2,737.50 | ₱1,282.50 | ₱4,020.00 |
| ₱28,750 - 29,249 | ₱2,785.00 | ₱1,305.00 | ₱4,090.00 |
| ₱29,250 - 29,749 | ₱2,832.50 | ₱1,327.50 | ₱4,160.00 |
| ₱29,750.00 - Over | ₱2,880.00 | ₱1,350.00 | ₱4,230.00 |
Summary of the changes compared to the previous rates:
The SSS contribution rate has increased from 13% to 14%. This increase mainly affects the Employer as the new Employer Share rate is increased from 8.5% to 9.5%, the Employee Share rate stays at 4.5%.
The Minimum Monthly Salary Credit (MSC) has increased from ₱3,000 to ₱4,000 which results in the increase of the minimum contributions: from ₱255 to ₱380 for Employer Share and from ₱135 to ₱180 for Employee Share.
The Maximum Monthly Salary Credit (MSC) has increased from ₱25,000 to ₱30,000 which results in the increase of the maximum contributions: from ₱2,155 to ₱2,880 for Employer Share and from ₱1,125 to ₱1,350 for Employee Share.
PhilHealth (PHIC) Contribution
| Monthly Compensation | PHIC Employer Contribution | PHIC Employee Contribution | PHIC Total Contribution |
| ₱10,000.00 and below | ₱200 | ₱200 | ₱400 |
| between ₱10,000.01 and 79,999.99 | 2.00% | 2.00% | 4.00% |
| ₱80,000.00 and above | ₱1,600.00 | ₱1,600.00 | ₱3,200.00 |
Pag-IBIG Fund (HDMF) Contribution
| Monthly Compensation | HDMF Employer Contribution | HDMF Employee Contribution | HDMF Total Contribution |
| ₱1,500 and below | 2.00% | 1.00% | 3.00% |
| between ₱1,500.01 and ₱4,999.99 | 2.00% | 2.00% | 4.00% |
| ₱5,000 and over | ₱100.00 | ₱100.00 | ₱200.00 |
Example of a Monthly Net Pay computation in the Philippines in 2023
Here is an example of payroll computation for an Employee earning ₱85,000.00 per month:
| Old | New | Difference | |
| Monthly Salary | ₱85,000.00 | ₱85,000.00 | - |
| SSS | ₱1,125.00 | ₱1,350.00 | +225.00 |
| PHIC | ₱1,600.00 | ₱1,600.00 | - |
| HDMF | ₱100.00 | ₱100.00 | - |
| Total Employee Deductions | ₱2,825.00 | ₱3,050.00 | +225.00 |
| Taxable Compensation | ₱82,175.00 | ₱81,950.00 | (250.00) |
| Withholding Tax | ₱15,485.73 | ₱12,362.55 | (3,123.18) |
| Net Pay | ₱66,689.27 | ₱69,587.45 | +2,898.18 |
| Employer Contributions | |||
| SSS | ₱2,155.00 | ₱2,880.00 | +725.00 |
| PHIC | ₱1,600.00 | ₱1,600.00 | - |
| HDMF | ₱100.00 | ₱100.00 | - |
| Total | ₱3,855.00 | ₱4,580.00 | +725.00 |
The increase in deductions from SSS Employee Contribution of ₱225.00 is lower than the decrease in Withholding Taxes of ₱3,123.18, resulting in an increase of ₱2,898.18 in the Net Pay of the employee.
Employer contribution is increased by ₱725.00 due to the increase of SSS Employer Contribution (+₱725.00)
5 Reasons Why you Should us a Payroll Software
Proseso Consulting - The Finance expert for growing and international businesses
For more information on our Payroll Services or if you have any questions on how you can outsource your admin and accounting functions, contact me directly at ninoy@proseso-consulting.com.
Proseso Consulting provides business advisory and finances managed services (bookkeeping and accounting, outsourced and automated payroll, tax compliance, financial reporting, etc.). We are here to help you achieve your long-term business goals!
Ninoy Salmon is a seasoned business and finance professional with extensive experience working with both fast-growing startups and companies in the Philippines and around the world.
Get in touch with our team at contact@proseso-consulting.com or visit us at www.proseso-consulting.com for more information about our services.
This blog article does not constitute professional or legal advice. It is only intended to provide general information on a subject.
