Quick answer
A payroll system in the Philippines turns attendance records into correct take-home pay. It also handles what the government requires each cut-off: SSS, PhilHealth and Pag-IBIG contributions, BIR withholding tax on compensation, payslips, and monthly remittances and reports. Very small teams can run it by hand or in a spreadsheet. Once you have shift workers, several branches or frequent changes, payroll software lowers the risk of errors and keeps the audit trail that agencies and employees may ask for. Whatever you use, the employer stays legally responsible for paying and remitting correctly.
This guide is for owners and finance or HR staff who run payroll themselves or are about to replace a manual process. It covers the end-to-end workflow, pay frequency rules, a summary table of current statutory rates with the official source for each, how manual, spreadsheet and software payroll compare, a selection checklist, implementation steps and your duties under the Data Privacy Act.
What “payroll system” means
“Payroll system” covers two things. One is the process: the rules, approvals and calendar you follow every cut-off. The other is the tool that runs it, which might be a ledger, an Excel workbook or software. A good tool cannot fix a broken process. If overtime approvals arrive after cut-off, or nobody owns the master list of employee rates, software will just produce the wrong numbers faster. Design the process first and pick the tool second.
A payroll management system or payroll software automates the calculation steps. An HRIS goes wider and adds employee records, leave, attendance and self-service. If you are weighing that broader option, see our guide to choosing HRIS software in the Philippines.
The end-to-end payroll workflow
Whatever tool you use, every Philippine payroll run goes through the same stages:
- Timekeeping and cut-off. Collect time-in and time-out, absences, tardiness, undertime, approved overtime, night shift hours, rest day and holiday work, and approved leave for the period. Lock the cut-off date so late changes go into the next run.
- Gross pay. Compute basic pay for the period, then add overtime, night differential, holiday and premium pay, allowances, commissions and other earnings according to the Labor Code and your policies. Deduct unpaid absences and tardiness.
- Statutory contributions. Compute the employee and employer shares for SSS (including Employees’ Compensation), PhilHealth and Pag-IBIG using each agency’s current table.
- Withholding tax on compensation. Take taxable compensation, which is gross taxable pay less the employee’s mandatory contributions and union dues, and apply the BIR withholding tax table for your pay frequency. Non-taxable items, such as de minimis benefits within limits and 13th month pay and other benefits up to ₱90,000 a year, are kept separate.
- Other deductions. Deduct only what the law allows or the employee has authorized in writing, such as SSS or Pag-IBIG loan amortizations, company loans and union dues. Article 113 of the Labor Code limits deductions from wages.
- Net pay and disbursement. Net pay is gross pay minus contributions, tax and authorized deductions. Release it by payroll account, cash or another agreed channel on the scheduled pay date.
- Payslips. Give each employee a breakdown of earnings, deductions and net pay for the period.
- Remittances and reports. Remit contributions and loan payments to SSS, PhilHealth and Pag-IBIG, and file BIR Form 1601-C for tax withheld, by each agency’s deadline. Keep the payroll register and proof of payment.
- Year-end. Pay 13th month by December 24, run the annual tax computation, issue BIR Form 2316 to employees and file BIR Form 1604-C with its alphalists.
Separated employees: Final pay, including pro-rated 13th month and unused leave convertible under policy, should be released within 30 days of separation under DOLE Labor Advisory No. 6, Series of 2020, unless a more favourable policy applies. See our step-by-step 13th month pay computation guide for the pro-rating formula.
Pay frequency: how often you must pay
Article 103 of the Labor Code says: “Wages shall be paid at least once every two (2) weeks or twice a month at intervals not exceeding sixteen (16) days.” Most Philippine employers therefore pay semi-monthly, for example on the 15th and the last day of the month, with cut-offs a few days earlier. Some pay weekly.
The pay frequency affects your tax computation. BIR publishes daily, weekly, semi-monthly and monthly withholding tables, and you must use the one that matches how you pay. Contributions are usually computed monthly, so set a clear policy on how they are split across two semi-monthly runs (all in one cut-off or half in each) and apply it the same way every month.
Statutory items at a glance (current rates)
The table below summarises the main employer and employee obligations as published by each agency. It is not a full contribution table. We are preparing a separate, deeper guide to SSS, PhilHealth, Pag-IBIG and BIR deductions. Always compute from the agency’s official table, because brackets and rounding matter.
| Item | Current rule | Effective date | Source checked |
|---|---|---|---|
| SSS regular contribution | 15% of monthly salary credit (MSC): employer 10%, employee 5%. MSC from ₱5,000 to ₱35,000. The portion for MSC above ₱20,000 goes to the mandatory provident fund. | January 2025 (final scheduled increase under RA 11199) | SSS news release (7 Jan 2025) and RA 11199 IRR schedule, checked 24 Oct 2026. SSS said in February 2026 it will not raise contributions until 2027. The SSS contribution-table page did not load when we checked. |
| SSS Employees’ Compensation (EC) | Paid by the employer only: ₱10 a month for MSC below ₱15,000, ₱30 for MSC of ₱15,000 and above | As listed on SSS EC page | sss.gov.ph Employees’ Compensation Program page, checked 24 Oct 2026 |
| PhilHealth premium | 5% of monthly basic salary, with a floor of ₱10,000 and a ceiling of ₱100,000 (₱500 to ₱5,000 a month). Shared equally by employer and employee. | 5% is the RA 11223 rate for 2024 and 2025; PhilHealth Advisory 2025-0002 confirms it from January 2025 | PhilHealth Advisory 2025-0002, RA 11223 Sec. 10, PhilHealth Circular 2020-0001 (equal sharing), checked 24 Oct 2026. We found no separate 2026 premium advisory for employed members. A July 2026 PhilHealth advisory still cites 5%. |
| Pag-IBIG (HDMF) contribution | Employee 2% and employer 2% of monthly compensation, capped at a maximum fund salary of ₱10,000 (₱200 each a month at the cap) | February 2024 | Reported by Philippine Information Agency and GMA News, checked 24 Oct 2026. The Pag-IBIG website returned a browser check and could not be read, so this is not confirmed on the official page. |
| BIR withholding tax on compensation | Graduated tables under RR 11-2018 Annex E. On the monthly table, ₱20,833 and below is not withheld. The top bracket is ₱183,541.80 plus 35% over ₱666,667. | 1 January 2023 onwards | BIR, RR 11-2018 Annex E, checked 24 Oct 2026. Income tax threshold bills were pending in Congress at the time of checking. |
| BIR Form 1601-C (monthly remittance) | File and pay on or before the 10th of the following month. December withholding is due by January 15. eFPS filers follow the deadlines in applicable revenue issuances. | Form version January 2018 | BIR Form 1601-C guidelines, checked 24 Oct 2026 |
| BIR Form 1604-C (annual information return) | On or before January 31 of the following year, with alphalists of employees | Form version January 2018 | BIR Form 1604-C guidelines, checked 24 Oct 2026 |
Example — one monthly payroll line (illustrative)
Assume an employee is paid monthly, with a ₱30,000 basic salary and no other earnings or absences. Rates are taken from the table above. Check your own results against the official agency tables.
- SSS employee share: 5% × ₱30,000 MSC = ₱1,500
- PhilHealth employee share: 5% × ₱30,000 ÷ 2 = ₱750
- Pag-IBIG employee share: 2% × ₱10,000 cap = ₱200
- Taxable compensation: ₱30,000 − ₱2,450 = ₱27,550
- Withholding tax (monthly table): 15% × (₱27,550 − ₱20,833) = ₱1,007.55
- Net pay: ₱26,542.45
- Employer cost on top of salary: SSS ₱3,000 + EC ₱30 + PhilHealth ₱750 + Pag-IBIG ₱200 = ₱3,980
Manual vs spreadsheet vs payroll software
| Factor | Manual (paper or calculator) | Spreadsheet | Payroll software / HRIS |
|---|---|---|---|
| Practical fit | A handful of employees on fixed pay | Small teams with simple schedules and one person who knows the workbook well | Growing headcount, shifts, overtime, several branches, frequent rate changes |
| Timekeeping input | Logbook or bundy cards, re-typed | Imported or re-typed from biometric exports | Attendance devices or apps feed payroll directly, if integrated |
| Rate updates | Manual lookup each time | Someone must update formulas and tables | The vendor updates tables. You still verify them. |
| Error risk | High: arithmetic and transcription | Medium to high: broken formulas, copied rows, version confusion | Lower for calculations. Setup and policy errors still happen. |
| Audit trail | Paper files | Limited. Changes are hard to trace. | Activity logs, approvals and history, depending on product |
| Payslips and reports | Handwritten or typed | Mail-merge or manual | Generated per run. Often available through employee self-service. |
| Data security | Physical access control | Files emailed and copied around | Role-based access, hosting controls, backups (check each vendor) |
| Direct cost | Staff time | Staff time plus software you probably already have | Subscription or licence, implementation, training |
There is no headcount at which software becomes legally required. The usual signal to switch is when payroll takes your team several days each cut-off, when corrections and employee complaints keep coming back, or when only one person can run the spreadsheet.
Still managing payroll and attendance manually?
Explore how NexHRIS can help organize your workflow.
Payroll software selection checklist
- Philippine statutory computations: SSS (including EC), PhilHealth, Pag-IBIG and BIR withholding for each pay frequency you use. Ask how and when the vendor updates tables when rates change.
- Labor Code pay rules: Overtime, night differential, rest day, regular and special holiday premiums, and how you configure company rules that are more generous than the law.
- Timekeeping integration: Which biometric devices, QR, mobile or GPS options feed payroll, and how exceptions and approvals are handled before cut-off.
- Loans and deductions: SSS and Pag-IBIG loan amortizations, company loans, cash advances, and controls on unauthorized deductions.
- Payslips and self-service: Can employees view payslips, leave balances and records without asking HR?
- Reports: Payroll register, contribution and remittance reports, 1601-C support, 2316 and alphalist support, 13th month and final pay.
- Controls: Role-based access, maker-checker approvals, activity logs and payroll locking after approval.
- Multi-branch and multi-company: Separate pay groups, cost centres and, if needed, separate employer registrations.
- Data privacy and hosting: Where data is stored, backups, encryption, a data processing agreement and how you get your data out.
- Support: Local support hours, implementation help, data migration and training.
- Total cost: Subscription basis (often per employee per month), minimum fees, implementation, add-on modules and hardware.
How to implement a new payroll system
- Document your current rules. Write down pay groups, cut-offs, pay dates, rounding, overtime approvals, allowances, leave conversion and how you split contributions between cut-offs.
- Clean the employee master data. Check names, TIN, SSS, PhilHealth and Pag-IBIG numbers, rates, start dates, tax status, bank details and loan balances. Most go-live problems come from bad master data.
- Configure and test. Set up policies, holidays and approval flows. Load year-to-date figures if you are switching mid-year so annual tax and 13th month computations stay correct.
- Run parallel payrolls. Run at least one or two cut-offs in both the old and new systems. Explain every peso of difference before you switch.
- Train the people involved. Train payroll staff, approvers and supervisors, and brief employees on payslip access and how to raise disputes.
- Go live and review. After the first remittance cycle, reconcile payroll totals against what was remitted to each agency and the BIR.
If you run delivery trucks or field crews, also plan how trip allowances and incentives will reach payroll. Our fleet management system guide covers that side of the operation.
Payroll and the Data Privacy Act (RA 10173)
Payroll files hold some of the most sensitive data a business keeps. Under Section 3(l) of the Data Privacy Act of 2012 (Republic Act No. 10173), sensitive personal information includes government-issued identifiers such as social security numbers, as well as tax returns and health records. Payroll and HR systems routinely hold all three. What the law means for payroll:
- Lawful basis and purpose. Payroll processing is usually needed to fulfil the employment contract and to meet legal obligations (Section 12). Use the data only for declared, compatible purposes. Collect only what you need, and keep it only as long as necessary (Section 11).
- Accountability. You remain responsible for payroll data even when a vendor or outsourced bookkeeper processes it. Designate the person or people accountable for compliance (Section 21). Make sure subcontracted processors have proper safeguards (Section 14). In practice that means a written data processing agreement with your software provider.
- Security. Use reasonable organisational, physical and technical measures (Section 20): role-based access, no payroll files sent by personal email or chat, encrypted storage and backups.
- Breach response. If sensitive personal information is reasonably believed to have been acquired by an unauthorised person and there is a real risk of serious harm, you must promptly notify the National Privacy Commission and the affected employees (Section 20(f)). Check NPC issuances for the current procedure and timelines.
- Employee rights. Employees can be informed about, access and correct their data (Section 16). Self-service portals can make this easier.
Where NexHRIS fits
NexHRIS is Nexvision’s cloud HRIS and payroll platform for Philippine businesses. For each payroll run it computes SSS, PhilHealth and Pag-IBIG contributions and BIR withholding tax on compensation, and it produces payslips and payroll reports. Attendance captured by biometric devices, QR code, facial recognition, mobile or GPS geofencing flows into payroll, depending on plan and deployment. Leave, overtime and claims go through approval workflows. Role-based access covers admin, HR, finance, payroll, supervisor, employee and auditor roles, and an activity log records changes. Employees can view their information through a self-service portal. Installation, data migration and training are available from Nexvision’s Metro Manila team. As with any software, your payroll team still reviews settings and outputs, and the business remains responsible for compliance.
Ready to move payroll off the spreadsheet?
Explore how NexHRIS can help organize your workflow.
Frequently asked questions
How often should employees be paid in the Philippines?
Article 103 of the Labor Code requires wages to be paid at least once every two weeks or twice a month, at intervals of no more than 16 days. Most employers pay semi-monthly.
Are SSS, PhilHealth and Pag-IBIG deducted before withholding tax?
Yes. Employee shares of SSS, PhilHealth and Pag-IBIG contributions, and union dues, are excluded from compensation subject to withholding tax under RR 11-2018. Tax is computed on what remains.
Is payroll software required by law?
No. The law requires correct pay, deductions, remittances and records, not a particular tool. Software helps you do that consistently as your headcount and pay rules grow.
Can I switch payroll systems in the middle of the year?
Yes, but load each employee’s year-to-date earnings, contributions and tax withheld into the new system. Otherwise the annual tax computation, the 13th month computation and Form 2316 will be wrong. Run parallel payrolls before you switch fully.
What payroll records should I keep?
At minimum, keep payroll registers, time records, payslips or acknowledgements, proof of remittance for each agency, BIR returns and certificates, and approvals for overtime and deductions. Store them securely under the Data Privacy Act and keep them for the period your counsel advises under labor and tax rules.
Sources
- SSS clarifies 1% contribution rate hike; bares plans for 2025 — Social Security System, checked 24 Oct 2026
- Implementing Rules and Regulations of RA 11199 (Social Security Act of 2018) — LawPhil Project, checked 24 Oct 2026
- SSS reiterates no hike in member contributions until 2027 — Inquirer.net, checked 24 Oct 2026
- Employees’ Compensation Program — Social Security System, checked 24 Oct 2026
- PhilHealth Advisory No. 2025-0002: Premium Contribution for All Direct Contributors for CY 2025 — PhilHealth, checked 24 Oct 2026
- PhilHealth Advisory No. 2026-0042 — PhilHealth, checked 24 Oct 2026
- PhilHealth Circular No. 2020-0001 — PhilHealth, checked 24 Oct 2026
- Republic Act No. 11223 (Universal Health Care Act) — LawPhil Project, checked 24 Oct 2026
- Pag-IBIG Fund explains hike in monthly contribution starting Feb. 2024 — Philippine Information Agency, checked 24 Oct 2026
- Pag-IBIG to double monthly contribution rate in February — GMA News, checked 24 Oct 2026
- RR 11-2018 Annex E: Revised Withholding Tax Table effective January 1, 2023 — Bureau of Internal Revenue, checked 24 Oct 2026
- Revenue Regulations No. 11-2018 — Bureau of Internal Revenue, checked 24 Oct 2026
- BIR Form 1601-C and guidelines (January 2018) — Bureau of Internal Revenue, checked 24 Oct 2026
- Guidelines and Instructions for BIR Form 1604-C (January 2018) — Bureau of Internal Revenue, checked 24 Oct 2026
- Labor Code of the Philippines, Book Three (Articles 103 and 113) — ChanRobles Virtual Law Library, checked 24 Oct 2026
- Labor Advisory No. 6, Series of 2020 on final pay — Mondaq, checked 24 Oct 2026
- Republic Act No. 10173 (Data Privacy Act of 2012) — LawPhil Project, checked 24 Oct 2026
- P350,000 income tax exemption ceiling bill hurdles House panel — Philippine Daily Inquirer, checked 24 Oct 2026
