Social Security System. Retirement, disability, sickness and maternity coverage. Split between employer and employee, with the employer carrying the larger share.
PhilHealth. National health insurance. Split between employer and employee.
Pag-IBIG. The Home Development Mutual Fund, covering housing and savings. Split between employer and employee.
13th month pay. Mandatory under Presidential Decree 851 at 1 twelfth of annual basic salary, which is approximately 8.33 percent. Payable by 24 December each year, and pro rated for anyone who joins or leaves mid year.
The first 3 are contributions with employer and employee portions. The fourth is entirely an employer cost.
Cost & Pricing
What employing someone in the Philippines actually costs on top of salary
In short
On top of gross salary, an employer in the Philippines carries contributions to SSS, PhilHealth and Pag-IBIG, plus mandatory 13th month pay at 1 twelfth of annual basic. Together these run roughly 11 to 16 percent depending on seniority. The percentage falls as salary rises because the 3 contributions are capped while 13th month stays proportional.
Budgets built on salary alone are wrong by a predictable margin. The useful thing about the Philippine statutory package is that the margin is knowable in advance and behaves consistently, which makes modelling straightforward once you understand the shape.
The 4 components
Why the percentage falls as salary rises
This is the part that surprises people, and it is the most useful thing to understand for modelling.
SSS, PhilHealth and Pag-IBIG contributions are all capped. Above a certain salary level, the employer contribution stops increasing. 13th month pay, by contrast, is proportional and stays at roughly 8.33 percent of basic salary at every level.
So at lower salaries the capped contributions represent a meaningful percentage, and the total lands nearer 16 percent. At senior salaries the same fixed contributions are a small fraction of a larger number, and the total approaches the 13th month figure, landing nearer 11 percent.
Practical consequence: a junior hire costs proportionally more to employ than a senior one, and a budget built on a single blended percentage will be wrong at both ends.
SSS, PhilHealth and Pag-IBIG contributions are all capped. Above a certain salary level, the employer contribution stops increasing. 13th month pay, by contrast, is proportional and stays at roughly 8.33 percent of basic salary at every level.
So at lower salaries the capped contributions represent a meaningful percentage, and the total lands nearer 16 percent. At senior salaries the same fixed contributions are a small fraction of a larger number, and the total approaches the 13th month figure, landing nearer 11 percent.
Practical consequence: a junior hire costs proportionally more to employ than a senior one, and a budget built on a single blended percentage will be wrong at both ends.
What is not in that number
Night shift differential. Not less than 10 percent of the regular wage for hours worked between 10pm and 6am. For any function covering US hours this is material and it is not optional.
Overtime, rest day and holiday premiums. Calculated separately and they stack. Overtime on a holiday attracts both.
Leave beyond the statutory minimum. Service incentive leave is 5 days per year after 1 year of service. Competitive offers provide considerably more, and that is a cost decision rather than a statutory one.
Benefits. Private health cover in particular. Not required by law, and close to universal in competitive offers for professional roles.
Equipment, software and any allowances.
A model that includes the statutory 11 to 16 percent and stops there will still understate the true cost of a competitive offer.
Overtime, rest day and holiday premiums. Calculated separately and they stack. Overtime on a holiday attracts both.
Leave beyond the statutory minimum. Service incentive leave is 5 days per year after 1 year of service. Competitive offers provide considerably more, and that is a cost decision rather than a statutory one.
Benefits. Private health cover in particular. Not required by law, and close to universal in competitive offers for professional roles.
Equipment, software and any allowances.
A model that includes the statutory 11 to 16 percent and stops there will still understate the true cost of a competitive offer.
How to model it properly
Start from the gross salary the role requires in the market you are competing in, not from a national average. National wage data describes the domestic employment base and is not the reference for internationally recruited roles.
Add statutory employer cost at the appropriate end of the 11 to 16 percent range for that seniority.
Add night differential where the roster requires it, calculated on the hours actually falling between 10pm and 6am.
Add benefits you intend to offer, treating them as part of the package rather than an extra.
The resulting number is what the hire costs. Compared against the same role in the US, UK or Australia, savings can reach up to 70 percent fully loaded depending on role and seniority, and the gap narrows at the senior specialist end where candidates are recruited globally.
Add statutory employer cost at the appropriate end of the 11 to 16 percent range for that seniority.
Add night differential where the roster requires it, calculated on the hours actually falling between 10pm and 6am.
Add benefits you intend to offer, treating them as part of the package rather than an extra.
The resulting number is what the hire costs. Compared against the same role in the US, UK or Australia, savings can reach up to 70 percent fully loaded depending on role and seniority, and the gap narrows at the senior specialist end where candidates are recruited globally.
Why this matters beyond budgeting
Two reasons.
First, a company that models on salary alone and then discovers the loaded cost tends to compress the salary to fit the original budget, which puts the offer below market and stalls the search at exactly the wrong moment.
Second, statutory obligations are not optional and not waivable. An employee cannot validly agree to forgo them, and arrangements structured to avoid them, most commonly engaging a full time role as a contractor, carry retroactive exposure assessed on the substance of the relationship rather than the paperwork.
This is general information rather than legal or tax advice. Contribution schedules are set by the respective agencies and change from time to time, so confirm current rates before finalising a budget.
First, a company that models on salary alone and then discovers the loaded cost tends to compress the salary to fit the original budget, which puts the offer below market and stalls the search at exactly the wrong moment.
Second, statutory obligations are not optional and not waivable. An employee cannot validly agree to forgo them, and arrangements structured to avoid them, most commonly engaging a full time role as a contractor, carry retroactive exposure assessed on the substance of the relationship rather than the paperwork.
This is general information rather than legal or tax advice. Contribution schedules are set by the respective agencies and change from time to time, so confirm current rates before finalising a budget.
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