A Guide on Employee Benefits and Compensation in the Philippines

Considering the Philippines’ competitive job market, companies now recognise the importance of refining their benefits and compensation packages to attract and retain top talent. 

In 2023, for example, salary increments saw a notable rise, with hirers offering an average increase of 10.24%, a substantial leap from 7.3% in 2022. Moreover, in a nod to more holistic employee welfare, 15% of surveyed companies now intend to introduce birthday leave, 14% are planning to offer menstrual leave, and 13% aim to provide family care leave. 

To better facilitate employee benefits and compensation in the Philippines, use this guide to learn what the guaranteed benefits are, the additional benefits you can offer, and best practices to take. 

What is Employee Benefits and Compensation?

Employee benefits and compensation are integral components of an employment package, designed to enhance the overall satisfaction and welfare of employees. 

• Compensation refers to the payment employees receive in exchange for their labour, including wages, salaries, and bonuses. This monetary compensation is straightforward and is usually determined by the role, experience level, and market standards.
• Employee benefits are non-wage compensations that supplement the salary package. These can include health insurance, retirement plans, paid time off, and other perks, such as gym memberships. 

Together, a well-structured compensation and benefits package is crucial for fostering a motivated and committed workforce.

Philippine Laws That Govern Employee Benefits and Compensation

In the Philippines, employee benefits and compensation are regulated by several laws and guidelines. These laws ensure that employees receive fair compensation and benefits that contribute to their welfare and job satisfaction. 

The Labor Code

The Labor Code is among the most important laws companies need to follow when it comes to employing workers. It outlines the employment practices and relations, including employee benefits and compensation:

• Minimum Wage
• Overtime Pay
• Night Differential
• Holiday Pay
• 13th Month Pay
• Maternity Leave

Laws on Mandatory Contributions

The country also has several laws that govern an employee’s mandatory contributions, which give them benefits. These laws include: 

• Republic Act 8282 (Social Security Act of 1997): This law ensures that contributions to the Social Security System (SSS) provide unemployment, maternity, injury, sickness, and disability benefits, and also serves as a retirement plan for private employees.
• Republic Act No. 9679 (Home Development Mutual Fund Law): Known as the PAG-IBIG Fund Law, this act allows employees to access low-interest housing loans and other investment opportunities through their contributions.
• Republic Act No. 10606 (National Health Insurance Act of 1995): This law mandates that contributions to PhilHealth provide healthcare services access to all employed persons and their dependents.

Tax Laws

Taxation laws also affect an employee’s compensation. These laws, for instance, set the ceiling of salaries and benefits that would be excluded from tax computations. 

For more information on the country’s salary structure, you may read An Employer’s Guide to Payroll in the Philippines. To learn more about the employment laws, please read Employment Laws in the Philippines: A Guide for Employers. 

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Who Are Entitled To Employee Benefits and Compensation?

Some benefits are available to workers even if they are not permanent or regular employees. For instance, employers need to pay at least the minimum wage to their workers. 13th Month Pay is also available to employees so long as they have already rendered one month of service in the company. Not providing these can be punishable by law. 

However, some benefits are not available to some types of workers. Employers do not take care of the SSS, PhilHealth, and Pag-IBIG contributions for independent contractors and freelancers. Hence, they have no hand when the worker wants to avail of the benefits. 

Most of the time, permanent or regular employees are entitled to all the employee benefits a company offers, including perks, such as rice subsidy, transportation allowance, etc.  

This is why a company must be careful of classifying their employees correctly. 

Guaranteed Benefits and Compensation for Employees in the Philippines

Employee benefits and compensation are among the factors employees look closely into when they are searching for a job or contemplating on accepting an offer. At the very least, the following compensation and benefits should be provided since they are required by law.

Minimum Wage 

In the Philippines, employers must pay at least the minimum wage. This varies across industries and regions. In Metro Manila, it’s:

• P610 per day for those in non-agricultural sector
• P573 per day for the agricultural sector
• P573 per day for retail and service sector, if the company employs 15 employee or less 
• P573 per day for manufacturing, if the company employs less than 10 workers 

13th Month Pay

Employees are entitled to 13th month pay. Regular employees who have worked the full year often receive at least 1 month their salary for their 13th month pay. Those who haven’t worked a full year will receive a prorated amount. 

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Holiday Pay, Overtime Pay, and Night Differential

By law, a worker’s compensation must be adjusted if they work overtime, at night or on a holiday. 

Holiday Pay

The Philippines recognises several regular holidays where workers are not required to report for work but should still receive 100% of their daily wage. If they do work, then they should receive 200% of their regular wage. 

Overtime Pay

Working beyond 8 hours a day should be compensated accordingly. The adjustment, however, depends on when an employee works overtime. 

During regular working days, an employee’s overtime hourly rate should be at least 125% their regular hourly rate. If they work on a holiday, it should be 130% of their holiday hourly rate. 

Example:

Commonly, the regular hourly rate is calculated by dividing the daily wage by 8 hours. 

• If the daily wage is P610, the hourly rate is P76.25. On a regular day, the overtime hourly rate is P76.25 x 125% = P95.3125. 
• If an employee works beyond 8 hours on a holiday, then the computation looks like this: P610 x 200% = P1220, divide that by 8 hours = P152.5 then multiply by 130%. Their overtime hourly rate should be P198.25. 

Night Differential

Work done between 10 PM and 6 AM should be 110% of the regular hourly rate. 

Benefits from Mandatory Contributions (SSS, PhilHealth, PagIBIG)

By law, employers must withhold contributions from employees for their Social Security System (SSS), PhilHealth, and Pag-IBIG benefits. Depending on the most recent circular, the employer must also either match the employee contributions OR contribute more. 

Below are the benefits employees ay be entitled to for their contributions:

Social Security System (SSS) Benefits

• Retirement: Regular monthly pension upon reaching retirement age, or a lump sum amount if the contributions do not qualify for pension.
• Disability: Monthly pension or a lump sum for employees who become permanently disabled.
• Maternity: Cash allowances for female employees for childbirth or miscarriage.
• Sickness: Daily cash allowance for employees unable to work due to sickness or injury for up to 120 days.
• Death and Funeral: A cash benefit given to the beneficiaries of a deceased member, plus a funeral grant.
• Salary Loans: Short-term loans to meet immediate financial needs.
• Unemployment Insurance: One-time financial assistance for involuntarily separated employees (e.g., due to retrenchment or closure).

For more information on SSS benefits, you may visit their website here. 

Philippine Health Insurance Corporation (PhilHealth)

• Inpatient Care: Coverage for room and board, drugs and medicines, laboratory exams, and operating room facilities during confinement.
• Outpatient Care: Coverage for day surgeries, dialysis, and cancer treatment sessions that do not require hospital admission.
• Z Benefits: Special package for catastrophic illnesses like leukaemia, prostate cancer, and major surgeries.
• Maternity Care: Coverage for prenatal care, delivery, and postnatal care.

For more information on PhilHealth benefits, you visit their website. 

Home Development Mutual Fund (PagIBIG)

• Low-interest loans for various purposes: PagIBIG members can apply for low-interest loans for various purposes, like minor home improvement, educational expenses, and health and wellness, and calamities.
• Savings: All contributions to PagIBIG earn annual dividends, which are tax-free and government-guaranteed.
• Affordable Housing Programs: Special loans for low-income earners to afford their own homes at preferential rates.

For more information on PagIBIG benefits, you may visit their website. 

Service Incentive Leaves

An employee who has worked for a year in the organisation has the right to 5 days of paid service incentive leave annually. However, it’s customary for many companies to provide their workers with 15 paid leaves a year. 

Maternity Leave

Women are entitled to 105 days of paid leave for childbirth and miscarriage. This can be extended to another 30 days of unpaid leave. Solo female parents, on the other hand, can have additional 15 days of paid leave. 

Separation Pay

If an employer terminates an employee for labour-saving devices, redundancy, retrenchment to prevent losses, or closure, they become entitled to a separation pay of 1 month salary OR ½ to 1 month of salary for every year of service, whichever is higher. 

Retirement Benefit

An employee who reaches the age of 60 years or older, up to the mandatory retirement age of 65 years, and has worked for a minimum of five years in the same establishment, shall receive retirement benefits in the absence of a retirement plan or agreement. This pay is calculated as at least half a month's salary for each year of service, where any period of six months or more is counted as a full year.

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Additional Benefits that Attract and Retain Talents

To attract and retain top talents, many companies in the Philippines offer a wider range of employee benefits and compensation packages. 

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• Competitive Salary: Offers compensation that is above the industry average to attract skilled professionals.
• Bonuses: Provides extra earnings through mid-year, Christmas, and performance-based bonuses to reward and motivate employees.
• Health Insurance: Extends comprehensive health coverage beyond basic PhilHealth, covering more medical expenses and sometimes including dependents.
• Paid Time Off: Grants more generous leave benefits such as vacation, sick, and parental leave, surpassing legal minimums.
• Allowances: Offers allowances for housing, commuting, and meals to alleviate daily expenses related to work.
• De Minimis Benefits: Provides small, additional company benefits that are tax-exempt, such as rice subsidy, medical cash allowance, and laundry allowance, enhancing the overall compensation package.

Flexible working hours and work-from-home arrangements are also among the benefits Filipinos look for in a job that can be accomplished remotely. Of course, these benefits depend mostly on the capacity of the organisation to provide them. 

Best Practices in Facilitating Employee Benefits and Compensation in the Philippines 

Managing employee benefits and compensation effectively is crucial for attracting, retaining, and motivating employees. Here are some best practices that companies in the Philippines can adopt to ensure their benefits and compensation strategies are both competitive and compliant:

Ensure Compliance with Local Regulations

Companies must stay updated with the latest regulations and requirements set by Philippine laws concerning employee benefits and compensation. Regular audits and consultations with legal experts can help ensure that all practices are in line with the law, avoiding potential fines and legal issues.

Make Sure You're Hiring the Right People 

Employing knowledgeable and trustworthy personnel to manage benefits and compensation is vital. Conducting thorough background checks ensures that those handling sensitive employee information and financial details are reliable and have a good track record.

Some of the background checks you may want to conduct are:

• Criminal Records Check
• Employment History
• Education Verification
• Credit Check

Learn more about Employment Background Checks in the Philippines here. In conducting background checks in the Philippines, you must also follow the PH Data Privacy Act of 2012. 

Adopt Flexible Benefits Plans

Flexibility in benefits offers employees the choice to tailor their employee benefits package to suit their individual needs. This could include options for different types of health insurance plans, a choice between more vacation time or higher bonuses, and other customisable benefits that increase employee satisfaction and loyalty.

Use Technology to Streamline Processes

Implementing modern HR software solutions can automate and streamline the management of benefits and compensation. These systems help in maintaining accuracy, ensuring timely updates, and providing easy access to benefits information for employees, which enhances overall efficiency and employee experience.

Let Veremark Help You Vet Your Employees 

Let Veremark assist you in building a trustworthy and efficient team to facilitate your employee benefits and compensation. Veremark stands out as a premier choice for conducting fast, compliant, and comprehensive employee background checks. Our service is highly scalable, with no lock-in periods or long-term contracts required, making it ideal for businesses of all sizes. Additionally, the platform is customisable, allowing companies to tailor the background check process to meet specific needs and requirements.

Trusted by some of the world’s best workplaces, Veremark has established a reputation for reliability and excellence in employee vetting. Learn more about our background checks here.  

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