Setting Up Payroll in the Philippines for a Foreign Company

Setting up payroll in the Philippines for the first time is a multi-agency process with firm deadlines. Missing a registration or miscomputing a contribution rate creates retroactive liability that compounds quickly — agency penalties, interest, and potential personal liability for company officers. The good news: the process is well-defined, and the compliance framework has been simplified under the Ease of Paying Taxes (EOPT) Act.

Before your first payroll run: the registration checklist

Your company must already hold a valid BIR Certificate of Registration (COR) before any payroll work begins. See our business registration guide if your entity is not yet registered. With the COR in hand, register with the following agencies:

1. SSS (Social Security System)

• Obtain an Employer SSS ID
• Register each employee within 30 days of their start date
• SSS provides social insurance: retirement, disability, sickness, maternity, and death benefits

2. PhilHealth (Philippine Health Insurance Corporation)

• Obtain a PhilHealth Employer Number (PEN)
• Enroll each employee upon hiring
• PhilHealth funds the national health insurance programme

3. Pag-IBIG / HDMF (Home Development Mutual Fund)

• Obtain a Pag-IBIG Employer ID
• Enroll each employee; contributions cover housing and provident fund benefits

4. BIR withholding tax on compensation

• No separate registration — add tax type 1601-C (withholding tax on compensation) to your existing COR via BIR Form 1905
• Set up your BIR eFPS or eBIRForms access for monthly filing

The 2026 contribution rates

SSS Employees’ Compensation (EC) fund: Employers also contribute a small EC levy (PHP 10 for MSCs up to PHP 14,750; PHP 30 for higher MSCs) on top of the standard contribution.

Withholding tax on compensation: Compute using the BIR withholding tax tables under the TRAIN Law income tax schedule. Taxable income = gross pay minus mandatory deductions (SSS + PhilHealth + Pag-IBIG employee shares) minus non-taxable allowances and de minimis benefits within prescribed limits.

Payroll cycle and remittance deadlines

Philippine payroll is typically semi-monthly (1st–15th and 16th–end of month). Statutory remittances follow separate schedules:

Late remittances attract penalties: 25% surcharge on the unpaid amount plus 12% annual interest and a compromise penalty. Company officers can be held personally liable for unremitted SSS and Pag-IBIG contributions under the respective laws.

What the EOPT Act changed

The Ease of Paying Taxes Act (RA 11976, effective January 22, 2024) introduced several simplifications relevant to payroll compliance:

• File and pay anywhere: Employers can now remit to any Authorised Agent Bank (AAB) or Revenue District Office (RDO), regardless of which RDO your company is registered under — no more strict venue requirements
• PHP 500 annual BIR registration fee removed: Effective for renewals under EOPT
• Invoices replace official receipts: BIR Revenue Regulations No. 7-2024 shifted the documentary standard from official receipts to invoices for all transactions — your payroll vendor invoices should now be commercial invoices, not ORs

BIR e-invoicing: where it touches payroll

The BIR’s Electronic Invoicing System (EIS), mandated under Revenue Regulation No. 11-2025, is being rolled out in stages from March 2026. Stage 1 covers large taxpayers (annual sales above PHP 1 billion) and e-commerce operators. If your Philippine entity qualifies as a Large Taxpayer, your invoicing — including payroll-related service invoices from vendors — must comply with EIS requirements. Mid-sized companies are expected to be phased in by end of 2026.

13th-month pay and annual obligations

In addition to monthly payroll, employers must:

• Pay 13th-month pay (one month’s basic salary pro-rated for months worked) by December 24 each year to all rank-and-file employees
• File BIR Form 1604-C (annual information return of income tax withheld on compensation) by January 31 of the following year
• Provide BIR Form 2316 (certificate of compensation payment and tax withheld) to each employee by January 31

See our 13th-month pay guide for computation details and the PHP 90,000 tax-exempt ceiling.

Running payroll in practice

Most foreign-owned companies in the Philippines start with one of two approaches:

1. In-house payroll using a cloud payroll platform that handles BIR and agency computations — practical for companies with a dedicated finance officer and 10+ employees
2. Outsourced payroll — a managed service that handles computation, payslip generation, agency remittances, and BIR filings — practical for companies building headcount from scratch or prioritising cost control

Our payroll service covers end-to-end setup: agency registrations, employee enrollment, monthly computation and remittance, and annual BIR filings. See our pricing or book a consultation to discuss your setup requirements.