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NOTE: This article was updated to include reference to Revenue Memorandum Circular No. 105 of 2019 and DOLE Department Advisory No.01-A.
The maternity leave benefit in the Philippines was recently extended from 60 days to 105 days through a new law – RA 11210, known as the 105-Day Expanded Maternity Leave Law.
Great news for employees and real progress for the labor law system!
Employers should, however, be aware of the implications of this new law from an accounting and finance perspective.
In this article, we explain: what the new law means for employers? Which employers are exempt? What are the financial implications? How is maternity benefit computed?
First off, what is the 105-Day Expanded Maternity Leave Law?
Contents
What is RA 11210?
Republic Act No. 11210 (RA 11210) also known as the 105-Day Expanded Maternity Leave Law is a new law, approved on 20 February 2019 and came into effect shortly after, which increases the standard period of maternity leave benefit in the Philippines for eligible employees from 60 days to 105 days.
The Implementing Rules and Regulations for RA 11210, which provide additional guidance on how the new law should be implemented, were signed on 1 May 2019.
The policy rationale behind this new law is to “protect and promote the rights and welfare of working women taking into account their maternal functions, and to provide an enabling environment in which their full potential can be achieved.”
Who is covered?
The law applies to all covered female workers in Government and in the private sector, including those in the informal economy, regardless of civil status or legitimacy of the child, in the instances of a birth, miscarriage or emergency termination.
For the purposes of this article, we are focusing on workers in the private sector only.
RA 11210 provides that, to be eligible for maternity benefit from the Social Security System or SSS, an employee must have paid at least 3 monthly SSS contributions in the 12 month period immediately preceding the semester of the birth, miscarriage or termination. An employee must also notify her employer of the pregnancy and expected date of birth.
The duration of the maternity benefit available to an employee may differ slightly depending on the circumstances of the birth, miscarriage or termination (see below).
Determining the duration of maternity leave
In order to compute the value of a maternity benefit, it is important to first clarify the maternity period applicable to an employee. This may depend on individual circumstances.
For workers who have given birth
Eligible employees are entitled to 105 leave days fully paid, regardless of whether the birth is through natural delivery or cesarean.
For miscarriages or emergency terminations
Employees who suffer miscarriages or emergency terminations of pregnancy are entitled to 60 days maternity leave benefit.
Additional extensions under the law
The Republic Act No. 8972 (Solo Parents’ Welfare Act of 2000) provides for an extended maternity leave benefit of an additional fully paid 15 days for solo parents.
Under RA 11210, eligible employees can extend their leave by 30 days if they wish. However, this additional 30-day period is unpaid and employees must provide written notice to their employers 45 days before the end of their maternity leave confirming that they wish to avail of the 30 day extension.
Financial implications for employers
Female employees in the private sector taking maternity leave are entitled to be paid their full salary during their maternity leave.
A portion of this maternity benefit is paid by SSS (as a result of prior SSS contributions from the employee).
However, RA 11210 mandates that private sector employers are responsible for paying the salary differential between the value of the cash benefits received from SSS and the employee’s full salary entitlement during a maternity leave period.
So employers should ensure that operational budgets take into account the level of payments that they are required to make to employees during their maternity leave.
We have outlined below an example for employers to help with calculating the salary differential.
Exempt employers
Not all private employers are required to pay the salary differential. Some employers can avail of an exemption!
The 105-Day Expanded Maternity Leave Law specifically identifies the following employers as being exempt from having to pay the salary differential:
- Employers operating distressed establishments (e.g. receivership, liquidation)
- Service/retail establishments and other types of enterprises regularly employing no more than ten (10) workers
- Micro business enterprises engaged in the production, processing or manufacturing of products or commodities including agro-processing, trading and services, whose total assets are not more than Three Million Pesos (P3,000,000)
- Establishments already providing benefits similar to or in excess of the benefits provided in RA 11210 (e.g. under a Collective Bargaining Agreement or existing company policy).
IMPORTANT – The above exemptions are only available as long as the employer can provide justification annually that they are entitled to an exemption. See below!
Applying for an exemption
To be deemed an “exempt employer” for the purposes of RA 11210, companies must apply for a Certificate of Exemption from the Department of Labor and Employment or DOLE, each year.
The application process requires the following:
- Submission of the DOLE Application Form;
- Submission of the company’s Certificate of Registration from the SEC, the Department of Trade and Industry/DTI or the Cooperative Development Authority
- Submission of the most recent Business Permit from the company’s Local Government Unit or LGU.
For further details on the registration requirements for exempt employers, check out DOLE’s guidelines on exemption requirements for RA 11210.
How to compute maternity leave benefits
RA 11210 requires that employers cover the difference between what SSS covers and what an employee would usually be entitled to earn under their salary.
SSS or the Social Security System is the state-run social insurance program for workers in the Philippines’ private sector. The SSS will pay some of the employee’s maternity benefit (based on previous employee contributions) and the employer pays the difference.
As an illustration, let’s assume that employee A is pregnant. Employee A has a monthly salary of P30,000.
In order to compute the cost to be covered by the employer, you need to determine first the full pay that Employee A would be entitled to receive during the 105 days.
Under the Implementing Rules and Regulations of RA 11210, full pay is defined as “actual remuneration or earnings paid by an employer to a worker for services rendered on normal working days and hours…”.
Computation of full pay
As per DOLE Department Advisory No. 01 Series of 2019, the full pay the employee should receive during her maternity leave will be computed as follows:
Full Pay = Monthly salary X maternity leave period in months
So it is necessary to:
- Determine the employee’s premium contribution share for SSS, PhilHealth and HDMF/Pag-IBIG during the maternity leave period (this will differ for each employee); and
- Determine the amount of the SSS maternity leave benefit receivable by the employee. This will differ for each employee and will be based on SSS formulae/computations.
Once these calculations have been made, in order to calculate the salary differential to be paid by the employer, the following computations should take place:
- Deduct a) the premium contribution share and b) the SSS maternity leave benefit payable from c) the full pay that the employee is entitled to.
A working example always helps! The figures below are estimates for illustration purposes only!
| Monthly Salary of Employee A | Full Pay Entitlement for Maternity Leave Period | Premium Contributions by Employee A | SSS Maternity Benefit receivable by Employee A | Salary Differential Payable by Employer |
| PHP 30,000 | PHP 105,000 | (PHP 5,000) | (PHP 72,000) | PHP 28,000 |
Is the salary differential payment subject to tax?
There was some uncertainty around the proper tax treatment of the salary differential payment when RA 11210 was first published. The BIR subsequently clarified the position.
Revenue Memorandum Circular No. 105-2019, issued on 9 October 2019, clarifies that the salary differential to be paid by the employer is exempt from income and withholding taxes. This was also confirmed through DOLE Department Advisory No.01-A.
To learn more about withholding tax, check out our recent articles about employer obligations on withholding taxes for employees and payroll deductions and contributions in the Philippines.
Financial penalties for non-compliance
Employers should ensure they understand their obligations under RA 11210!
Failure to comply may result in financial penalties, as follows:
- Fine of between P20,000 and P200,000
- Imprisonment for a duration of between 6 years and 1 day up to 12 years
- Both (a) and (b)!
- Non-renewal of business permits.
IMPORTANT – If the act or omission resulting in penalization is committed by an association, partnership, corporation or other form of institution, the managing head, directors or partners can be liable for these penalties!
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