Employers in the Philippines! Did you know that the SSS Contribution Rate is increasing from January 2021?
If you are the Founder, Owner or Manager of a business here in the Philippines, you need to consider the implications that this increase will have on your payroll function and your finances.
So below, we have outlined the key elements of the recent SSS Contribution Rate increase and importantly, what it means for employers and businesses in the Philippines!
What is the Social Security System?
The Social Security System (SSS) is a state-run pension fund designed to support individuals who are working here in the Philippines.
The SSS is the country’s social insurance scheme and it offer various benefits and advantages for SSS members for the duration of their membership of the scheme.
Why are People Now Talking About the SSS Contribution Rate?
Republic Act No. 11199, also known as the Social Security Act of 2018, came into force in 2018.
RA No. 11199 implemented a schedule for the rate of SSS contributions (and minimum and maximum monthly salary credits) to increase on an ongoing basis at specific intervals over the coming years.
In short, RA No. 11199 provides for an increase to the SSS Contribution Rate of 1% every second year until 2025. In 2019, the Contribution Rate increased from 11% to 12%. In 2025, the SSS Contribution Rate will be 15%.
The SSS has recently issued a new schedule of SSS Contributions, via SSS Circular No. 2020-033, which further confirms that the increase of the SSS Contribution Rate, as per the schedule in RA No. 11199, is now coming into effect.
What is the Increased Contribution Rate?
The new SSS Contribution Rate will be 13%. As mentioned above, since 2 years ago, the Contribution Rate has been 12%. So, a 1% increase in 2021.
The % contribution rate is computed based on minimum monthly salary credits (MSC) which in turn is based on an individual’s compensation.
The minimum MSC and the maximum MSC are also increasing in 2021.
So, under Republic Act No. 11199 and to ensure alignment with the increased Contribution Rate, the minimum MSC will increase to P3,000 from P2,000 (except for Kasambahay and OFW members) and the maximum MSC will increase to PHP25,000 from PHP20,000,
When Does the New Contribution Rate Kick In?
The increased SSS Contribution Rate and increased MSCs are effective for the applicable month of January 2021 and going forward.
This was confirmed under Social Security Commission Resolution No. 578-s.2020.
What Does This Mean for Payroll the Philippines?
Employers need to consider this increased Contribution Rate when preparing budgets and forecasts for their business.
While the rate of increase might be small, for businesses with a large number of employees, the implications may not be insignificant.
Under the SSS, employers are obliged to contribute a certain % from the salary of their employees and pay it into the SSS every month. All contributions submitted during a particular employee’s career will then form a type of savings account that employees can access once their retirement kicks in.
The SSS also provides for a range of other social security benefits, including sickness benefit, disability benefit and maternity benefit.
Who is Responsible for Paying the Contribution? Is it the Employer or the Employee?
Actually – it’s both the employer and the employee!
The employer contributes two thirds of the relevant payment contribution. The employee contributes the remaining one third. So with the increased Contribution Rate, the increased amount will be divided across both employer and employee.
Ultimately however, the onus and responsibility to prepare and submit the SSS Contribution filings and payments each month lies with the employer.
Where can I find more information on the increased SSS Contribution Rate?
The Government’s SSS Website has published a reader-friendly Schedule which outlines what the new increased SSS Contribution Rate means across different salary brackets.
For ease, you can check out the SSS Contribution Rate Schedule for 2021 via SSS Circular No. 2020-033.
Actually – Yes.
As a result of COVID-19 and the strain the pandemic has put on the economy, there has been efforts made within Government to seek to defer this scheduled increase to the SSS Contribution Rate.
Recently, the House of Representatives Committee on Government Enterprises and Privatization has approved a measure enabling the Government to defer the proposed 1% increase in 2021.
Watch this space for further updates (if any) on the possible deferment of the increase to the SSS Contribution Rate for 2021.
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