Heads up, employers and employees. Here are the compensation and payroll updates in 2023 that you should take note of. First, the Bureau of Internal Revenue has implemented lower tax rates for Filipinos earning purely compensation income resulting in higher take-home pay for employees.
Meanwhile, the Social Security System has implemented an increase in the contribution rate from 13% to 14% effective January of this year. Below is a brief overview of the upcoming payroll-related updates so you can track and keep your files updated as the new year ushers in.
What are the 2023 personal income tax updates?
Filipinos are set to have more spending power in the coming months, as the BIR rolls out lower tax rates for individuals with purely compensation income. Enforced under the Tax Reform for Acceleration and Inclusion Law (TRAIN Law), individuals with taxable earnings of less than P8 million annually will have 15% to 30% tax rates effective this year. The rate will depend on the tax bracket they belong to.
Those earning below P250,000 are still exempt from paying their personal income taxes, but those whose annual taxable income is greater than P8 million will still have to pay 35% in personal income tax.
Below is a comparison of the tax rates between 2018 and 2023.
Tax rates for Filipinos earning above P250,000 to P2,000,000 were lowered by 5%, while those earning more than P2,000,000 to P8,000,000 were lowered by 2%. Those with over P8,000,000 in taxable income will still have a tax rate of 35%.
Meanwhile, those earning P400,000 to P800,000, P2,000,000 to P8,000,000, and above P8,000,000 will see a reduction of their bracket’s tax bases by P7,500, P27,500, P87,500, and P207,500, respectively.
How much is the increase in SSS contributions?
Pursuant to Republic Act No. 11199 or the Social Security Act of 2018, SSS contributions will have a 1% increase for 2023– another payroll update for 2023 that employees and employers should take note of!
This was signed by former president Rodrigo Duterte in 2018 and is seeking to raise contributions to 15% by 2025. In addition, there will also be an adjustment to the minimum monthly salary credit from P3,000 to P4,000, while the maximum salary credit will increase from P25,000 to P30,000.
Below is the updated schedule of contributions for your reference:
Who will shoulder the increase in SSS contributions in 2023?
The employer will shoulder the 1% increase in SSS contributions. Specifically, employers will have to pay 9.5% and employees will be deducted 4.5%. Before the increase, employer share is at 8.5%.
According to the SSS, the higher contribution rate will result in more SSS benefits for members and pensioners. Moreover, the SSS said that the contribution hike will help in making sure that the SSS will have a longer fund life. The SSS fund’s life got shorter from 2042 to 2032 in 2017, following the P1000 pension increase in 2017 and 2022. With the higher contributions, the agency’s fund life will be extended until 2045.
Are there changes for Philhealth and Pagibig contributions in 2023?
There are no current changes for both Philhealth or PAGIBIG contributions for this year. While Philhealth’s premium rates were set to go up from 4% to 4.5% this year, and the income ceiling expected to increase from P80,000 to P90,000, President Ferdinand “Bongbong” Marcos, Jr. ordered a suspension citing the socioeconomic challenges brought about by the COVID-19. The halt will give Filipinos a financial reprieve from the rising costs of goods and services, according to the Malacañang.
On a similar note, PAGIBIG contributions will not change this year. The Home Development Mutual Fund has decided to forego the planned increase in member contributions due to the economic hardships brought on by the pandemic. This is the third time PAGIBIG deferred their planned increase of members and employers from P100 to P150.
How will these changes affect employees’ take-home pay and compensation?
The lower tax rates implemented by the BIR will result in higher take-home pay for employees and are set to cushion them from the SSS increase should it lead to higher salary deductions. However, since employers will shoulder a higher percentage of the SSS contribution, employees will not feel the effect that much.
In order to keep tabs and make sure that you are in compliance with the payroll updates for 2023, you should consider getting in touch with an end-to-end payroll services provider. Cloudcfo’s streamlined and cloud-based HR and timekeeping system will do the job for you. Get a quote today and make payroll hassle-free and easier for you and your employees.
Why is paying your SSS contributions important?
Paying your SSS contributions is important because it is an agency that gives social security protection to workers in the private sector. It provides income replacement for workers during difficult times such as death, disability, sickness, maternity, and old age. Paying contributions correctly and on time ensures that you get SSS benefits without hassle and delay.
When was the last premium increase for PAGIBIG contributions?
The HMDF or PAGIBIG last raised their premiums in 1986. Since then, there has been no increase in members’ and employers’ contributions.
How can I track my employees’ contributions for SSS, PAGIBIG, and Philhealth?
Employers can track their employees’ government contributions through the online channels of SSS, PAGIBIG, and Philhealth. Their respective websites provide logins for both employees and employers and other members. For those who need assistance in payroll, there are experts that offer payroll services and expertise you can tap that will translate data into accurate and timely payroll registers. They also take care of your employees’ statutory compliance filings so you can focus on the most important part of your business– its growth!