This article outlines the changes to the Social Security System contribution rate which come into effect in April 2019. Employers, employees, self-employed individuals and voluntary members should all be aware of how this change might affect their finances.
CloudCfo is the service provider for finance, bookkeeping, payroll, tax and accounting services in the Philippines.
If you wish to receive tailored updates such as this one directly to your email, subscribe to our monthly newsletter here. Also visit www.cloudcfo.ph/blog on a regular basis for updates and information about accounting, financial, payroll and bookkeeping services in the Philippines.
The Social Security Commission has announced that, from the start of April 2019, the Social Security System (SSS) contribution rate will increase to 12%. The maximum monthly salary credits are also set to increase. If you are an employer, an employee, a self-employed or voluntary member, you should know the implications that these increases will have on your finances.
The Government’s SSS website have published a schedule detailing the new contribution rates. However, our Q&A below includes the Government’s schedule and outlines the key elements of the SSS and the effect the upcoming changes will have.
If you need any further information or advice on the SSS changes or on any other accounting services, bookkeeping services or payroll outsourcing in the Philippines, don’t hesitate to contact us at firstname.lastname@example.org or visit us at www.cloudcfo.ph.
Why are people suddenly talking about the SSS?
Earlier this year, the Government indicated that it would be increasing the SSS contribution rate at some point during 2019. The Governing Board of the SSS has recently confirmed that the increased contribution rate will take effect from April 2019.
What is the Social Security System?
The Social Security System (SSS) is a state-run pension fund for individuals working in the Philippines. It is a social insurance scheme that provides for various benefits during the lifetime of an SSS member.
How does it work from an employer perspective?
Employers are required to contribute a % from the salary of their employees and pay it into the SSS on a monthly basis. The contributions made during the employee’s career will then become a form of savings that they can access during their retirement. The SSS also provides for other types of social security benefits, for example, sickness benefit, disability benefit and maternity benefit.
What is the increase?
From April 2019, the SSS contribution rate will increase from 11% to 12% – an increase of 1%. The % contribution rate is based on minimum monthly salary credits (MSC) which in turn is based on an individual’s compensation. The maximum MSC will also increase, from PHP16,000 to PHP20,000, effective April 2019.
Who finances the contribution? The employer or the employee?
Both. The employer contributes two-thirds of the payment. The employee contributes the remaining one third. This will not change when the increased rate takes effect in April. Ultimately however, it is the employer who is required to actually submit the SSS contributions on behalf of the employer and its employees.
Will the contribution rate stay at 12% in the future?
No. The Republic Act No. 11199, signed into law earlier this year, provides for an increase to the contribution rate of 1% every second year until 2025 – at which point the contribution rate will be 15%. Employers should ensure to take this increase into account when preparing budgets and forecasts.
I am self-employed. Do I need to worry about the SSS or the increased contribution rate?
Yes. Self-employed individuals are responsible for calculating and paying the SSS contribution themselves (unless specific circumstances apply). It is important for self-employed individuals to review their SSS obligations and ensure to comply with them.
Where can I find more information on the increased rate?
The Government’s SSS website has published a user-friendly schedule which sets out the increased SSS contribution rates for individuals based on their compensation levels. We have also included the schedule below.
Let CloudCfo show you the most efficient processes for managing your accounting, bookkeeping, taxes and payroll services – tailored accountant services to fit your specific business model! Visit us at www.cloudcfo.ph or contact us at email@example.com.