SSS Contribution Rate Increasing – Payroll Services Update for PH Employers

Employers in the Philippines! Did you know that the SSS Contribution Rate is increasing from January 2025?

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 2023, the Contribution Rate increased from 13% to 14%. In 2025, the SSS Contribution Rate will be 15%.

The SSS has recently issued a new schedule of SSS Contributions, via SSS Circular No. 2024-006, 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 15%.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 2025.

So, under Republic Act No. 11199 and to ensure alignment with the increased Contribution Rate, the minimum MSC will increase to P5,000 from P4,000 (except for Kasambahay and OFW members) and the maximum MSC will increase to PHP35,000 from PHP30,000,

When Does the New Contribution Rate Kick In?

The increased SSS Contribution Rate and increased MSCs are effective for the applicable month of January 2025 and going forward.

This was confirmed under Social Security Commission Resolution No. 560-s.2024.

What Does This Mean for Payroll the Philippines?

An increase in the SSS (Social Security System) contribution rate in the Philippines means that both employers and employees will have to contribute more to the social security fund. Here’s how this affects Philippine payroll:

1. Higher Deductions for Employees
   With the contribution rate going up, employees will notice a higher deduction from their monthly salary. This will reduce their take-home pay, as a larger portion will go toward the SSS contribution.
2. Increased Employer Contributions
   Employers are also required to pay a larger share of the contribution. This means employers will have to pay more for each employee, in addition to deducting the employee’s portion from their salary.
3. Impact on Payroll Processing
   The payroll team will need to update the payroll system to reflect the new contribution rates. This includes recalculating deductions, adjusting salary brackets, and ensuring that contributions are accurately remitted to SSS.
4. Potential Adjustments in Salaries
   Some employers may choose to adjust employee salaries or offer other forms of compensation to help offset the impact of the increased deductions. However, this will depend on the company’s policies and financial situation.
5. Long-term Benefits
   While the immediate effect of an increased contribution is higher deductions, this change will help ensure the sustainability of the SSS system, which provides essential benefits such as retirement, disability, and health coverage for employees in the future.

In summary, an increase in the SSS contribution means more funds are being set aside for employees’ future social security benefits. However, it also leads to higher deductions and costs for both employees and employers. Employers will need to update their payroll systems to reflect these changes.

Who is Responsible for Paying the Contribution? Is it the Employer or the Employee?

For private employees in the Philippines, both the employer and the employee share the responsibility of paying the SSS premium contributions.

Here’s how it works:

• Employee’s Share: A portion of the employee’s salary is automatically deducted by the employer to cover the employee’s share of the contribution.
• Employer’s Share: In addition to the employee’s portion, the employer also contributes to the SSS on behalf of the employee. The employer’s share is paid directly by the employer.

So, while the employee’s share comes out of their salary, the employer is responsible for both deducting it and ensuring that the total contribution (employee’s and employer’s portions) is paid to the SSS on time.

In short, the employer manages the process, but both parties contribute to the payment.

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 2025 via SSS Circular No. 2024-006.

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DISCLAIMER: This article is strictly for general information purposes only. Nothing in this article constitutes or intends to constitute financial, accounting, regulatory or legal advice and must not be used as a substitute for professional advice. It is still necessary to consult your relevant professional adviser regarding any specific matter referenced above.