Filing your Income Tax Return (ITR) Philippines is crucial for responsible financial management, but it can also seem daunting. This guide simplifies the process and equips individuals and businesses with the knowledge and tools to navigate how to compute ITR Philippines effectively.

Who is Required to File for ITR?

Individuals and entities engaged in income-generating activities are required to compute ITR Philippines. This includes employees, self-employed individuals, corporations, partnerships, and other entities earning income within the country.

According to the Bureau of Internal Revenue (BIR), you are mandated to file income tax return, if it meets the following criteria: 

• Resident citizens engaged in trade, business, or practice of profession within and without the Philippines.
• Non-resident citizens who have income from sources within the Philippines.
• Resident aliens who have income from sources within the Philippines.
• Non-resident aliens engaged in trade or business in the Philippines.
• Estates and trusts engaged in trade or business in the Philippines.
• Corporations, partnerships, and other juridical entities registered with the Securities and Exchange Commission (SEC) and doing business in the Philippines.
•  Cooperatives registered with the Cooperative Development Authority (CDA) and doing business in the Philippines.

Common Jobs in the Philippines

The Philippines boasts a diverse workforce, with individuals employed in various sectors contributing to the nation’s economy. Understanding the landscape of common jobs is crucial in the context of ITR Philippines filing, as it helps identify who might be required to participate in this process.

While specific income thresholds determine the mandatory filing of ITRs in the Philippines, individuals earning above the minimum wage in various occupations are generally obligated to file their tax returns. Here are some examples of common jobs in the Philippines that fall under this category:

Agriculture

The Philippines is an agricultural country, with about 30% of the land area devoted to farming. The major crops are rice, corn, coconut, sugarcane, banana, pineapple, and mango. Agriculture employs about  24% of the labor force and contributes about 8.6% of the GDP. 

Construction

The construction industry is one of the fastest-growing sectors in the Philippines, thanks to the government’s infrastructure program and the increasing demand for housing and commercial spaces. Construction employs about 8% of the labor force and contributes about 7.2% of the GDP.

Housework

Many Filipinos work as domestic helpers, either locally or abroad. Housework involves tasks such as cleaning, cooking, laundry, childcare, and elderly care. Housework employs about 4% of the labor force and contributes about 1.9% of the GDP.

Transportation

The transportation sector is vital for the movement of people and goods across the country. The common modes of transportation are jeepneys, buses, tricycles, taxis, trains, and airplanes. Transportation contributes about 3.6% of the GDP and this sector alone has a total of 209,919 workers. 

BPO

Business process outsourcing (BPO) is the practice of contracting non-core business functions to a third-party provider. The Philippines is one of the leading BPO destinations in the world, offering services such as call centers, data entry, accounting, human resources, and information technology. In 2022, the Philippines IT-BPO industry emerged as the country’s leading employer, boasting over 1.44 million full-time employees and contributing about 6.3% of the GDP.

What is the Minimum Wage in the Philippines?

According to the Department of Labour and Employment, the national minimum wage in the Philippines is ₱610 per day. However, the salaries of Filipino workers vary according to their region, and sector. For instance, Metro Manila has the highest minimum wage, at ₱505.23 per day. Rural locations usually have the lowest salary ranges.

How to Compute Income Tax Return Philippines

When it comes to computing ITR Philippines, understanding the process is important. From determining your taxable income to applying deductions and credits, each step plays a vital role. Here is the breakdown of the key elements involved in calculating your ITR Philippines: 

Gather documents

The first step to compute ITR Philippines is to gather all the necessary documents that will serve as the basis of your income and deductions. These documents include:

Income documents: These are the documents that show how much income you earned in a given year, such as the BIR Form 2316 (Certificate of Compensation Payment/Tax Withheld), payslips, bank statements, invoices, receipts, etc.

Deduction documents: These are the documents that show how much expenses you incurred in relation to your income, such as BIR Form 2307 (Certificate of Creditable Tax Withheld at Source), official receipts, and vouchers.

Proof of tax payments: These are the documents that show how much taxes you already paid or withheld in a given year. 

You should keep these documents organized and accessible, as you will need them to fill out the appropriate ITR Philippines forms and to support your tax declarations in case of an audit.

Determine your taxable income

The next step on how to compute income tax return Philippines is to determine your taxable income, which is the amount of your gross income used to calculate how much tax you owe in a given year.

(Tax Income = Gross income – allowable itemized or standard deductibles)

To determine your taxable income, you need to follow these steps:

Step 1: Choose your tax rate

Graduated Income Tax (GIT): This is the standard tax scheme based on your total taxable income. You can find the tax rates in the BIR’s tax table.

8% Preferential Tax Rate: This is a simplified scheme where you pay a flat 8% tax on your gross sales/receipts. However, this option is only available if your annual gross sales/receipts do not exceed ₱3,000,000.

Step 2: Calculate your gross income

Gross income or gross sales refers to the total income earned by an individual on a pay check before taxes and other deductions.

You can do this by adding up your income from all sources, such as compensation income, business income, passive income, etc. 

Step 3: Calculate your allowable deductions (if applicable):

You can go for either a 40% Optional Standard Deduction (OSD) or itemized deductions.

40% OSD: This allows you to automatically deduct 40% of your gross income as business expenses without needing to provide individual receipts.

Itemized deductions: This involves listing and providing receipts for all your actual business-related expenses. This option might be beneficial if your expenses exceed 40% of your income.

Step 4: Subtract deductions from gross income to get your taxable income

Subtract any allowable deductions from your income, such as personal and additional exemptions, optional standard deduction (OSD), itemized deduction, etc. The result you get is your taxable income which is further used to compute ITR Philippines.

The following is the formula used to compute ITR Philippines:
Taxable Income = (Monthly Basic Pay + Additional Pay) – (SSS + PhilHealth + PAG-IBIG + Deductions Due to Absences/Tardines)

• Identify Your Tax Type: Are you a resident or non-resident taxpayer? This affects your tax obligations.
• Refer to the BIR Tax Table: This table shows the tax rates for different income brackets under the GIT scheme.

Find your tax rate

The tax rates and brackets vary depending on your tax type and income type. For example, for individual compensation income earners, the tax rate is based on a progressive system, where the higher your taxable income, the higher your tax rate. The tax rates range from 0% to 35%, with six brackets. 

For corporate income earners, the tax rate is based on a flat system, where the tax rate is the same regardless of your taxable income. The tax rate is 30% for domestic and resident foreign corporations, and 35% for non-resident foreign corporations.

Calculate tax due

• Multiply next taxable income by the tax rate from the table: Once you identify your tax bracket, find the corresponding tax rate. Multiply your taxable income by this tax rate. This gives you the basic tax liability before further adjustments.
• Subtract any tax credits or withheld taxes: If applicable, subtract any tax credits you’re eligible for from your basic tax liability. These credits can reduce your overall tax owed. Additionally, if your employer withholds income tax from your salary, subtract the amount withheld from your basic tax liability. This reflects the tax already paid on your behalf.

If your tax due is positive, it means that you have to pay the difference to the government. If your tax due is negative, it means that you have a tax refund or a tax credit that you can use for future tax payments.

Preparing for Income Tax Return Philippines

To compute ITR Philippines, we have outlined the necessary steps needed in preparation for it. 

1. Determine the forms you need: Tax returns are generally prepared using forms prescribed by BIR. Depending on your income type and situation, you may need BIR Form 1701, 1701A, or 1700 as an Individual taxpayer.

• Form 1701 can be used if you’re a mixed-income individual, that is you are earning from employment and a side profession or business (e.g freelancer, consultant)
• Form 1701A can be used if you are receiving income from your profession or business. 
• Form 1700 can be used for individuals who are earning based on employment income. This remains solely their only source of income. 

For Corporate taxpayers, the forms available are:

• Form 1701Q is used for reporting quarterly income.
• Form 1702-MX is used to report mixed income subject to varying tax rates.
• Form 1702-RT is used when reporting income subject to a regular or fixed tax rate.

2. Gather necessary documents: As outlined in the computation process above, once you have determined the forms needed, collect all required income, deduction, and payment proofs. 

3. Choose your filing method: To successfully compute ITR Philippines, you need to determine which filing method is right for you. There are two filing methods available: 

• Online: This is done through the electronic filing and payment system (eFPS) and electronic BIR forms (eBIRForms). If you want to compute ITR Philippines via eFPS, it requires taxpayers to pay taxes online through the convenience of an Internet banking service via debit from their enrolled bank account. eBIRForms is a tax preparation software that allows taxpayers to fill out their tax forms, by submitting their papers to the system. 
• Offline: This is done manually by preparing and submitting a physical ITR form at your Revenue District Office (RDO).

4. Calculate your taxes: Use the steps mentioned above to determine your tax liability.

5. Pay your taxes (if applicable): To avoid penalties and interest charges, it is important to pay taxes on time. If you have them due, make the payment through authorized channels before the deadline.

The deadline for computing ITR Philippines falls on the 15th of April every year following the close of a taxable year. 

Read more: HR’s Guide to Payroll Taxes in the Philippines

Tools to Improve ITR Philippines Processing

There are many tools and strategies to improve the processing of ITR Philippines. From digital platforms to software solutions, various tools can streamline and enhance the efficiency of ITR processing. Here are some of the key tools that you can implement to simplify and improve your ITR Philippines processing: 

Spreadsheets

Spreadsheets have been a go-to tool for managing data, which is also used when individuals and entities compute ITR Philippines. This tool allows you to compute your income and deductions along with the tax figures manually. 

While spreadsheets offer a free and customizable option, the manual effort involved in data entry, formula creation, and error checking can be significant, especially for individuals or businesses with complex tax situations. The risk of errors can also lead to inaccurate calculations and potential tax liabilities.

Tax software

Tax software presents itself as a modern solution to compute ITR Philippines in an effective manner. This tool offers a user-friendly and efficient alternative to manual spreadsheets. 

However, it’s often separate from existing systems, meaning your HR department has to input information from various sources. Every time data needs to be transferred from one system to another, there’s a chance for errors. Manual data entry, even with careful review, can introduce typos, inconsistencies, and missed information. 

These errors can have significant consequences, like underpaying or overpaying taxes, leading to penalties and audits. Additionally, investing in tax software incurs an extra cost, which might not be feasible for all organizations.

HR automation

With HR automation, the chances of human error are minimized and accurate results are ensured. This tool is designed to compute ITR Philippines easier and faster. 

It streamlines the process, making filing your income tax return more efficient. There’s no need for additional data input when using HR tools. Your information is already stored within the system, reducing errors and speeding up the process. Plus, it integrates seamlessly with your existing HR processes, making information easily accessible when you need it most.

Read next: Top 6 HRIS Philippines for 2024

Stay Ahead of the Philippines Tax Season with Omni

Navigating the complexities of ITR Philippines can be overwhelming, but with the right tools, such as Human Resources Information System (HRIS), organizations can streamline the process.

HRIS like Omni can automate data collection, calculation, and submission, ensuring accuracy and compliance with tax laws. Omni offers a comprehensive payroll solution tailored to Philippines specific requirements. 

With features like support for Philippine peso, automated tax calculations, and managed SSS, PhilHealth and PAG-IBIG contributions, Omni can help HR teams simplify ITR Philippines processing and ensure compliance with ease. 

Book a demo with us today and see how Omni can simplify the intricacies and complexities of preparing and submitting for income tax reporting in the Philippines and minimize the costs associated with common errors.

For HR professionals in Singapore, understanding the Employment Act Singapore is crucial. It is perhaps the most important labor law in the country, and covers everything from wages to working hours. Staying compliant with its regulations is essential.

That said, the Act is subject to frequent updates (with the most recent change implemented in January 2024). Staying up to date and interpreting not only the mandatory regulations, but also the common practices it outlines is important for HR success in Singapore.

In this guide, we will delve into the specifics of the Employment Act Singapore, everything from who it applies to, key provisions to be aware of, and tips for staying compliant. 

Who is Covered by the Employment Act Singapore?

The Employment Act Singapore covers all employees, regardless of nationalities, except for certain groups such as managers and executives, domestic workers, seafarers, and public servants. The Act covers employees who:

• Work under a contract of service (written or verbal.)
• Employed entirely or partially in Singapore 
• Workers engaged in manual labor earning a basic monthly salary of no more than S$4,500, other workers earning a basic salary of no more than S$2,600. 

The Employment Act Singapore provides basic protections for the employees it covers, including regulating working hours, overtime pay, rest days, annual leave, and the regulations around terminations or lay-offs. Knowing the specifics of The Act, and staying up to date with any changes or additions should be a top priority if you’re an HR professional working in Singapore.

Key Provisions of the Employment Act Singapore

The Employment Act Singapore has many different provisions that are put in place to protect the rights of employees working in Singapore. They can broadly be placed into two categories. These are:

Core provisions

• Employment terms and conditions: The Employment Act Singapore regulates that employers must provide written employment contracts to employees within the first two months of their employment, and they should outline the terms and conditions involved, such as job scope, working hours, and salary details.
• Working hours: It also specifies the maximum number of working hours per day and week, including rest day requirements and overtime pay entitlements for work beyond stipulated hours. For most employees, this comes out to 9 hours per day (44 hours per week) with any work in excess of that being considered overtime. 
• Annual leave: The Act mandates minimum annual leave entitlements for employees based on their length of service, ensuring they receive adequate rest and recreation. After employees have served three months, they are entitled to seven days of leave, which increases one day per year of service up to the maximum 14 days. Employers are also required to keep accurate records of employees’ attendance and overtime. While the statutory standard working hours are regulated, many organizations also offer flexible or remote work arrangements, such as telecommuting or flexible schedules, to accommodate their employees’ needs and promote work-life balance.
• Public holidays: It also regulates employee entitlement to paid public holidays and payment arrangements for work performed on such days. In Singapore, there are a total of 11 public holidays.
• Sick leave and medical benefits: The Employment Act Singapore includes provisions for sick leave entitlements, including certification requirements and medical benefits for ill employees. Employees who have served at least 3 months of service and who provide 48 hours’ notice of absence are entitled to 14 days of sick leave and 60 days of paid hospitalization leave. It’s important to note that the 60 days of paid hospitalization leave includes the 14 days of sick leave unless the employee has worked for 6 months or more, in which case they receive the full entitlement. 
• Termination of employment: The act also regulates termination procedures, including notice periods, termination without notice, and payment of salary in lieu of notice.

Read next: HR’s Guide to Managing Singapore Employment

Part IV Provisions

• Additional protection for manual laborers: Part IV of the Employment Act Singapore provides added protections for workers engaged in labor-intensive jobs. These include regulations on working hours, rest intervals, and overtime pay rates.
• Benefits for non-manual laborers: It also includes provisions related to benefits such as annual leave, public holidays, and sick leave for workers making less than S$2,600 per month, ensuring fair treatment for all types of employees.

These key provisions of the Employment Act Singapore serve as the foundation for regulating employment and promoting a healthy and fair work environment for all employees. 

Statutory Requirements and Common Practices

While the Employment Act makes certain regulations legally binding, it also outlines some common practices most employers choose to abide by, and encourages other Singaporean organizations to follow suit. Here’s what you should consider, aside from the core provisions mentioned above:

• Salary and wages: While there’s no regulated minimum wage in Singapore, companies who wish to access a variety of government subsidies need to abide by the Local Qualifying Salary for their employees of at least S$1,400 per month. While that is generally a baseline, many employers in Singapore offer competitive salaries and benefits packages to attract and retain talent, which may include performance bonuses, incentives, and allowances such as transportation or meal subsidies.
• Health insurance: While the Employment Act does not mandate health insurance coverage for employees, many employers offer comprehensive medical insurance plans as part of their employee benefits package to provide financial protection and access to healthcare.
• Maternity and childcare leave: Under the Employment Act, mothers of newborn Singaporean citizens are entitled to 16 weeks of paid maternity leave, while mothers of non-Singaporean citizens receive 12 weeks of unpaid leave. Fathers are eligible for four weeks of leave, which must be taken within 12 months of their child’s birthdate. Many Singaporean employers voluntarily offer an additional two weeks of parental leave. Employers can apply to the government for reimbursement for these maternity leaves once they have been provided.

Learn more: HR’s 2024 Guide to Singapore Maternity Leave

• Probation period: While The Act doesn’t mandate a probation period, it allows for one, and it’s very common for employers to take a three to six month period where they assess the skills and fit of their new hires before committing to them fully.
• Employment termination: The Employment Act Singapore regulates the termination of employment relationships, including notice periods, severance pay, and the circumstances under which employment can be terminated. The most important item The Act stipulates is that the employment contract originally offered to the employee is followed closely. 
• Retrenchment, layoffs, downsizing: In cases of retrenchment, layoffs, or downsizing, employers must comply with the statutory requirements regarding notice periods, severance pay, and the provision of support services to affected employees. These include notifying the Ministry of Manpower (MOM), and abiding by the terms of employment contracts. Although not mandatory, the MOM website strongly recommends offering two weeks to one month of salary for every year of service is a common and likely expected practice for employees facing retrenchment. 
• CPF Contributions: The Central Provident Fund (CPF) is a mandatory social security savings scheme for both Singaporean employers and employees. Employers are required to make CPF contributions for their eligible employees based on specific contribution rates set by the CPF Board, which vary based on the age of the employee in question.

Non statutory benefits & perks

• Personal well-being: Employers can and often do provide a variety of wellness programs and initiatives to support their employees’ physical and mental well-being. These can include gym memberships, wellness workshops, counseling services, and employee assistance programs (EAPs).
• Travel allowance: Most employers looking to stand out in recruiting provide travel allowances or reimbursements to employees for business-related travel expenses, such as transportation, meals, and accommodation. These allowances help keep expenses down for employees who need to frequently travel for business. 
• Relocation package: For employees relocating for work purposes, many employers offer relocation packages to help with the costs and challenges of moving. These packages include financial assistance for housing, transportation, moving expenses, and settling-in allowances.
• Employee Stock Purchase Plans (ESPP): ESPPs are programs that allow employees to purchase company shares at a discounted price, often through payroll deductions. These plans enable employees to become shareholders in the company and potentially benefit from its financial performance—sharing in the success of a company is a great way to boost employee engagement and motivation.

Strategies to Stay Compliant with the Employment Act Singapore

As we’ve already laid out, there’s more than a few regulations from the Employment Act Singapore you’ll need to keep in mind. Failing to follow them could lead to fines or legal consequences—something your organization will certainly want to avoid. Here’s some tips to ensure you are compliant:

Leverage HRIS for accurate recordkeeping

Implementing a robust Human Resources Information System (HRIS) will greatly assist in ensuring compliance with the Employment Act Singapore. An HRIS harnesses automation and streamlines many different HR processes, including payroll management, leave tracking, and employee data management. 

By maintaining accurate records of employee information, work hours, salaries, and statutory benefits, an HRIS helps minimize risk and ensures thorough recordkeeping for potential audits. Additionally, it improves operational efficiency, enhances data accuracy and facilitates informed decision making through access to real-time analytics.  

Read next: The 7 Best HR Software Singapore Has to Offer in 2024

Hire a local HR manager

Employing a local HR manager who is well-versed in the Employment Act Singapore and the regulations associated with it is a great idea for ensuring compliance. A local HR manager can provide valuable, first-hand insights and guidance on interpreting the provisions of the Employment Act, as well as other relevant legislation. They can also serve as a point of contact for your employees’ questions and concerns regarding their rights and entitlements under the law.

Seek expert guidance

Given the complexities of employment laws and regulations in Singapore, your organization might benefit from seeking expert guidance from legal professionals or HR consultants specializing in local labor laws. These experts can provide tailored advice on compliance, including interpreting legal requirements, conducting compliance audits, and addressing any gaps or issues before they become a problem. 

Also, it’s a good idea to attend regular training sessions or workshops on employment law updates and compliance best practices to help you and your HR team stay informed and up-to-date on regulatory changes.

Omni Helps HR Leaders Stay Compliant in Singapore

HR managers have their hands full, and the ever changing Employment Act Singapore adds yet another layer of responsibility to their already existing workload. Tracking and calculating hours, managing employee records, and administering payroll requires a clear, secure, and accurate system to ensure compliant and timely payouts for your employees.

Omni’s all-in-one HR solution helps make these tasks streamlined and free of manual error to reduce the administrative burden on HR. With secure and centralized employee database, HR teams can easily store, update, and communicate employee information across departments and with employees. Our payroll solutions make it easier than ever to calculate accurate employee payments and tax calculations through automation that saves time and reduces errors. And with automated payroll information synchronization, end of month processing becomes a streamlined and seamless effort.

Start your free trial today and learn how Omni can help you remain compliant with regulations like the Employment Act Singapore and reduce your administrative workload for all of your People management needs.

The Social Security System (SSS) in the Philippines is a safety net Filipinos rely on. It covers individuals and families in times of need, such as retirement, disability, sickness, maternity, or death. The trust in the system has considerably increased as its 2023 revenue surged to ₱362.20 billion, exceeding its revenue target of ₱330.80 billion by 9.5 %.

In fact, in 2022, SSS disbursed a total of ₱236.3 Billion in benefits from January to November 2022, a whopping growth of 13.2% from the ₱208.8 Billion for the same period recorded last year. If the numbers continue to increase annually, one can  imagine the significant benefits that SSS provides to its members. 

All registered businesses and establishments in the Philippines are required to contribute to SSS for their employees. Furthermore, employees regardless of their employment status are mandated to contribute SSS. Understanding how to calculate your SSS contribution is crucial. This article will delve into the calculations and rates, which vary based on several factors. 

What is the Social Security System (SSS) fund?

The Social Security System (SSS) fund refers to the pool of money managed by the Philippines’ Social Security System, consisting of contributions from both employers and employees. These funds are utilized to provide social insurance, retirement, and other benefits to employees and workers.

The goal is to ensure members are looked after both presently and in the future. The government closely monitors the fund and makes prudent investment decisions to maintain its health. 

Who is covered by SSS benefits?

SSS benefits cover the following individuals, ensuring both theirs and their families’ protection against incidents such as sickness, disability, maternity and retirement: 

• Private employees: this category includes individuals employed by private companies or corporations. Whether you work for a large corporation or a small business, as long as you are employed in the private sector, you are likely covered by the SSS benefits. 
• Household helpers and domestic workers: these are the individuals who work in private households, assisting with household chores, childcare, or other domestic duties. It includes maids, nannies, cooks, gardeners, and other similar roles. 
• Drivers and operators of public utility vehicles: this group consists of people who operate public transportation vehicles such as buses, jeepneys, taxis, tricycles, and other forms of public transport. Given the nature of their work and the services they provide to the community, they are eligible for SSS benefits to address their social security needs. 
• Self-employed persons: self-employed individuals are those who run their own businesses or work independently without being employed by a specific company. It includes freelancers, entrepreneurs, consultants, and professionals who operate their businesses on a freelance basis. 

Who can perform SSS contributions?

All individuals, including employees, self-employed individuals, non-working spouses, and Overseas Filipino Workers (OFWs) up to the age of 60 who possess an existing SSS number, have to make SSS contributions to either initiate or maintain their coverage. Moreover, employers are mandated to contribute on behalf of their employees.

It’s important to note that unemployed Filipinos can voluntarily make SSS contributions only if they have prior employment or self-employment or were previously OFW members with a verified history of at least one month of contributions. Moreover, SSS provides flexibility for certain members, such as farmers and fishermen, permitting them to contribute at any time within the twelve months preceding their payment schedule. 

What is the SSS Contribution Rate for 2024?

In 2021, the SSS contribution rate was set at 13%. However, it increased to 14% in 2023 and stands strong in 2024 as well. Of this 14%, 9.5% of SSS contributions are made by the employer, while employees contribute 4.5% of their monthly salary credit. 

The SSS Contribution Schedule was originally scheduled to increase by 1% every year starting January 2023, reaching 15% by January 2025. However, due to economic concerns and public feedback, the Philippine government decided to defer the planned increase for 2024. 

As a result, both employers and employees will continue to contribute at the current rate of 14% throughout 2024. This applies to employees earning a monthly salary within the range of ₱4,000 to ₱30,000.

How to calculate SSS contribution?

The SSS contribution is made by both employer and employee when an individual is permanently employed by a company. For freelancers, self-employed individuals, overseas workers, and voluntary members, contributions are made differently. Let’s explore the specifics for each of these cases.

Regular employers and employees

The SSS contribution for regular employers and employees is covered based on the employee’s monthly salary credit (between ₱4,000 and ₱30,000). Both the employer and employee contribute to the SSS as per the contribution rate (14%). Out of the 14%, 9.5% of the monthly salary credit goes into SSS contributions by the employer. The remaining 4.5% is contributed by the employee. 

For example, Christina earns a monthly salary credit of ₱20,000.

Employer’s contribution: 9.5% x ₱20,000 = ₱1,900

Employee’s contribution: 4.5% x ₱20,000 = ₱900

Total SSS contributions: ₱1,900 + ₱900 = ₱2,800

In addition to the regular SSS contribution, employers also make monthly contributions to the employee compensation (EC) program. Employees earning below ₱15,000 receive ₱10, while the ones making ₱15,000 and above receive ₱30. 

Self-employed members 

Self-employed members determine their monthly contributions based on their declared monthly earnings. The contribution rate remains the same (14%) in their case as well. Since self-employed individuals do not have an employer to contribute on their behalf, they are solely responsible for making their own SSS contribution. This ensures they are covered under the social security system and are eligible for the benefits it provides.

For example, Nathaniel makes a monthly salary credit of ₱4,000 per month.

Total SSS contribution: 14% x ₱4,000 = ₱560

Employee compensation (EC): ₱10

Self-employed individuals, in this case Nathaniel, can contribute the total amount of ₱570 using various payment channels provided by SSS. These include online platforms, authorized banks, or SSS branches. 

Voluntary members and non-working spouses

Calculating SSS contributions for voluntary members and non working spouses is similar to regular employees, whereby the contribution rate remains the same (14%), However, the difference lies in determining the Monthly Salary Credits (MSCs).

For voluntary members, their MSC is based on their declared monthly income during registration. It can range from ₱4,000 to ₱30,000.

For example, Maria declared a monthly income of ₱12,000.

MSC = ₱12,000

Total SSS contribution: 14% x ₱12,000 = ₱1,680

As for non-working spouses, their MSC is based on 50% of their working spouse’s MSC.

For example, a working spouse has an MSC of ₱15,000.

Calculation of SSS contribution for non-working spouse:

MSC = 50% * ₱15,000 = ₱7,500

Total SSS contribution: 14% x ₱7,500 = ₱1,050

It is important to note that non-working spouses can choose an MSC between ₱4,000 and ₱30,000, but it cannot be higher than 50% of their working spouse’s MSC. 

Household employers

Household employers are those who employ household helpers such as maids and drivers. The employer is in charge of making both theirs and the employee’s share of SSS contribution, with the employee’s share deducted from their salary. 

For example, a household helper earns a monthly salary of ₱12,000.

Employer’s contribution: 9.5% x ₱12,000 = ₱1,140

Employee’s contribution: 4.5% x ₱12,000 = ₱540

Total SSS contributions: ₱1,140 + ₱540 = ₱1,680

Overseas Filipino workers

Overseas Filipino workers (OFWs) are individuals from the Philippines who are employed or working abroad. They may be employed in various sectors such as healthcare, construction, domestic work, hospitality, and more. The Social Security System makes it a point to provide a safety net and financial security for them and their families back home. OFWs have the option to become voluntary members of the SSS and can continue their coverage even while working abroad. 

The SSS contributions are made based on their declared earnings abroad. They can make these contributions through online platforms, accredited banks, remittance centers, or through authorized SSS representatives in their host countries. 

For example, Sophia has a MSC of ₱8,000.

Total SSS contribution: 14 % x ₱8,000 = ₱1,120.

These individuals are also provided assistance services specifically tailored to their needs. This includes information dissemination, assistance in processing claims and benefits, and outreach programs conducted in coordination with Philippine embassies and consulates abroad. 

Learn more: HR’s Guide to Payroll Taxes in the Philippines

When to pay SSS contributions?

SSS contributions are typically made on a monthly basis, with the deadline varying based on membership type. While you can manually handle the payment procedure, it’s better to invest in a trusted HRIS in the Philippines. It automates the entire process and simplifies the payment breakdowns, which are as follows in different cases: 

• Employers and employees (monthly) 

For employees, SSS contributions are deducted from their salaries by the employers and remitted to the SSS. Employers must pay the total amount, including their share, by the last day of the month following the applicable month. For example, contributions for April 2024 should be paid by 31 May 2024.

• Household employers (monthly/quarterly) 

Household employers can remit SSS contributions either monthly or quarterly, with the payment due by the last day of the month following the applicable period. Quarterly payments are generally preferred. Thus, contributions for January 2024 can be made by 30 April 2024.

• Self-employed, voluntary, and non-working spouse members (monthly/quarterly) 

Similar to household employers, self-employed, voluntary, and non-working spouse members can choose to pay their contributions monthly or quarterly. Payments should be made before the last day of the month following the applicable period.

• OFWs (monthly, quarterly, annually) 

Overseas Filipino Workers (OFWs) have the flexibility to make SSS contributions monthly, quarterly, or annually. They can make payments at any time during the year according to their preference.

It’s crucial to note that missing or late payments may incur penalties or interest charges. Therefore, ensuring timely payment of SSS contributions is essential to maintain good standing.

If you are unsure of how to pay your SSS contributions, check out the list of collecting agents for the period of January 2024 to 31 October 2024. These collecting agents ensure the efficient collection of funds from its members while complying with the necessary standards. In case you require an HR compliance checklist to ease out the whole process, here’s everything you need to know.

What are the benefits of SSS?

The Social Security System (SSS) offers a lot of benefits to its members and provides financial assistance in their time of need. Here are some of its major benefits:

Sickness

The SSS provides sickness benefits to support members who cannot work due to illness or injury. This benefit entails a daily cash allowance equivalent to 90% of the member’s Average Daily Salary Credit (ADSC). It is applicable for a maximum duration of 120 days within a calendar year.

To qualify for sickness benefits, here are the criteria one needs to meet: 

• The member must have been confined to the hospital or home for at least four days due to illness or injury.
• Members can only claim sickness benefits if they have exhausted their company sick leave with pay for the calendar year.
• Regardless of employment status (whether regular employees, self-employed, or overseas workers), members must claim sickness benefits from the SSS directly.

Maternity

Maternity benefits provide crucial support to expecting mothers during their childbirth journey. By submitting a maternity leave application, mothers-to-be can access paid benefits, determined by the type of delivery – whether natural birth or by cesarean. 

These benefits amount to 100% of the member’s average daily salary credit, with variations based on circumstances: 105 days for normal delivery, 105 days for cesarean, 120 days for solo parents, or 60 days for cases of miscarriage, stillbirth, or terminated pregnancy.

Upon applying, beneficiaries typically receive benefits within 30 days. Moreover, an option exists for transferring up to seven days of these benefits to the father, regardless of marital status. 

To qualify for these benefits, members must have contributed to the SSS for at least three months within the 12 months preceding the semester of childbirth or miscarriage. These provisions ensure that expecting mothers receive the necessary financial assistance to cover medical expenses, childcare costs, and other necessities during their maternity leave. 

Disability

The disability benefits paid in either lump sums or monthly payments cater to the needs of disabled members of the SSS, whether partially or fully. Qualified members receive a monthly disability pension and a ₱500 supplemental allowance every month. 

Again, the amount credited depends on the years of service. 

• Less than ten years: ₱1,000
• Ten years of service: ₱1,200
• 20 years of service: ₱2,400 with an additional ₱1,000 benefit

The individuals are eligible to receive disability benefits if they have made at least one month of contributions before the disability semester. To receive monthly contributions, they must have completed at least 36 contributions. If not, they are only eligible for the lump sum amount. 

Unemployment

Terminated members benefit greatly from the unemployment benefit of making SSS contributions. The total credited amount can be used by the member to look for another job. Generally, the amount received is 50% of the member’s monthly salary. However, the maximum limit is set at ₱10,000 even if the member has a salary or wage over ₱20,000 and exceeds the contribution limit. It’s crucial to note that resignations are not covered under this benefit. The members must be terminated to avail of the benefit. 

Retirement

Retirement benefits are crucial to ensure you live a healthy and fulfilling life during old age. The SSS provides retirement money in a lump sum or monthly payments as deemed fit. Moreover, as a bonus, SSS grants an additional 13th-month pension to its members every December. 

The amount received depends on the years of service: for 10 credited years, members receive ₱1,200, and for 20 years, they are entitled to ₱2,400 along with an additional ₱2,000 in benefits.

To qualify for these benefits, members must meet specific criteria:

• For voluntary retirement, members must be at least 60 years old and have paid at least 120 contributions before the retirement semester.
• For mandatory retirement, members need to be at least 65 years old and have made 120 contributions before the retirement semester.

For members seeking a lump sum payment, a minimum of 120 contributions is required. If this criterion isn’t met, members can continue making contributions until they reach the threshold necessary to avail further benefits.

Moreover, there are special provisions for specific categories of workers:

• Surface and underground mine workers are eligible for voluntary retirement at 50 and mandatory retirement at 60, provided they have at least five years of service.
• Racehorse jockeys can opt for retirement at 55, with a minimum of 120 months of contributions and five years of experience.

Death

The SSS makes it a point to cater to the needs of the family members of the deceased person. It gives cash grants, either monthly or a lump sum amount, to the deceased member’s beneficiaries. This is in addition to the 13th-month pension they receive every December. 

The monthly amount depends on the years of service. However, the minimum amount stands at ₱1,000 for members with less than 10 years of service with additional benefits of ₱1,000. 

The benefits are given to the primary beneficiaries, including the spouse and children. In the absence of primary beneficiaries, second beneficiaries, such as dependent parents, get the benefits. Family members are only entitled to receive the death benefit if the member has made 36 contributions before the semester of the death. 

In the case of minor beneficiaries, an equivalent of 10% of the member’s contribution will be given or ₱250, whichever is higher. 

Funeral

The funeral benefit is the total amount of cash given to the member who conducts the funeral services of the deceased. The amount received can be anywhere between ₱20,000 to ₱40,000, depending on the number of SSS contributions, years of service, and average monthly salary credit. 

In case the member was employed, the employer should report the coverage. On the flip side, self-employed, non-working spouses, and voluntary members should make at least one month of contribution to become eligible. 

Simplify SSS Contribution Compliance with Omni

Understanding and managing SSS contributions is important not only for the employers but also employees in the Philippines. Employers must comply with laws and ensure that employees are receiving the benefits they deserve, while employees on the other hand, rely on these contributions for social security and financial stability. That’s why it’s important to have automated HR tools on your side. 

Omni’s all-in-one HR solution helps streamline payroll processes and free of manual error to reduce the administrative burden on HR. With secure and centralized employee records, HR teams can easily store, update, and communicate employee information across departments and with employees. 

Omni offers a comprehensive payroll solution tailored to Philippines specific requirements. With features like support for Philippine peso, automated tax calculations, and managed SSS, PhilHealth and PAG-IBIG contributions, Omni can help HR teams simplify their SSS contributions and ensure compliance with ease.

If you’re ready to take SSS contribution management to the next level,

If you’d like to learn more about how Omni’s all-in-one HR software automates the entire end-to-end employee lifecycle, book a demo with our team.

Singapore is renowned worldwide for its laws. However, less recognized is the intricate network of statutes and legal requirements detailed in its labor laws, which HR professionals must grasp when considering Singapore employment.

From hiring and onboarding employees, to termination and retrenchment and right down to tax requirements, there’s a lot to know about Singapore employment. In this article, we take a deep dive into both the legal requirements, and some prevailing norms in Singapore, that you’re going to need to consider.

Legal Framework in Singapore

In Singapore, the legal framework governing employment is created and handled by two different entities—the Employment Act (which includes the Ministry of Manpower [MOM]) and the Central Provident Fund (CPF).

The Singapore Employment Act is the main legislation laying out the terms and conditions of employment for Singaporean employees. It codifies basic employment rights and protections for workers, like the regulation of working hours, overtime pay, rest days, annual leave entitlements, and termination. The Act applies to most employees, with the exception of positions such as managers and executives earning above a specified salary. Its coverage also doesn’t apply to domestic workers and government employees.

In addition to the Singapore Employment Act, the statutory board called MOM plays another important role in regulating Singapore employment. MOM is responsible for implementing and enforcing labor laws and regulations, including work pass regulations for foreign employees, workplace safety and health standards, and dispute resolution. Employers need to prioritize compliance with MOM’s regulations, which exist to provide fair treatment to all employees.

Another important statutory board is the CPF, a mandatory social security savings scheme for Singaporean and permanent resident employees. Under the CPF, both employers and employees are required to make monthly contributions to employees’ CPF accounts, which are used to fund their retirement, healthcare, and housing needs. Employers need to make timely and accurate CPF contributions to meet their obligations towards their employees’ social security.

For HR professionals working with Singapore employment, it’s important to stay up to date on the latest regulations, and keep a keen eye on compliance at your organization, so you don’t incur fines or other penalties.

Hiring and Onboarding Process

The hiring and onboarding process in Singapore involves several key steps meant to guarantee you remain compliant with local regulations and experience smooth integrations of new employees into your organization.

Types of work passes

One of the first considerations you need to make when hiring foreign workers for Singapore employment is the type of work pass they require. The most common work passes are the Employment Pass (EP) for professionals, the S Pass for mid-level skilled workers, and the Work Permit for foreign workers in construction, manufacturing, marine, process, or service sectors. Each work pass has specific eligibility criteria, and you have to ensure that foreign employees hold valid work passes as long as they work for your organization.

Learn more: Singapore Employment Pass: Updates & Requirements in 2023

Employment contracts

Employment contracts are essential for defining the terms and conditions of Singapore employment. These contracts should clearly outline key details such as job responsibilities, salary and benefits, working hours, leave, termination clauses, and other important employment details. You’ll need to make sure that your employment contracts comply with the requirements under the Employment Act.

Probationary periods

Including a probationary period into your contract is considered standard practice in Singapore. During the probationary period, which typically lasts between three to six months, you’ll have the flexibility to terminate employment with shorter notice periods if your employee’s performance or conduct is unsatisfactory. That said, you and your organization must adhere to fair employment practices and provide employees with reasonable support and feedback during their probationary period.

Onboarding practices

Like elsewhere, the onboarding process is incredibly important for defining the success your employees will have at your organization. This includes providing them with necessary information and resources to understand their roles and responsibilities, introducing them to key stakeholders and team members, providing training and orientation sessions, and addressing any questions or concerns they might have.

You should also use the onboarding process as an opportunity to communicate your company’s values, cultures, and expectations, helping them get up to speed with their new workplace environment and cultivate a sense of belonging from the get go.

Take your onboarding process to the next level: Download our comprehensive 30-60-90 Day Plan now!

Wages and Benefits

Paying wages and offering benefits are going to be at the top of your priority list when offering Singapore employment. Here’s what you need to consider:

Minimum wage and Local Qualifying Salary (LQS) Scheme

Unlike some countries, Singapore doesn’t have an official minimum wage. That said, the government has introduced the Local Qualifying Salary (LQS) scheme, which sets a minimum salary threshold for eligible local employees to qualify for various government support schemes, such as the Workfare Income Supplement (WIS) and SkillsFuture Credit. In other words, employers are incentivized to pay their employees a minimum amount, or miss out on government support.

Working hours

• General: The standard workweek in Singapore is 44 hours, typically spread over five or six days. Actual working hours might vary depending on industry practices and individual employment contracts.
• Overtime: Employees are entitled to overtime pay for work that extends beyond normal working hours. Overtime rates are specified in the Employment Act and typically range from 1.5 to 2x the hourly basic rate, depending on the employee’s designation and nature of work.
• Working week: While the standard workweek is 44 hours, specific working hours and rest days vary depending on factors like industry norms, shift arrangements, and collective agreements.

Central Provident Fund (CPF)

The CPF is a mandatory savings scheme for Singaporean and permanent resident employees, as well as certain foreign workers. Both employers and employees are required to make monthly contributions to the CPF, which are allocated to different accounts for retirement, healthcare, and housing purposes.

Leaves and holidays

• Paid time off: The Employment Act stipulates Singapore annual leave entitlements based on how long your employee has been with your organization, ranging from seven to 14 days per year. Employers can also offer additional leave benefits that go beyond the requirements outlined in the Singapore Employment Act.
• Public holidays: All employees are entitled to paid Singapore public holidays (there are typically 11 each year.)
• Sick days: Employees covered under the Employment act are entitled to outpatient sick leave and hospital stay so long as they’ve been at your organization for three or more months.
• Maternity/paternity leave: Mothers are entitled to up to 16 weeks of government-paid maternity leave (within 12 months of giving birth) so long as their child is a Singapore citizen. Otherwise, mothers receive 12 weeks of leave without government pay. Fathers who meet certain qualifications are eligible for up to three weeks of Government Paid Paternity Leave (GPPL).
• Parental leave: Beyond maternity and paternity leave, Singaporean employees are also eligible for shared parental leave, allowing parents to share caregiving responsibilities for their newborn child.
• Bereavement leave: While not a statutory requirement, most Singapore employers typically offer 2-5 days of paid bereavement (or compassionate) leave to employees in the event of the death of an immediate family member.
• Marriage leave: Like bereavement, marriage leave isn’t mandatory. But some employers may provide paid leave for employees getting married as an added benefit.
• Voting leave: Employees are entitled to paid time off to vote in national elections or by-elections.
• Military leave: Reservist employees may be granted time off from work to fulfill their National Service obligations, with some employers optionally providing paid leave during this time.

Employee Benefits

In addition to the statutory benefits, you may want to offer a variety of employee benefits to attract and retain the best available talent. These could include health insurance, retirement plans, flexible work arrangements, wellness programs, employee assistance programs, or other perks aimed at enhancing employee well-being and job satisfaction.

You should tailor your benefits packages to meet the diverse needs and preferences of your target workforce in order to remain competitive for Singapore employment. For instance, if you’re typically recruiting younger employees, consider adding on marriage leave as a potential benefit—it may be an attractive offering and even a deciding factor for top talent looking at your organization.

Performance Management and Development

As with HR best practices around the world, in Singapore effective performance management and development strategies are key to enhancing employee engagement, productivity, and employee retention. Here’s what you need to know to make the most of Singapore employment performance:

Setting objectives and performance reviews

First, you need to establish key performance indicators (KPIs) and expectations for your employees, aligning them with your organization’s goals and priorities. Regular performance reviews (conducted frequently, with an official one done annually) allow managers and employees to assess progress, provide feedback, and identify areas for improvement. These reviews should take a holistic look at all performance metrics, like job competency and culture fit.

Empower your team to reach new heights: Download our Total Performance Review Kit

Training and development opportunities

Successful companies recognize the importance of investing in employee training and development to enhance skills, knowledge, and capabilities. For your Singapore employment, consider offering a range of training programs, workshops, seminars, and certifications to support your team’s growth and career advancement.

Training initiatives should cover technical skills, soft skills, leadership development, industry-specific competencies, and emerging trends relevant to your employee’s job function or career aspirations.

Career progression

Career advancement opportunities are an essential part of talent retention and overall success in Singapore employment. There are multiple ways you can lay a path for advancement, including:

• Internal mobility: Create internal job postings and transfers to help encourage career growth within your organization.
• Promotions: Recognize and reward high-performing team members with opportunities for advancement to higher-level roles or positions with increased responsibilities.
• Mentorship and coaching: Provide mentorship and coaching programs to support your employees in their career journey, offering guidance, advice, and support from experienced team members or senior leaders.
• Career pathing: Map out clear career paths and progression routes for your employees, outlining the skills, experiences, and milestones needed for them to advance within your organization.

Employee Relations and Termination

For Singapore employment, managing employee relations and handling terminations requires careful attention to legal requirements, communication protocols, and conflict resolution strategies. Here’s what you need to know:

Termination of employment

When you need to terminate someone’s employment, you must adhere to the statutory notice period outlined in the employment contracts or the Employment Act. Typically, notice periods range from one to three months, depending on the employee’s length of service. You also need to provide payment in lieu of notice. Also, while severance pay isn’t technically mandatory, it is common for employers to offer 1-2 weeks of salary or more per year of service.

Redundancy and retrenchment

In cases of redundancy or retrenchment due to business restructuring, economic downturns, or technological advancements, you need to comply with a variety of statutes imposed by MOM. These include abiding by the notice period that should be outlined in their employment contracts, and paying severance—called a retrenchment benefit—to employees who’ve worked for your organization for at least two years.

While this might differ based on the particular employment contract, MOM states it is common to offer between two weeks and one month of salary per year of service. While employees who have worked fewer than two years aren’t entitled to a retrenchment benefit, MOM suggests, “an ex-gratia payment out of goodwill.”

Communication and conflict resolution

Effective communication is key for managing Singapore employment relations and resolving conflicts in your workplace. You should establish and promote open channels of communication to address the concerns of your team as promptly as possible before things escalate.

Additionally, your organization can offer training programs on effective communication, conflict management, and emotional intelligence to better equip its employees and managers with the necessary skills to navigate challenging situations.

HR Compliance and Reporting

Staying compliant is enormously important for businesses seeking success in Singapore. This is made far easier with well-kept records, and diligent data management. Here are a few points to consider:

Recordkeeping and reporting

Your HR department will need to maintain a comprehensive log of employee records, including personal information, employment contracts, payroll records, time off records, and performance evaluations. Accurate recordkeeping maintains compliance with requirements (and streamlines processes in the event of an audit) as well as enabling your organization to track employee information effectively. You should lean on available technology to establish robust recordkeeping systems, helping to ensure data accuracy, accessibility, and security.

Data privacy

Compliance with the Personal Data Protection Act (PDPA) is essential for protecting the data rights of your employees—and staying within the law. You’ll need to obtain consent before collecting, using, or disclosing personal data and meet the PDPA requirements for data retention, access, and security measures.

Implementing data protection policies, conducting regular privacy impact assessments, and offering your employees training on data privacy best practices will lower the risk of non-compliance all while protecting sensitive information.

Tax and payroll compliance

Like elsewhere, tax and payroll compliance are of the utmost importance for Singapore employment. This includes deducting and remitting employee contributions to the CPF, calculating and withholding income tax, and submitting accurate payroll reports to the Inland Revenue Authority of Singapore (IRAS). You will need to stay informed about changes to tax laws, payroll regulations, and CPF contribution rates to make sure your organization keeps compliant and avoids any penalties.

Read next: Payroll Singapore Reference Guide: Everything You Need to Know

Navigating Singapore’s Employment Lifecycle Management

It is crucial for HR leaders to stay well-informed about Singapore employment laws and regulations. This knowledge is essential for ensuring compliance and fostering a positive work environment for employees.

Looking for additional resources to improve your HR practices and employee experience? Leveraging technology such as AI tools for HR can decrease administrative tasks, improve the accuracy and security of essential HR functions such as payroll and employee records management, and streamline your employee’s access to the benefits that keep them engaged.

Omni’s automated payroll processing brings a new level of ease to the payroll process. With secure and centralized employee records, HR teams can swiftly access employment contracts and essential documents that support payroll practices. Our time and attendance features empower teams to automate data and produce accurate reports in minutes. And with payroll solutions that support SGD and Singapore pay schedules, Omni offers an entire suite of solutions to make your payroll system seamless.

If you’d like to learn more about how Omni’s all-in-one HR software automates the entire end-to-end employee lifecycle, saving People leaders from administrative tasks and increasing organizational innovation,

As an HR professional, it is important to ensure your payroll process is not only about disbursing salaries but also about fulfilling tax obligations, especially concerning income tax Indonesia. 

Staying compliant with tax laws is crucial to avoid legal issues. However, keeping updated with regulations governing income tax Indonesia can be quite challenging. 

Recently, the Indonesian government revised the method for calculating employee income tax. These aim to simplify the tax calculation process for individual taxpayers, including your employees.  

It is essential to stay informed to ensure that your organization and employees comply with the new income tax Indonesia regulations. 

Here’s what you need to know about the new regulation and how to help your employees prepare for income tax Indonesia.

Income Tax Indonesia Rates 2024

The new regulation stipulates that going forward, withholding tax calculation for the months of January to November will be calculated using an Effective Tax Rate (ETR) and annual calculation performed in December will still be calculated using Progressive Income Tax Rate. 

The ETR is the average percentage of an employee’s income paid as taxes, applied to their gross income without considering deductions like pension contributions or non-taxable income. 

Conversely, the progressive income tax rate for annual calculations means that taxes increase as taxable income increases. 

To calculate the final tax underpayment, subtract the tax withheld from January to November from the December calculation. 

Classifications Of Effective Tax Rates 

Effective Tax Rate on personal income is calculated based on the individual’s gross monthly income or, if they don’t receive a monthly compensation, their daily income.

The two classifications are explained below.

• Monthly ETR
• Daily ETR

Monthly ETR

This is applied to all income an employee receives on a monthly basis. Depending on the range of monthly income received and the employee’s marital status, there are three categories in this classification:

• Category A for individuals with marital status of:
  • Single with no dependent (S/0);
  • Single with one dependent (S/1);
  • Married with no dependent (M/0).
• Category B for individuals with a marital status of:
  • Single with two dependents (S/2);
  • Single with three dependents (S/3);
  • Married with one dependents (M/1);
  • Married with two dependents (M/2).
• Category C for individuals with a marital status of:
  • Married with three dependents (M/3).

These monthly taxes are due for payment and lodgement on the 15th and 20th of the following month, respectively.

Annual tax returns (SPT) on the other hand must be lodged by 31st of March the following year.

Daily ETR

A daily ETR is applied on income received by a non-permanent employee on a daily/weekly/unit basis.

And if this employee’s income is not paid on a daily basis, the daily ETR will be applied based on the number of working days.

The applicable daily ETR and their income range are shown below:

• 0% for daily income up to IDR 450,000;
• ▪ 0.5% for daily income above IDR 450,000 up to IDR 2,500,000.

Note that the new government regulation does not apply daily ETR for income above IDR 2,500,000.

It is clear that these new rates will alter the take-home pay of your employees. It is important that this is communicated to them to ensure transparency and smooth implementation.

Learn more: The 5 Best HR Software Indonesia Has to Offer in 2024

Who Needs to Pay Income Tax Indonesia?

Generally, there are two categories of individuals who pay income tax Indonesia:

• Domestic tax subject
• Foreign tax subject

Several requirements govern which category an individual falls into and how they are required to report their Indonesia income tax.

Domestic Tax Subject

For an individual to be regarded as a domestic tax subject for income tax Indonesia, that person must meet the following criteria:

• The person must be residing in Indonesia, or
• The person must have lived in Indonesia for more than 183 days within a 12-month period; or
• The person must stay in Indonesia during the tax year and have plans to stay in Indonesia.

If an employee passes this criteria, they are taxed on their worldwide income regardless of where that income comes from or which service is performed.

There are instances where an individual might be exempted from worldwide income taxation.

• An Indonesian citizen who resides outside Indonesia for more than 183 days will be treated as a non-resident taxpayer provided several conditions, like tax treaties, are met.
• A foreign employee can also be exempted from worldwide income tax if they qualify based on the nature of their work or industry. The exception period will last 4 years, starting from when the employee first arrived in Indonesia.

Income tax Indonesia regulations also have requirements for couples.

Spouses can choose to file their taxes jointly or separately. But if the couples have separate Tax Identification Number, they are required by law to calculate their tax payable based on the combined family gross income, and then report the payable in each return based on their prorated income.

Foreign Tax Subject (Expatriate)

For an individual to be regarded as a foreign tax subject for income tax Indonesia, that person must meet the following criteria:

• The individual doesn’t reside in Indonesia or has not resided in Indonesia for more than 183 days within a 12-month period. But they run a business or carry out activities through a permanent establishment in Indonesia; or
• The individual don’t reside in Indonesia or have not resided in Indonesia for more than 183 days within a 12-month period but earn an income from Indonesia from means other than not from running a business.

Who is Considered a Tax Resident in Indonesia?

Tax residency refers to an employee’s legal status within a country. It is important that your organization is aware of the tax residency status of employees, especially if you have remote or expatriate workers, as it determines the extent of their tax obligations in Indonesia.

These are the requirements for being a tax resident in Indonesia:

• You are domiciled in Indonesia; or
• You’ve stayed in Indonesia for more than 183 days in any 12-month period; or
• You’re present in Indonesia during a tax year and intend to reside in Indonesia.

If a foreign employee meets any of those requirements, that employee becomes a tax resident from the date they arrive in Indonesia till the date of their final departure from the country.

However, if the employee is already an Indonesian national, that employee is considered a tax resident from birth unless they leave the country permanently.

There are exceptions to this. There are cases where an employee might need to leave the country temporarily, for example, for a work assignment. In this case, that employee can be considered as a non-resident during the assignment and will only be taxed on their Indonesian-sourced income.

Every tax resident is required to comply with the following procedures:

• Registration
• Payment of monthly tax installments
• Lodgement of annual individual tax return (SPT)
• Deregistration upon leaving Indonesia permanently

Do Non-Residents Have to Pay Tax?

Yes, non-residents have to pay income tax Indonesia. However, there are some nuances that need to be taken into consideration.

• Non-residents are taxed on their Indonesian-sourced income only, at a final flat rate of 20%.
• Non-residents do not have an obligation to register for a tax ID number or file income tax return.
• The obligation to withhold, remit, and report taxes on employment compensation rests with the local employer.
• The income tax withheld by employers must be remitted on a monthly basis. It must be remitted by the 10th of the following month and reported by the 20th of the following month.

What to Prepare Before Submitting Income Tax Indonesia

Register as taxpayer and obtain Tax Identification Number (NPWP)

If you meet the requirements of a taxpayer in Indonesia, you need to register for a tax identification number (NPWP). You can either do this offline at a tax office or online at the website of the Directorate General of Taxes.

Gather relevant documents and information

Taxpayers in Indonesia are also obligated to file annual individual tax returns. Assist your employees in getting the following forms: Form 1770 S 1, SPT 1770, or 1770 SS. The forms to be used depend on the source and size of income that the individual receives.

When it is time to remit taxes, taxpayers are encouraged to e-file their SPT. This can be done anywhere and anytime as long as you’re connected to the internet.

You only need to include proof of deduction that has been provided by the employer as the main capital for submitting the annual tax returns (SPT). 

Then fill in other information columns such as ownership of assets and debts.

Other documents every taxpayer need before they can submit income tax Indonesia include:

• Proof of any additional income sources (e.g., rental income, freelance work)
• Proof of tax-deductible expenses (e.g., medical bills, education expenses, dependent allowances)
• Bank statements
• Investment statements
• NPWP card

You also need to have information on your total annual income from all sources, details of any tax-deductible expenses, and number of dependents.

Expatriates also need to get a tax identification number so they can file their tax returns. The documents required for their registration include:

• Copy of passport;
• Copy of work permit (Notifikasi);
• A copy of limited stay permit;
• Completed electronic registration form;
• And some tax offices require a copy of the sponsoring company’s NPWP.

Navigate Income Tax Indonesia with Omni

Managing income tax Indonesia is a complex and detail-oriented task that demands a deep understanding of the region’s unique legal requirements and a commitment to accuracy and compliance. That’s why it’s important to have the right technology on your side.

Omni offers a comprehensive payroll solution tailored to Indonesian specific requirements. With features like support for Indonesian rupiah and automated tax calculations, Omni can help HR teams simplify their payroll processing and ensure compliance with ease. 

Omni’s suite of features makes the requirements for running a compliant and efficient payroll system and taxes in Indonesia easy. With secure and centralized employee records, HR teams can swiftly access employment contracts and essential documents that support payroll practices. 

Our time off and attendance features empower teams to automate data and produce accurate reports in minutes, making payroll calculations seamless and accurate. And with payroll solutions that support Indonesian rupiah and pay schedules, Omni offers an entire suite of solutions to make your income tax Indonesia seamless. 

If you’re ready to take your income tax Indonesia management to the next level, book a demo with us today. We’ll walk you through the platform’s capabilities and demonstrate how Omni can transform your payroll processing, saving you time, reducing administrative burdens, and enhancing overall efficiency.

During the tax season in the Philippines, you may be tasked with submitting a set of documents to the Bureau of Internal Revenue (BIR), leaving you questioning their necessity. 

Among the various tax forms required, the BIR Form 2316 is one of the most important forms as it provides insight into the tax ratio for an individual employee, breaking down their payments into various categories. With the form deadline right around the corner, this guide aims to provide you with all the necessary information to gain a clearer understanding of the BIR Form 2316.

What is the BIR Form 2316?

The BIR Form 2316, also known as the Certificate of Compensation Payment or Income Tax Withheld, is an annual tax return form in the Philippines. It consolidates an employee’s gross income along with the corresponding taxes and government deductions withheld throughout the calendar year or relevant taxing period. 

In other words, it acts as evidence that a salary underwent income tax deductions, aiding the BIR in verifying businesses’ tax compliance. Moreover, in the event of an employee quitting, it assists their new employer in calculating the taxes withheld for the remaining portion of the year and can serve as proof of financial eligibility for various applications. 

Employers are required to issue this form to employees subject to a declaration of final tax or any salary or remuneration and submit it to the BIR. Additionally, it should be attached to the employee’s Annual Income Tax Return (AIR) if they file one or if they are not eligible for substituted filing.

To be specific, the BIR Form 2316 should be attached to the BIR form 1700 for employees receiving purely compensation income or BIR form 1701 for employees receiving mixed income.

Who Should Prepare the BIR Form 2316?

Employers are in charge of preparing the BIR Form 2316 for any employee who received a salary, wage, or any other forms of remuneration from the organization during the preceding year.

Once the forms are accurately filled, employers are in charge of submitting the BIR Form 2316 on behalf of its employees. It is essential to prepare three copies: the original form designated for the employee, a duplicate for the BIR, and an additional copy for record-keeping purposes, which employers must retain for the next ten years.

When to Prepare the BIR Form 2316

Employers are required to prepare the BIR Form 2316 after computing the annual taxes for the year. This means preparing the tax return form towards the conclusion of the financial year for employees whose taxes and gross incomes are implicated. 

When is the Deadline for the Submission of BIR Form 2316?

Generally, employees must receive their BIR Form 2316 on or before January 31 of the succeeding year. 

However, there are two other deadlines to be aware of: 

• Employer filing: For employers required to file the BIR Form 2316 on behalf of your employees, the deadline for the submission is 28 February 2024. 
• Duplicate copy submission: For employees who received a BIR Form 2316 from their employer, they are required to submit a duplicate copy to the BIR by 29 February 2024.

How to Submit the BIR Form 2316

To submit the BIR 2316, you should follow these steps. First off, head over to the BIR certificate pages and download the BIR form.

Then, collect the needed employee information in Part 1. You’ll need to enter the date, which should be January 1. The only exception is for employees who you’ve hired in the past year; the date for those is their tenure start date. Note that items nine to 11 apply to employees who earn minimum wages only.

Next, enter the required employer information in Part II. Fetch the Certificate of Registration (RIB form 2303), as it includes the data you need for items 12 to 15. Under Part II, you’ll either check Main Employer for full-timers or Secondary Employer for part-timers.

Part III is dedicated to previous employer information. For employees that you’ve hired in the past year, you’ll need to check that the details of their previous employer are accurate.

Now, in Part IV, you fill in all your employee benefits (taxable and non-taxable), government contributions, and remunerations. It’s divided into sections A for your employee’s financial summary and B for their compensation income and taxes withheld details. Afterward, consider items 29 to 33 only if your employee is a minimum wager.

Also, the authorized signatory must sign item 51. You’ll need to sign item 52 and enter your current Community Tax Certificate number or a valid ID number, the paid amount, and the place of issuance. Finally, note that items 53 and 54 apply only to employees eligible for substituted filing.

Don’t forget the signatures. You must sign on item 53, and your employee must sign on item 54. Then, create your three copies, and submit or store them (as mentioned above).

To illustrate, you’ll need to save the electronic copies individually on a USB drive, DVD, or DVD-R. They must be in a PDF file format with the file names alphabetically arranged in the DVD-R. To name them, follow this naming convention: EmployeesLastName_EmployeesTin_TaxablePeriod.

What are the Required Attachments for BIR Form 2316?

For any BIR 2316 form, you should submit the original copy of the following documents:

Notarized Sworn Declaration

This document is a sworn declaration to affirm that the soft copies of all the BIR 2316 in the DVD-R are complete and typical of the originals. 

You swear:

That in compliance with the requirements of Revenue Regulations No. 02-2015, submitted herewith is/are one (1) DVD-R containing ___________ covering the period of 12/31/2023

 That the contents of the DVD-Rs being submitted herewith conform to the conditions/specification requirements set by the Bureau of Internal Revenue.

That the soft copies of the BIR Form 2316 contained in the DVD-R/s being submitted herewith are the complete and exact copies of the original thereof.

Notarized Substituted Filing Declaration

This form is composed of a list of the employees that qualify for substituted filing. It’s a table including the following information about each employee working for you:

• Name of employee
• Taxpayer identification number
• Amount of compensation
• Tax due withheld and remitted

Then, you follow the list with this statement: “I declare under the penalties of perjury, that this declaration has been made in good faith, and to the best of my knowledge and belief to be true and correct.”

Transmittal Form

This form includes a list of all the employees with the BIR Form 2316 in the submitted DVD or USB drive. Simply, it contains the employees whom you’re submitting the BIR Form 2316 on behalf of. Also, it includes the tax identification number and taxing period covered in the income tax withheld form.

What is Substituted Filing?

Understanding the eligibility criteria will help you submit exactly the needed forms according to the BIR, which should make the tax filing process as smooth as possible. Substituted filing applies to employees who:

• Receive purely compensation income of any amount
• Have one employer only in the Philippines for the calendar year
• Have a spouse who complies with the above conditions

Another eligibility aspect relates to you. For your employee to not have to file their own AITR and to rely on the BIR Form 2316, you must:

• Withhold the taxes of your employees properly
• File the BIR Form 1604-C for them
• Issue the latest version of the BIR Form 2316 for them

Are Electronic Signatures Allowed in the BIR Form 2316?

Yes, electronic signatures are allowed on the BIR Form 2316. Based on the Revenue Memorandum Circular (BCM) No. 29-2021 issued by the BIR on February 26, 2021, e-signatures are permitted for four forms including the BIR Form 2316. This includes digital signatures among other methods.

This decision was necessary to address the difficulties that COVID-19 posed and comply with the mandates of Republic Act (RA) No. 11032 or the “Ease of Doing Business and Efficient Government Service Delivery Act of 2018.” In the past, you and your employee would’ve needed to sign the BIR Form 2316 manually or in wet ink for it to be valid and binding.

What is the Purpose of the BIR Form 2316 From Previous Employer?

Employers typically request that their new hires provide them with the BIR Form 2316 for two reasons. It’s proof of their previous income and the taxes withheld (during the taxable year) by their previous employer. This way, new employers don’t deduct the same taxes already withheld by the former employer.

If your employee requests the BIR Form 2316 when leaving, you are obliged to provide them a copy on their last payday or back pay.

Other Use Cases of BIR Form 2316

BIR Form 2316 is beneficial to the HR department, as it makes it easier to conduct payroll processing. The most common use case of BIR Form 2316 is for BIR to monitor businesses’ tax compliance as it proves that the right taxes were withheld from your employees’ total income.

Other use cases include an employee proving their financial eligibility for a loan, credit card, visa, or scholarship. By presenting the BIR Form 2316, they can prove that they meet the requirements. Likewise, government agencies and private organizations may demand this form as part of certain applications.

Another use case concerns expats. Expatriates living or working in a country other than their own can submit this BIR Form 2316 to prove that they are paying taxes. This way, they can avoid getting taxed for the same income source in their home country.

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