How Net Pay Works Philippines
Every Filipino worker has a gross salary — the amount agreed with your employer — and a net salary, which is the amount that actually lands in your account on payday. The difference is made up of four mandatory government deductions: your SSS contribution, your PhilHealth premium, your Pag-IBIG contribution, and your withholding tax if your income is above the tax-exempt threshold. These deductions are not optional and they are not losses — three of them go to programs that pay you back in benefits, loans and healthcare coverage.
Understanding how net pay works Philippines 2026 matters for three practical reasons. First, it lets you verify your own payslip — errors in payroll deductions are more common than most workers realize. Second, it helps you budget accurately because you know your real income. Third, knowing what each deduction funds means you know what you are entitled to claim — from SSS retirement pension to PhilHealth hospitalization coverage to Pag-IBIG housing loans.
Last updated: January 2026 · SSS Circular 2024-006 · PhilHealth Circular 2019-009 · HDMF Circular 460 · TRAIN Law RA 10963
SSS Contribution — What It Is and What You Get
The Social Security System (SSS) deducts 5% of your Monthly Salary Credit (MSC) from your paycheck every month. Your employer adds 10% on top — making the total 15% — but only your 5% appears as a deduction on your payslip. The MSC is not your exact salary; it is the bracket your salary falls into on the SSS contribution table, which goes from ₱5,000 to ₱35,000 in ₱500 steps. If your salary is ₱22,300, your MSC is ₱22,000 and your monthly deduction is ₱1,100.
Your SSS contributions build eligibility for retirement pension, sickness allowance, maternity benefits, disability benefit, and salary loans. The more months you contribute and the higher your MSC, the larger these benefits become. The minimum to qualify for a monthly retirement pension is 120 months — ten years — of contributions. Members who contribute at a higher MSC also build up their Mandatory Provident Fund (WISP Plus) balance, a separate retirement savings component for MSC above ₱20,000.
| SSS 2026 | Rate |
|---|---|
| Employee deduction | 5% of MSC |
| Employer contribution (not deducted from you) | 10% of MSC |
| Minimum monthly deduction | ₱250 |
| Maximum monthly deduction | ₱1,750 |
PhilHealth and Pag-IBIG Deductions
PhilHealth deducts 2.5% of your basic monthly salary, with a floor of ₱10,000 and a ceiling of ₱100,000. If you earn less than ₱10,000, your premium is still based on ₱10,000 — a minimum deduction of ₱250 per month. If you earn more than ₱100,000, your premium is capped at ₱2,500. Your employer pays the matching 2.5%, making the total PhilHealth contribution 5% of your salary. This funds your healthcare coverage and that of your declared dependents for hospitalization, outpatient procedures, and maternity care.
Pag-IBIG deducts 2% of your monthly salary, capped at ₱200 per month. Every employee earning ₱10,000 or more pays the same flat ₱200 monthly. Your employer contributes a matching ₱200. In exchange, you build eligibility for housing loans, multi-purpose loans, and a provident savings balance returned to you with dividends when you retire or leave employment. The Pag-IBIG deduction is the smallest of the three mandatory contributions but provides access to the government’s housing loan program — one of the most affordable mortgage options available to Filipino workers.
| Deduction | Rate | Floor | Max |
|---|---|---|---|
| SSS | 5% of MSC | ₱250 | ₱1,750 |
| PhilHealth | 2.5% of salary | ₱250 | ₱2,500 |
| Pag-IBIG | 2% of salary | ₱100 | ₱200 |
How Withholding Tax is Computed Under the TRAIN Law
Your withholding tax is computed not on your gross salary but on your taxable income — which is your gross salary minus your SSS, PhilHealth and Pag-IBIG contributions. This means the three mandatory contributions actually reduce your taxable income and therefore reduce the tax you pay. A worker earning ₱40,000 gross does not pay tax on ₱40,000 — they pay tax on roughly ₱37,700 after deductions are subtracted.
The TRAIN Law (Republic Act 10963) sets the tax brackets. Monthly taxable income up to ₱20,833 is fully exempt — this protects minimum wage earners and lower-income workers from any income tax at all. Above that threshold, rates start at 15% and rise progressively. The key point is that tax applies only to the portion of income above each threshold — not your entire salary. A worker with ₱35,000 in taxable income pays 15% only on the slice between ₱20,833 and ₱33,333, then 20% on the remainder above ₱33,333.
| Monthly Taxable Income | Tax Due |
|---|---|
| ₱20,833 and below | ₱0 — Exempt |
| ₱20,833 to ₱33,333 | 15% of excess over ₱20,833 |
| ₱33,333 to ₱66,667 | ₱1,875 + 20% over ₱33,333 |
| ₱66,667 to ₱166,667 | ₱8,542 + 25% over ₱66,667 |
| ₱166,667 to ₱666,667 | ₱33,542 + 30% over ₱166,667 |
| Above ₱666,667 | ₱183,542 + 35% over ₱666,667 |
Source: TRAIN Law RA 10963 · BIR Revenue Regulations No. 11-2018 · Rates effective January 2023, unchanged for 2026
Step-by-Step Net Pay Example
Here is how net pay is computed for a worker earning ₱30,000 gross monthly salary. SSS: the MSC for ₱30,000 is ₱30,000, so the employee contribution is ₱1,500. PhilHealth: 2.5% of ₱30,000 is ₱750. Pag-IBIG: 2% of ₱30,000 is ₱600, capped at ₱200. Total mandatory contributions: ₱2,450. Taxable income: ₱30,000 minus ₱2,450 equals ₱27,550. Withholding tax: the first ₱20,833 is exempt, the remaining ₱6,717 taxed at 15% gives ₱1,007.55. Net pay: ₱30,000 − ₱1,500 − ₱750 − ₱200 − ₱1,007.55 = ₱26,542.45.
| Gross monthly salary | ₱30,000.00 |
| SSS contribution | − ₱1,500.00 |
| PhilHealth premium | − ₱750.00 |
| Pag-IBIG contribution | − ₱200.00 |
| Taxable income | ₱27,550.00 |
| Withholding tax (TRAIN Law) | − ₱1,007.55 |
| NET TAKE-HOME PAY | ₱26,542.45 |
Of the ₱3,458 difference between gross and net, ₱2,450 goes to SSS, PhilHealth and Pag-IBIG — programs that pay you back directly. Only ₱1,008 is income tax. Use the Net Pay Calculator to check the exact figures for your own salary.
Frequently Asked Questions
What should I check on my payslip?
Check that your SSS deduction matches 5% of the correct MSC bracket for your salary. Check that PhilHealth is 2.5% of your basic salary, not your gross including allowances. Check Pag-IBIG is ₱200 if your salary exceeds ₱10,000. If any figure is lower than it should be, your employer may not be remitting the correct amount to the government — which affects your future benefits.
What if my employer deducts more than the required amount?
Ask your employer for a written breakdown. Some employers deduct for company loans, health plans, or other benefits — these must appear as separate lines on your payslip. You can verify your posted SSS contributions at my.sss.gov.ph, PhilHealth at the member portal, and Pag-IBIG at www.pagibigfund.gov.ph.
Are allowances included in the deduction base?
It depends on the type. SSS contributions are based on your basic salary and regular allowances that form part of compensation. Non-taxable benefits — such as meal allowances within the de minimis limit and 13th month pay up to ₱90,000 — are excluded from the withholding tax base and do not increase the tax you owe.
Do probationary employees have the same deductions?
Yes. SSS, PhilHealth and Pag-IBIG apply from the first day of employment regardless of status. Your employer is required by law to register you with all three agencies within 30 days of hiring and to remit contributions every month.
Also in Philippines:
📋 Rates verified — Official sources: sss.gov.ph · philhealth.gov.ph · pagibigfund.gov.ph · bir.gov.ph · TRAIN Law RA 10963
⚠️ This page is for informational purposes only and does not constitute financial or legal advice. KnowMyGovt is not affiliated with SSS, PhilHealth, Pag-IBIG, BIR, nor the Philippine government. Always verify with official government sources.
