MODULE 6

COMPENSATION – POLICIES, PRINCIPLES AND PROBLEMS IN

COMPENSATION ADMINISTRATION

What Is the Importance of Compensation and Benefits?

Compensation and benefits are two of the best tools for companies to recruit and
retain quality employees. Enticing benefits and compensation also help existing employees
stay motivated to excel each day at work.

Competitive compensation packages ensure a company attracts the top talent available
in the industry. When deciding between potential job offers, employees often look to the
compensation package first. Benefits help ensure a prospective candidate sticks with a
company. As single employees marry and start families, benefits such as health and life
insurance become essential parts of living. Companies that provide these services for free or a
reduced cost as benefits entice employees to stay.

Many companies tie compensation directly to employee job performance through

incentive packages, such as bonuses and profit-sharing plans. This helps employees align
their professional goals with those of the company while rewarding top performers and
providing incentives for them to stay.

Competitive benefits and compensation packages often pay for themselves with the
amount of money the company saves on headhunting and training costs of acquiring new
employees. Compensation also ensures companies are compliant with federal labor laws such
as the Fair Labor Standards Act or the Equal Pay Act. A company with competitive
compensation and benefit packages is far more likely to recruit and retain great employees
and position itself ahead of the curve in its industry.

Wage (or salary) according to the revised Labor Code of the Philippines, is the
remuneration or earning that is expressed in terms of money, which is payable by an
employer to an employee for work done or for services rendered or to be rendered. And the
wage is due to labor.

 The pay that you receive from your employer is the primary reason for staying on
your job.
 You still report and stay in the workplace eight (gemba) eight hours a day, become
productive by accomplishing the tasks assigned to you.
 There are intrinsic rewards, which are related to motivation and job satisfaction
(psychologist Herzberg calls them motivators).
 Your pay, as a matter of principle, should provide you with a stronger incentive to
report to work and do your job well.
 The pay that you receive must match your efforts; it must be proportionate to the
sweat of your brown and fruit of your labor, so to speak.

Is the salary commensurate with the work you do?

You cannot help asking your co-employees if the pay they receive is commensurate
with the services they render. Among yourselves, it is a natural tendency to compare the pay
you receive. That is to be expected. Then from your exchange of ideas and comparison you
assess whether or not the firm is fair and just. The inevitable happens here, such that job
satisfaction or dissatisfaction flows from knowing the kind of payment you receive.

 If your salary is either lower than what you expect for the services you render or less
than what other employees receive for similar job, you feel dissatisfied. The feeling
of dissatisfaction is natural because what is due is not given. The most obvious form
of motivation….”and the one that is probably responsible for more gossip and
disgruntlement than any other is your direct compensation.
 Or you might stay on with your job, yes but will remain dissatisfied, disgruntled, and
forlorn. Sooner or later, you will find yourself quitting your job and going elsewhere
in search of greener pasture. Isn’t this the story of many of our OFWs? Isn’t this the
pathetic story of many of our licensed teachers preferring to work as domestic helpers
abroad for higher pay? A story repeated among our medical doctors who are now
taking up nursing to get the easy way out of low pay?

It is good to know that salaries and benefits are not only the driving force in
employment performance. There is also what is known as intrinsic motivation, which is a
personal and psychological trait. It refers to the employee’s predisposition to value the work
itself rather than financial rewards because of the ability of work itself to provide you with
self-esteem, personal growth, and sense of accomplishment.

There is also what HR practitioners call “organizational commitment” which

is the employee’s effective ties to his organization. Organizational commitment is an
important job attitude because it is directly linked to your intention to satay, as well as to
productivity and organizational citizenship behaviors- regardless of salaries and benefits.
Organizational commitment is a person’s emotional bond to the organization. In brief, when
you are satisfied with what you do, you are motivated to stay and remain committed t your
organization.

Is Wage a cost or a benefit?

It must be stressed, however, that wage remains the principal (and perhaps the only)
means you have to satisfy your basic socio-economic needs to those of your family. For
many employers, however, that wage is one of the costs of production, in fact the heaviest
burden in running a business. And as cost they see to it that salaries and wages are not
bloated as against the revenues generated per human capital. In other words, the employee
thinks of wage as benefit, whereas the employer (in general) seems to consider it as cost.

Conceptual Difference between salary and wage

Wage – usually applies to the compensation given to the skilled or unskilled manual laborer.
A wage is measured by the hour or day, or on a piece rate (on a specified volume of
production).

Salary – denotes a higher degree of employment, a more permanent compensation for

employees doing more important services and other persons in position of great responsibility
in the organization.
 Although both salary and wage are forms of compensation, earnings, or payment for
services done, it implies that wage is appropriate for blue-collar laborers and salary for white-
collar jobs. This differentiation usually n many textbooks, however, is not to denigrate the
manual workers.

What is just compensation?

Compensation is just because it is due to the worker and the worker deserves it. He
earns it with the “sweat of his brow,’ so to speak. Justice, simply put is “to give what is due.”
It means that the pay should be commensurate to the worker as a human person.

Iron Law of Wages interpreted as “labor is more expensive when it is scarce or

cheaper when it is plentiful.”

Allowance for contingencies

For your salary to be just and right, management should take into account some
allowances for contingencies. Common sense imposes, for instance, that the company may
increase your monthly take-home pay accordingly when:

 The price of basic commodities increases

 The company becomes more capable to increase the pay
 The level of pay in the industry rises

Basic determinants of employee compensation

1. Organizational Factors – such as financial condition of the organization, size of the

firm’s workforce, union demands and collective bargaining agreement in unionized
firms. These factors can definitely help establish the just pay.

2. Environmental Factors – such as the cost of living standard, labor supply and
demand, politico-economic conditions of the country, government policies and laws
affecting wages like the minimum wage law.

3. Personal Factors – the personal values of owners and managers may also influence
the decision on salary administration.

Minimum Wage

In a legal sense, the just wage is the minimum wage. The minimum wage is set by
the government to protect low-paid employees against all types of exploitation by setting a
floor in which their remuneration cannot further fall.

 Everyone has a basic right to just and proper wage, which s determined according to
some criteria of justice and of course in proportion to the capital resources or financial
capability of the company.
 It is the wage that will enable every Filipino to meet the bare cost of living and will
also provide a means of desirable improvements in his way of life.
 For the wage to be just, management needs to consider some allowances for
contingencies, such for instance when prices of basic commodities are increasing.
 What we must remember is that a just wage is a means to provide for the worker and his
family a manner of living in keeping with the dignity of the human person. Anything less
is morally unacceptable. The just wage is calculated by the Federation of Free Workers
as one that:
1. Has the capacity to buy food with sufficient nutritional value, to supply adequate
clothing and medical security;
2. Has the capacity to educate children at least up to high school and provide them
the opportunities to finish college;
3. Gives the worker an opportunity to build and own a modest home for his family;
4. Gives the worker opportunity to save for emergencies and old age or for investing
in smaller business to augment his family income; and
5. Does not depend on wage-fixing alone, but also requires non-wage measures and
policies.

Coverage of employee compensation

Salary or wage - is the basic compensation or net pay for the work done. This is what you
receive regularly on the 15th and the end of every month. The basic pay is the basis for other
types of benefits, including the 13th month pay, separation pay and pension.

Incentive pay – is designed to encourage the employee to render extra effort over normal
production. An example of which is the sales-incentive program, wherein most sales jobs are
paid on an incentive basis. Sales people earn on a commission or bonus based on personal
sales, and naturally this system motivates people to knock themselves out to make more sales.

Allowances - are given to meet employee needs during temporary situations.

Fringe benefits – are a gamut of rewards for belonging to an organization. Benefits include
vacation and sick leaves with pay, paternity and maternity leaves, bereavement leave, life
insurance, accident and health benefits, and others – on top of the benefits mandated by the
revised Labor Code of the Philippines.

General policies in compensation administration

General policies in compensation administration are contingent to innovative

ingenuity of the HR executives and the availability of funds of the company. For instance, in
designing the starting salaries for new employees, many factors are considered. During the
probationary period, after you meet the minimum qualifications for a position, you are given
the minimum salary of the pay class to which the position belongs.

Then there is the salary adjustment for new employees. Our salary may be increased
by one step above the minimum or starting salary of the pay class upon completion of one
year of service with the company, provided that your efficiency, services, and attendance
records for the past year are satisfactory. Take note of the provisions for salary adjustment:
Efficiency or good performance and attendance record. It means tons of evidence to show
that you delivered, and excelled.

1. Salary increases. There are two ways by which a salary may be increased. What is
presented under this topic are various models of general policies in salary
 administration. There is no one sure formula in providing salary increases and
companies have their own models of doing it.

2. Merit increase - is considered on the basis of good performance. Subject to the

budgetary limitations, the organization may increase your salary as a form of reward
for merit. In special cases, salary increases may also be commensurate with added
responsibilities offered to you.

3. Promotional increase. A promotion or a transfer from within the organization

usually results to reorganization and this movement of personnel fill up higher
positions. After they promote you, expect that they will increase your salary, which is
proportionate to your new duties and responsibilities.

Procedure in salary increase

Most companies provide pay increases as part of the performance review system. The
amount of increase, the how and when of the pay increase largely depend on the performance
review system. Now there are two methods by which your salary may increased.

1. Annual review – is a kind of performance appraisal which the HR Office does very
year, with your direct supervisor and department head assisting. They review your
personal record of service and take note of your attendance and performance rating
for the whole year. During this annual review, if you are found to have increased
your productivity, or you showed some personal initiative or did additional duties, or
if you are performing tasks other than those called for in your position/designation,
the immediate superior may recommend the reclassification of your position and with
it a corresponding salary change.
2. Special review – (may be done quarterly or occasionally) by your department head by
reason of unusual or extraordinary accomplishments on your part that merit particular
recognition. You must be outstanding in your job performance to deserve this review.
Bottom line is, if you want your salary increased, work harder to deserve it. You earn
your promotion.

Job movement and salary administration

Once you get employed and settled down on your job, you do not expect to stay put in
that particular position for the rest of your life. Do you? You cannot be proud of staying
on your job for the next ten years. You have got to move. And job movement or
mobility may be described as follows:
 Upward movement
 Lateral movement
 Outward movement
 Downward movement

Job mobility may involved change in salary rate, benefits package, and job conditions.
Upward movement or change of position within an organization, such as promotion
and transfer, can be a morale booster because it signals higher pay and more benefits.
Resignation and retirement are voluntary. An employee is not entitled to a separation
pay when he resigns, whereas he is entitled to some retirement pay (and pension plan
 for those in the public sector) when he retires voluntarily or compulsorily. Hence,
salary and benefit administration is anchored on job movement. Besides
compensation functions, job movement is also interlinked with the other functions of
human resources management, such as staffing, development, and labor relations
functions.

Principles considered in salary administration

1. Equal pay for equal work

2. A fair day’s pay for a fair day’s work
3. Incentive pay for extra effort

Sound compensative policy is imperative

1. When the pay policy is clearly spelled out

2. A wage policy is sound and sensible when the policy is uniformly and consistently
implemented
3. When it is flexible enough to meet economic contingencies
4. When the wage policy has in-built safeguards in order to prevent unmerited raises
5. When properly disseminated and made known to all

MODULE 7

6Payroll Salary Compensation and Benefits in the Philippines

Labor and Social Legislation

The Labor Code of the Philippines, otherwise known as Presidential Decree No. 442.,
governs all employee-employer relations, their rights and obligations.

Payroll Salary Compensation and Benefits in the Philippines as provided under the
Labor Code of the Philippines and other relevant laws.

Wage and Wage-Related Benefits Overview

– At least the minimum wage per region and/or sector

– Holiday wage and overtime pay for work during holidays or rest days
– Overtime pay when working in excess of 8 hours
– Service Incentive Leave: 5 days of vacation per year of service
– Parental leaves (Maternity, Paternity and Solo parent leaves)
– Other Leaves
– 13th month
– Separation pay

WAGE AND WAGE-RELATED BENEFITS

1. MINIMUM WAGE

The Wage Rationalization Act, Republic Act No. 6727, sets the minimum wage rates
applicable per region, province and industry sector. The industry sectors are: non-agricultural,
agriculture (plantation and non-plantation), cottage and handicraft, retail and service sectors.
Minimum wage may vary depending on the number of employees and gross-sales of an
enterprise and its industry sector.

As of April 2015 the minimum wage of non-agricultural workers in Metro Manila is PHP 481
and PHP 444 for agricultural workers. Outside of Metro Manila, the minimum daily wage
varies from PHP 279 to PHP 337 for non-agricultural workers, depending on the region.

2. OVERTIME

Minimum wage is based on a work week of 40 hours or 8 hours per day. The daily 60 minute
mandatory lunch break is not included in the 8 hour work day and is not compensated.

Overtime pay rates vary depending on when the overtime work takes place: regular work day,
holiday, rest day, or night (between the hours of 10pm to 6am).

Overtime Rates:

– Regular work day: plus 25% of the hourly pay rate.

– Rest day, regular/special holiday: plus 30% of the hourly rate on said day.

3. PREMIUM PAY

Premium pay is given on non-working days (rest days/special holidays)

There are 3 special holidays:

– Ninoy Aquino Day

– All Saints Day
– Last Day of the Year

Premium Pay Rates:

– On a rest day or special holiday, an employee is entitled to an additional 30% of his daily
basic rate, or a total of 130%.

– On a rest day which is also a special holiday, an employee is entitled to an additional 50%
of his daily basic rate, or a total of 150%.

– On a regular holiday which is also an employee’s rest day, an employee is entitled to an

additional 30% of the regular holiday rate of 200%, or a total of 260%. Note that it is only
applicable to employees covered by the holiday-pay rule.

The “no work, no pay” principle applies during special non-working days and such other
special days as may be proclaimed by the President of the Philippines. Workers who are not
required or permitted to work on these days are, therefore, not entitled to any compensation.
This, however, is without prejudice to any voluntary practice or CBA providing for payment
of wages and benefits for declared special days even if unworked.

4. HOLIDAY PAY

The Labor Code requires the payment of an employee’s daily basic wage for all non working
regular holidays.

There are 12 regular and 3 special non working holidays (see above) in the Philippines.

12 regular holidays are (Republic Act No. 9849):

– New Year’s day

– Maundy Thursday
– Good Friday
– Araw ng Kagitingan
– Labour Day
– Independence Day
– National Heroes’ Day
– Eidl Fitr
– Eidl Adha
– Bonifacio Day
– Christmas Day
– Rizal Day

Rate Example:
If work is accomplished on a regular holiday (up to 8 hours), an employee is entitled to at
least twice (200%) of his basic wage. If the holiday corresponds to a scheduled rest day, the
employee is entitled to an additional 30% based on his regular holiday rate of 200%, which
comes to a total of at least 260%.

Absences

1. All covered employees shall be entitled to holiday pay when they are on leave of absence
with pay on the workday immediately preceding the regular holiday. Employees who are on
leave of absence without pay on the day immediately preceding a regular holiday may not be
paid the required holiday pay if they do not work on such regular holiday.

2. Employers shall grant the same percentage of the holiday pay as the benefit granted by
competent authority in the form of employee’s compensation or social security payment
whichever is higher, if the employees are not reporting for work while on such leave benefits.

3. Where the day immediately preceding the holiday is a non-work day in the establishment
or the scheduled rest day of the employee, he/she shall not be deemed to be on leave of
absence on that day, in which case he/she shall be entitled to the holiday pay if he/she worked
on the day immediately preceding the notwork day or rest day.

Successive Regular Holidays

Where there are two (2) successive regular holidays, like Maundy Thursday and Good
Friday, an employee may not be paid for both holidays if he/she absents himself/herself from
work on the day immediately preceding the first holiday, unless he/she works on the first
holiday, in which case he/she is entitled to his/her holiday pay on the second holiday.

5. NIGHT SHIFT DIFFERENTIAL

For work done between the hours of 10pm to 6am, employees are entitled to Night Shift
Differential (NSD), which represents an additional 10% to the regular wage for each hour of
work performed.

6. SERVICE CHARGES
Employees of employers collecting service charges are entitled to an equal share in the 85%
of the total of such charges, except managerial employees. The remaining 15% of the charges
may be retained by the management to answer for losses and breakages and for distribution to
managerial employees, at the discretion of the management in the latter case. Service charges
are collected by most hotels and some restaurants, night clubs, cocktail lounges, among
others.

Exceptions to Coverage of Benefits granted under the provisions on Overtime,

Premium, Holiday, Night Shift Differential Pays and Service Charges

These mentioned benefits apply to all employees except:

1. Government employees.
2. Workers of retail and service establishments regularly employing less than 10 workers.
3. Managerial employees and officers or members of a managerial staff.
4. Househelpers and persons in the personal service of another.
5. Workers who are paid by results/output.
6. Field personnel if they regularly perform their duties away from the office or place of
business.

7. SERVICE INCENTIVE LEAVE

Every employee who has rendered at least one (1) year of service is entitled to a Service
Incentive Leave (SIL) of five (5) days with pay. SIL may be used for sick and vacation leave
purposes. The unused SIL at the end of the year can be converted into cash using the salary
rate at the date of conversion. It is the employer’s prerogative to grant additional vacation
leave.

Meaning of “one year of service”

The phrase “one year of service” of the employee means service within 12 months, whether
continuous or broken, reckoned from the date the employee started working. The period
includes authorized absences unworked weekly rest days, and paid regular holidays. Where
by individual or collective agreement, practice or policy, the period of working days is less
than 12 months, said period shall be considered as one year for the purpose of determining
entitlement to the service incentive leave.

8. PARENTAL LEAVES
The Labor Code of the Philippines covers three different types of parental leaves: maternity
leave, paternity leave and solo-parent leave.
A. Maternity Leave
Whether married or not, each pregnant employee is entitled to a maternity leave benefit of 60
days for a normal delivery or miscarriage, or 78 days for a caesarean delivery, for up to four
pregnancies.

For the duration of the maternity leave, the employee receives a fraction of his regular
monthly salary from the company which is in turn reimbursed by the SSS. It is common for
companies to give the whole regular pay and shoulder what is not covered by the SSS.

To benefit from a maternity leave, it is required for the employee to be registered with the
SSS and be employed at the time of the expected delivery. Furthermore, the SSS must be
notified by the employer and at least three monthly contributions must have been made to the
SSS for that employee within the past year.

The maternity leave benefit being given instead of a regular wage, it can not be included in an
employee’s 13th month wage.

B. Paternity Leave
All married male employees are entitled to a 7 day paternity leave for the delivery or
miscarriage of his legitimate spouse with whom he must live, for up to four pregnancies. The
paternity leave is at the cost of the employer and is not reimbursed by the SSS.

C. Solo-Parent Leave
In addition to parental leaves at the time of a child’s birth, the Filipino labour code drew a
special leave for solo-parent employees as described in the Solo Parents Welfare, Republic
Act No. 8972. The employee must have been working for at least a year to be entitled to a
solo-parent leave, which allows him to 7 working days of leave in a year.

9. OTHER LEAVES

A. Gynecological Leave
A woman employee having rendered continuous aggregate employment service of at least six
(6) months for the last twelve (12) months shall be entitled to a special leave benefit of two
(2) months with full pay based on her gross monthly compensation following surgery caused
by gynecological disorders.

B. Leave For Women And Their Children Who Are Victims Of Violence
Victims shall be entitled to take a paid leave of absence up to ten (10) days in addition to
other paid leaves under the Labor Code and Civil Service Rules and Regulations, extendible
when the necessity arises as specified in the protection order.

Any employer who shall prejudice the right of the person under this section shall be
penalized in accordance with the provisions of the Labor Code and Civil Service Rules and
Regulations. Likewise, an employer who shall prejudice any person for assisting a co-
employee who is a victim under this Act shall likewise be liable for discrimination.

10. 13th MONTH PAY

Each year, a 13th month pay is given to all rank-and-file employees. By law, this benefit
must be paid before December 24th and is mandatory. Employees who have resigned or have
been severed from the company before the payment of the 13th month pay are still entitled to
it in proportion to the length of time they worked for during that year.

The 13th month pay must be at least 1/12th of the total basic salary of each employee earned
during that calendar year.

11. SEPARATION PAY

Following the labor code of the Philippines, articles 283 and 284 state that an employee can
claim separation pay if his contract is ended under authorized causes. According to article
282 an employee terminated for just cause (neglect of duties, fraud, crime…) is generally not
entitled to separation pay.

A separation pay of ½ month pay for every year of service can be claimed under the
following authorized causes:
– Retrenchment of person for loss prevention.
– Cessation of operation of a branch not due to serious losses or financial difficulties.
– If the employee has contracted a disease not curable within 6 months and that his presence
at work can be harmful to himself or his co-workers.

A separation pay of 1 month pay for every year of service can be claimed under the following
authorized causes:
– Labor-saving devices installed by the employer.
– Redundancy of the employee’s services for the company.
– Impossibility to reinstate the employee to his former position or to an equivalent position,
for reasons outside of the employer’s power.

The employer has the right to terminate the contract of an employee following any of the
above authorized causes through a written notice to both the employee and the Department of
Labor and Employment of the Philippines at least one month before the contract cessation
date.

12. RETIREMENT PAY

All employees from the private-sector may retire from age 60 up to age 65, at which
retirement becomes compulsory, and must have served the establishment for at least 5 years.

Retirement pay must at least be equivalent to half of a month’s salary for each year of service
and a fraction of at least 6 months is therefore considered as one whole year.

One “half month salary” must include the following: a) 15 days salary based on the last salary
pay, b) the pay equivalent of a five days of incentive leave, c) 1/12 of the 13th month pay.
Therefore, one ½ month salary is equivalent to 22.5 days.

Minimum Retirement pay = Latest daily pay rate x 22.5 days per month x number of years of
service

Depending on the agreements between the employer and employee other benefits can be
included in the retirement pay such as a Collective Bargaining Agreement (CBA).

13. GROSS BENEFITS & DE MINIMIS BENEFITS

To reward employee performance and to set incentives it is common for employers to give
compensations in cash or in kind to employees. According to the Philippine regulations, these
benefits are exempt of taxes under certain conditions.

Following the tax code, benefits received are excluded from the computation of gross income
as long as it remains below P82,000. “Gross benefits” include: the 13th month pay, Christmas
bonuses, productivity and incentive bonuses, and other benefits of the same nature in cash or
in kind.

In addition to that, compensations of small value, called De Minimis Benefits, are also
excluded from the computation of gross income. De Minimis Benefits have the purpose to
promote the well-being and efficiency of employees and are limited to facilities or privileges
of relatively small size.

De Minimis Benefits include:

– Monetized unused vacation leave credits, maximum of 10 days per year.
– Medical cash allowance to dependents of employees, maximum of P750 per semester of
P125 per month.
– Rice subsidy, up to P1,500.
– Uniform and clothing allowance, up to P5,000 per year.
– Actual medical benefits, up to P10,000 per year.
– Laundry allowance, up to P300 per month.
– Employee achievement awards (loyalty reward, safety reward…) in forms other than cash
or gift certificates, and in a maximum value of P10,00

0 per year in accordance to an established plan which does not discriminate to favour highly
paid employees.
– Gifts given for Christmas, special festivities or special circumstances (marriage, illness…)
can not be over P5,000 per employee per year.
– Daily meal allowances during overtime work must not exceed 25% of the basic minimum
wage.

Meal allowance is non-taxable only for overtime or graveyard shift.

Maximum PHP 120.00 per day based on PHP481.00 (Metro Manila minimum wage – Wage
Order No. NCR-19).

– Benefits received by an employee by virtue of a collective bargaining agreement (CBA)

and productivity incentive schemes provided that the total annual monetary value received
from both CBA and productivity incentive schemes combined, do not exceed ten thousand
pesos (Php 10,000.00) per employee per taxable year.

TAXATION ANNUAL TABLE

If taxable income is: Tax due is:

Not over P 10,000 5%

Over P 10,000 but not over P 30,000 P 500 + 10% of the excess over
P 10,000
Over P 30,000 but not over P 70,000 P 2,500 + 15% of the excess over
P 30,000
Over P 70,000 but not over P 140,000 P 8,500 + 20% of the excess over
P 70,000
Over P 140,000 but not over P 250,000 P 22,500 + 25% of the excess over
P 140,000
Over P 250,000 but not over P 500,000 P 50,000 + 30% of the excess over
P 250,000
Over P 500,000 P 125,000 + 32% of the excess over
P 500,000

Minimum Wage Earners are exempt paying from income tax. (RR 10-2008, RA
95054)

SOCIAL SECURITY SYSTEM

By law, private sector employees must be covered under the Social Security System (SSS).
Based on each employee’s gross monthly pay, both the employer and employee remit
monthly contributions to the SSS. In turn, the SSS benefits cover maternity, retirement,
sickness, disability, death and pension benefits. SSS

PHILHEALTH
For all employees covered by the SSS medical coverage is mandatory and automatic. Both
the employer and employee contribute equal monthly amounts to the PhilHealth Insurance
Corporation. PhilHealth

HOME DEVELOPMENT MUTUAL FUND

The Home Development Mutual Fund (HDMF), also known as the Pag-IBIG Fund, is
mandatory to all employees who are compulsorily covered by the Government Service
Insurance System (GSIS, for Filipino Government employees) or the SSS. Through the
Republic Act No. 9679, the HDMF answers two important needs for Filipino workers by
establishing a national savings program and an affordable house financing system. HDMF
members benefit of 1. savings, 2. short term loans and 3. access to low cost housing
programs. Both the employee and the employer contribute to the fund.

For a monthly compensation of PHP 1,500 and less the employee contributes 1% and above
PHP 1500 monthly compensation it is 2%. The employer’s contribution always remains at
2%. Contributions are deducted from gross income before computation of the income tax.
Note that the maximum employee contribution is set at PHP 5,000. Hence the minimum
contribution for employees and employers is now set at PHP 100. HDMF

DOLE
The Department of Labor and Employment (DOLE) is the national government agency
mandated to formulate and implement policies and programs, and serve as the policy-
advisory arm of the Executive Branch in the field of labor and employment. DOLE