Payroll is the process of computing and paying employees' wages, deducting taxes and government contributions, and keeping the records. In the Philippines, every payroll run covers gross pay, SSS, PhilHealth and Pag-IBIG contributions, BIR withholding tax, net pay, payslips, and monthly remittances to each agency. A payroll management system automates these computations and reports.
What Does Payroll Mean?
Payroll means two related things:
- The list of employees a company pays, with how much each one earns.
- The process of computing, paying and recording those wages every pay period.
In Tagalog, payroll is often described as talaan ng sahod (record of wages), while payday is araw ng sahod. In accounting, payroll is one of a company's biggest expenses: it includes salaries, the employer's share of government contributions, and benefits.
What Does Payroll Include in the Philippines?
| Part | What it covers |
|---|---|
| Gross pay | Basic salary plus overtime, holiday pay, night differential and allowances |
| Government contributions | SSS, PhilHealth and Pag-IBIG — shared by employee and employer |
| Withholding tax | Income tax on compensation, deducted and remitted to the BIR |
| Other deductions | Loans, cash advances, absences and tardiness |
| Net pay | What the employee actually receives after deductions |
| Records and reports | Payslips, payroll register, and monthly and yearly government forms |
What Are the Steps in the Payroll Process?
- Collect attendance — hours worked, overtime, absences and leaves for the cutoff.
- Compute gross pay — basic pay plus premiums like overtime and holiday pay.
- Compute contributions — SSS, PhilHealth and Pag-IBIG.
- Compute withholding tax using the BIR withholding tax table.
- Apply other deductions and arrive at net pay.
- Pay employees by bank transfer, e-wallet or cash, and issue payslips.
- Remit and file — contributions to SSS, PhilHealth and Pag-IBIG, and BIR Form 1601-C every month.
- Keep records — payroll registers and payslips for each period.
For the full walkthrough, see how to process payroll in the Philippines.
What Should a Payslip Show?
A payslip (payroll slip) is the employee's breakdown of one pay period. A clear payslip shows:
- Employee name and pay period
- Basic pay and each premium (overtime, holiday, night differential)
- Allowances
- SSS, PhilHealth and Pag-IBIG employee shares
- Withholding tax
- Loans and other deductions
- Net pay
Showing each line lets employees check their own pay and reduces payroll questions to HR.
Payroll Example: One Semi-Monthly Cutoff
Employee with a monthly basic salary of ₱18,000, paid twice a month, no overtime or absences:
- Basic pay for the cutoff: ₱18,000 ÷ 2 = ₱9,000
- Monthly SSS employee share: 5% × ₱18,000 MSC = ₱900
- Monthly PhilHealth employee share: 2.5% × ₱18,000 = ₱450
- Monthly Pag-IBIG employee share: ₱200
- Withholding tax: ₱0 — monthly taxable pay of ₱16,450 is below the ₱20,833 tax-free threshold
If the employer deducts the full monthly contributions on the second cutoff, that payslip shows ₱9,000 − ₱1,550 = ₱7,450 net pay. Some employers split the deductions across both cutoffs instead.
What Is a Payroll Management System?
A payroll management system is software that does the computations above automatically: it applies the current government tables, produces payslips, and generates remittance reports and BIR forms. It replaces spreadsheets that need manual updates whenever rates change.
Kinsweldo is a payroll system built for Philippine rules. It's free for up to 5 employees, and our payroll software cost guide explains what paid plans cost.
Frequently Asked Questions
Payroll is how a company pays its employees: computing each person's wages, deducting taxes and government contributions, paying the net amount, and keeping records.
In HR, payroll is the function that turns attendance, salary and benefits data into correct pay for each employee, and makes sure government deductions and reports are filed on time.
Most Philippine companies pay semi-monthly (twice a month, often on the 15th and 30th). The Labor Code requires wages to be paid at least once every two weeks or twice a month, at intervals not exceeding 16 days.
A payroll slip, or payslip, is the document an employee receives each payday showing gross pay, each deduction, and net pay for that period.
Stop computing this manually.
Kinsweldo auto-computes SSS, PhilHealth, Pag-IBIG, and BIR withholding tax — with the correct, always-current rates on every payroll run.
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