Guide to Understanding Your Payslip, Deductions, and Benefits

You put in the hours, give your best effort, and wait for payday—but when you check your payslip, do you fully understand how much you're actually taking home? Have you ever been confused about where your hard-earned money is going? Your payslip is more than just a piece of paper—it’s a financial roadmap that details your earnings, deductions, and benefits. Knowing how to read it correctly ensures that you receive the right salary, pay the correct taxes, and take advantage of the benefits your employer provides. However, many Filipino employees overlook the details on their payslips, leading to confusion about deductions and missed opportunities for better financial planning.

One key aspect of understanding your payslip is knowing how to compute for 13th month pay—a mandatory benefit for eligible employees in the Philippines. By gaining deeper insight into your payslip, you can take better control of your finances and ensure long-term financial stability.

Understanding the Taxes on Your Payslip  

Taxes represent a significant portion of the deductions listed on your payslip. While they may appear complex, understanding their function helps ensure compliance and prevents overpayment.  

Withholding Tax: This is taken from your earnings in accordance with the tax brackets set by the Bureau of Internal Revenue (BIR). Employers are responsible for calculating this tax and sending it to the government on your behalf.  

Payroll Taxes: These contributions provide funding for government-mandated programs such as the Social Security System (SSS), PhilHealth, and PAG-IBIG.  

FICA Taxes: In certain international job situations, employees might see deductions for Social Security and Medicare.  

By grasping how these taxes are assessed, you can better manage your budget and verify the accuracy of your salary deductions. Another key element for Filipino employees should be aware of is the 13th month pay benefits, a tax-exempt bonus that can greatly enhance their annual income. Many workers also review their withholding tax to ensure they are within the appropriate tax bracket, thereby avoiding issues of underpayment or overpayment.  

How Salary Deductions are Computed

Let’s break down an example to illustrate how these mandatory deductions impact an employee’s take-home pay. Imagine an employee with a gross monthly salary of ₱20,000. The typical deductions would look like this:

1. Social Security System (SSS) Contribution

Starting January 2025, SSS contributions will increase by 1% to 15% per Republic Act No. 11199. Employers cover 10%, while employees pay 5%, with ₱1,000 as the employee's share for this salary bracket.

2. PhilHealth Contribution

The total PhilHealth contribution rate as for 2025 is 5% of an employee's basic monthly salary. This rate applies to a monthly salary of at least ₱10,000 and up to ₱100,000. For this employee:

• Total Monthly Premium: ₱20,000 × 0.05 = ₱1,000

• Employee’s Share: ₱1,000 ÷ 2 = ₱500

3. PAG-IBIG Contribution

The mandatory contribution for PAG-IBIG is a fixed amount, regardless of salary. For this employee, the contribution is ₱200.

4. Withholding Tax

To calculate the withholding tax, we need to know the annual salary. For this employee:

• Annual Salary: ₱20,000 × 12 = ₱240,000

• Less non-taxable income: ₱250,000 (since the taxable income is below this, no withholding tax applies)

Thus, no withholding tax is deducted for this employee.

Total Monthly Deductions

Let’s summarize the deductions:

• SSS: ₱1,000

• PhilHealth: ₱500

• PAG-IBIG: ₱200

• Withholding Tax: ₱0

Total Deductions = ₱1,000 + ₱500 + ₱200 + ₱0 = ₱1,700

Net Monthly Salary

• Gross Salary: ₱20,000

• Total Deductions: ₱1,700

• Net Salary: ₱20,000 – ₱1,700 = ₱18,300

To understand how much of the salary goes toward mandatory deductions, here’s the calculation of percentage:

• Total Deductions: ₱1,700

• Percentage of Gross Salary = (₱1,700 ÷ ₱20,000) × 100 = 8.5%

Therefore, around 8.5% of the employee’s gross salary is allocated to mandatory deductions, leaving a net take-home pay of ₱18,300. Another important aspect of earnings in the Philippines is the 13th month pay, which is calculated separately from your regular salary but plays a significant role in boosting your overall income.

Keep in mind that contribution rates and tax brackets may change from time to time. It’s always best to consult the latest updates from relevant government agencies or seek guidance from a tax professional to ensure the most accurate calculations

Additional Compensation and Perks

Many employees focus only on their salary, but employer-provided benefits can significantly enhance total compensation. These benefits include:

• Bonuses: Performance bonuses, holiday bonuses, and other incentive-based payments that reward productivity.

• Approved Expenses: Some companies reimburse employees for work-related expenses like transportation, meals, and office supplies.

• Allowances: Non-taxable benefits such as meal and transportation allowances that supplement income.

• Retirement Contributions: Employer contributions to retirement plans or pensions that secure long-term financial stability.

By fully understanding these benefits, employees can maximize their compensation and improve financial planning. This is especially important when following the 13th month pay guide, as this plays a crucial part of annual earnings.

Take Charge of Your Payslip for Financial Empowerment

Your payslip is a tool for financial empowerment. By understanding its components—earnings, deductions, and benefits—you can take control of your finances and ensure that you’re receiving the correct compensation. Regularly reviewing your payslip helps catch potential errors and provides insight into ways you can maximize your benefits.

Start paying closer attention to your payslip today. If you notice discrepancies, don’t hesitate to ask your HR department for clarification. Understanding your payslip is the first step toward financial literacy, stability, and long-term success.