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Payroll in the Philippines – Emerging Trends

November 8, 2022
By Ganesh Ram
Payroll in the Philippines – Emerging Trends

The payroll industry in the Philippines has been affected by several macroeconomic changes of late.

Apart from the recent local data compliance regulations in the Philippines and elsewhere that have influenced how firms process data, there has also been an accelerated adoption from spreadsheets to a digitized payroll to ensure a consistent employee experience.

The sudden shift from in-office to a hybrid environment due to the pandemic has also affected several aspects of payroll, including payroll processing, answering payroll queries, and so on.

If you are a payroll specialist from the Philippines reading this, here are some of the trends to watch out for:

Migration to cloud-based technologies

According to the 2021 Payroll Complexity Index, 40% of companies still use spreadsheets, and 18% continue to use high-risk and largely non-compliant manual and paper-based activities as part of their payroll processing.

But this is changing.

According to a survey by Alibaba, a majority (94%) of Philippine businesses view cloud-based IT solutions as an essential factor in mitigating the impact of the pandemic. This is because organizations have realized the benefits of having a centralized repository of information that HR teams and employees can access anytime and anywhere.

For firms in the Philippines, having the entire payroll data on the cloud allows employees to access their payroll information, including pay slips, tax information, leave status, etc., in a centralized hub. Managers can also directly approve leaves on the system, and the information is continuously updated in real-time, improving the system’s accuracy.

Another key benefit of a cloud-based payroll management system is scalability. A cloud-based payroll system should easily weather scalability challenges.

In summary, a cloud-based payroll system can help firms overcome payroll processing and management challenges, such as miscalculating payrolls, tax-related errors, and overdue deadlines, to make organizations future-proof.

The emergence of mobile-first systems

Like the consumer experience they are already used to, employees now expect a similar employee experience where they can access all payroll-related information via their mobile phones.

A mobile app frees managers from logging into their desktop/laptop each time for every approval and gives employees access to their personal information at their fingertips.

The pandemic has also fueled a rise in the gig economy, with several contract workers joining the workforce. In their case, a mobile app is crucial in helping them view pay slips, fill in their shift/overtime details, and so on.

Mobile apps/ESS portals are also expected to be instrumental in personalizing the employee experience and creating a better employer brand.

Increasing use of AI in Payroll

The future of work is paved by artificial intelligence-powered technologies like Face ID and chatbots that make it seamless for HR teams to track timesheets and collect data on various parameters.

When it comes to payroll, chatbots or conversational AI allows employees to strike up a dialogue and swiftly find answers to their queries.

For instance, instead of asking HR to pull out records and answer questions about payroll or unused leave, employees can get instant answers for commonly asked queries from a chatbot.

Besides answering payroll-related questions, a chatbot can also provide employees with personal documents that they might need without having to rope in the HR team.

Learn how firms in Southeast Asia are using Jinie to eliminate time spent on answering payroll queries >

 

A rise in on-demand pay

On-demand pay is a payroll service that allows employees to access some or all their wages.

Rather than waiting to receive a bi-weekly or monthly paycheck with wages earned from the previous payroll period, employees using on-demand pay can have more control over their finances — choosing when to access their earned income before the next payroll cycle.

With the rise in the gig workforce, on-demand pay is increasingly becoming common, especially in countries such as the Philippines, where super apps such as Gojek (via Coins.ph), Grab, and others are employing tens of thousands of workers that cater to the burgeoning middle class.

Even amongst the salaried class, on-demand pay is increasingly becoming a feature that helps them tide over unexpected financial situations.

Firms leveraging features such as on-demand pay with their payroll management software can have an edge in employee experience over their peers.

Use of HR analytics to make business decisions

Data is the new oil.

Although using data in HR to take strategic decisions is familiar, it will become a necessary part of running the people department in the future.

When the payroll team is well-versed in data, it can also help the HR leaders make crucial decisions related to expansion from a payroll point of view. The former can help provide accurate figures for employee expenditure, labour costs, and so on, thus helping HR teams make the right decisions affecting a company’s bottom line.

Enterprise-grade data security becoming mainstream

Modern payroll systems make it easier to comply with emerging regulations through automatic updates and robust security features like dual authentication on top of the traditional security questions to keep your data safe.

Furthermore, new laws have emerged in the last few years, requiring payroll software in the Philippines to be Data Privacy Act (DPA) compliant.

Such security features automatically encrypt any sensitive information you enter into the system, using the highest cybersecurity standards possible.

Need for payroll softwares that complies with local regulations 

No matter the size of the company, organizations ought to choose a Philippines payroll program that adheres to rules by the Department of Labor and Employment (DOLE).

For payroll specialists, here are the major regulations that need to be adhered to –

Tax

Employers in the Philippines must also report tax to the Philippines Bureau of Internal Revenue (BIR) and obtain a tax certificate from a nearby treasurer’s office along with the requisite permits.

Note: Philippines payroll is calculated between 1 January and 31 December

Companies in the Philippines must also report tax to the Philippines Bureau of Internal Revenue (BIR) and must obtain a tax certificate from a nearby treasurer’s office along with the requisite permits.

The company must also file annual tax returns via BIR Form 1700 on or before 15 April of the subsequent year.

Know more about reporting tax in the Philippines here >

Social Security

SSS is the private social insurance program in the Philippines meant to protect its members and their families against disability, sickness, maternity, old age, death, and other contingencies resulting in loss of income or financial burden.

The SSS program covers all private employees and employers. The payroll software should enable employers to deduct social security contributions from employers and employees.

An employer is obliged to:

  • Report all employees for SSS coverage within 30 days of their appointment
  • Deduct from the employees the monthly SSS contributions based on the schedule of contributions and submit the summary to the authorities

Failure to follow this would result in significant penalties along with accumulated interest.

Philippine Health Insurance Corporation (PhilHealth)

The Philippine Health Insurance Corporation, colloquially referred to as PhilHealth, is a government-funded healthcare system in the Philippines. Established to administer the National Health Insurance Program, it takes care of the needs of the underprivileged, minorities, sick, and elderly.

Employers and employees must contribute equally to the PHIC based on the latter’s income.

Banking

It is recommended that you make payroll payments to both employees and other stakeholders from an in-country bank.

Conclusion

Given the changing technological landscape and demands of employees, payroll is set to change in the coming few years.

An advanced payroll system is necessary for any organization in Philippines that plans to invest in employee experience and productivity. However, besides focusing on the technology aspect, the usability and flexibility of the platform need to be considered.

PeopleStrong’s local legal expertise will guide you through complicated labor and tax requirements of the Philippines so you can run payroll without hassle.

PeopleStrong’s next-generation payroll management platform will also equip your organization with seamless and efficient payroll processing while improving employee satisfaction through intuitive employee self-service options and customizable features.

The robust platform will help you create a smarter workplace through intelligent payroll management. If you are looking to upgrade your payroll process or grappling with building enhanced transparency around a distributed workforce and operations, PeopleStrong Payroll could be the solution you’re looking for.

 

Find out how you can enhance your digital HR transformation journey with PeopleStrong

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