Post Business Registration: Labor Compliance in the Philippines
A company is considered a formed legal entity once the certificate of registration with BIR is acquired. This will allow the organization to onboard employees.
After going through the business registration process and securing the necessary documents from the government agencies, the company must now comply with several labor-related requirements to hire employees. Below are the most crucial prerequisites to complete for proper compliance:
- Employer Registration with Social Security System (SSS), PhilHealth and HDMF
Registration documents for these three (3) labor welfare agencies are submitted on or after the hiring date of the 1st employee. Ideally, the company hires at least one (1) employee to begin the registration process.
Registration to these agencies usually takes a month to be completed. Therefore, it is advisable to onboard the rest of the employees once the registration certificates are obtained to avoid penalties due to late payment of contributions.
- Get the Log-in Details for SSS Portal
After receiving the Registration Certificate from SSS, the company should register with the SSS portal to get its Log-in information. The SSS Portal is the system used to generate monthly payment forms for contributions and loans. The same is also being utilized to view payment status, approve loans and benefits, and reimbursement from SSS. Here’s a link to the SSS website to register.
- Get the Log-in Details for PhilHealth’s Electronic Payment and Remittance System (EPRS)
Similar to SSS, EPRS is vital to generate monthly payment forms, updating employee details, and viewing payment status. Unlike SSS, there are no options related to the availment or approval of benefits here. Also, obtaining the Log-in details can be done via email through your company’s assigned PhilHealth Officer.
- Activate Your Bank’s Online Payment Facility
Once the bank is set up, the company should advise the bank officer to activate the online Payroll Facility and link the bank to the Government portals. To avoid additional bank charges and ensure timely payment of salaries and remittances to the government, disbursement is highly recommended to be done through the Company’s bank. This has been the best solution to ease doing admin work from check preparation to payment over the counter.
- Reporting of Employees to SSS, PhilHealth and HDMF
As the employer, the company will be the withholding agent and, therefore, responsible for remitting the necessary contributions to the Government on behalf of their employees. To reflect these contributions under each employee’s account, reporting them as employees of the company is necessary. By doing so, employees can be eligible to use their benefits such as loans, sickness claims, maternity claims, or hospitalization. You may check our previous article as a guide: Steps in Reporting of Employees.
- Withhold and File Taxes on Compensation
Salaries paid to employees are usually taxable in nature. Therefore, as a withholding agent, the need to compute the accurate income tax and reporting the same to the tax authority is necessary. Amongst other government agencies, penalties for non-compliances and late payment charges under this bureau are significantly higher. Thus, the following should be taken into consideration:
- Compute taxes based on the updated withholding tax schedule by the BIR.
- Maximize the allowable Non-taxable benefits to reduce tax and make sure to withhold taxes on remunerations that are taxable.
- You may check Revenue Memorandum Circular No. 50-2018 for the detailed list of the taxability of each payroll item.
- File and Pay the BIR Form No.1601C (Monthly Remittance Return of Income Taxes Withheld on Compensation) on or before 10th of the following month
- Conduct Tax Annualization at the end of the year to determine the correct tax rate applicable to the total earnings of each employee.
- Prepare the BIR Form No. 2316 for each employee, Alphalist Schedule, and other related requirements and submit to the BIR on or before Feb 28 of each year.
Complete Labor Related Compliances to Seamlessly Hire Employees
Before hiring employees entities must be prepared for labor related compliances after they successfully register their business with BIR. This prerequisite is crucial as it ensures the mandatory benefits of employees such as Pag-ibig, PhilHealth, and SSS.
Compliances after Business registration can be tedious and time-consuming. If you find such procedures exhaustive, it is best to reach out to business consulting firms to guide you through these processes seamlessly.
Know More About Labor Compliance After Business Registration
With our large pool of human resource services, our team of consultants can help you navigate the processes of the compliances post business registration easily.