Decoding the True Cost of Hiring in the Philippines: A Salary Breakdown for Employers
Published Date: August 27, 2025
Published By: Jac Cantos, Upcloud Accounting
Planning to expand your team in the Philippines? While a monthly salary is a good starting point, it's only part of the picture. Understanding the true cost of hiring is crucial for accurate budgeting and smart financial decisions.
If you're a Philippine business owner, startup founder, or HR leader, you're likely asking: "What does it really cost to hire an employee in the Philippines?"
The answer: Expect to budget 30-40% above the basic salary. This accounts for mandatory government contributions, 13th-month pay, and common (but optional) tax-free benefits.
This guide breaks down the real employer costs, helping you make informed, compliant, and cost-effective hiring decisions.
Why Knowing the Full Cost Matters
Many growing businesses in the Philippines focus solely on gross salary. However, the actual payroll expense per employee includes:
Government-mandated contributions (SSS, PhilHealth, Pag-IBIG)
13th-month pay
Optional benefits (de minimis)
Compliance overhead (and potential penalties)
Ignoring these factors can lead to budget overruns, penalties, and inaccurate financial forecasting.
Breaking Down the Real Employer Cost
Let's examine the components of employer costs, using a ₱35,000 monthly gross salary as an example:
1. Basic Salary:
₱35,000/month - The agreed-upon compensation with the employee.
2. 13th Month Pay:
Mandatory under Philippine law. Equivalent to one-twelfth of the employee's annual basic salary.
Calculation:
Php 35,000/month x 12 months = Php 420,000/year
Php 420,000/year ÷ 12 months = Php 35,000 (13th-month pay) or Php 2,916.67/month (accrual)
3. Government-Mandated Employer Contributions:
Monthly contributions based on the employee's gross salary.
Agency Employer Share (Example):
SSS: Php 3,530
Philhealth: Php 1,750
Pag-ibig: Php 200
Total Estimated Employer Share: Php 5,480*
Important: Always refer to the latest contribution tables from government agencies to ensure compliance.
4. De Minimis Benefits (Optional, Tax-Efficient):
Non-taxable benefits that enhance employee compensation without increasing taxable salary. These improve retention, reduce taxable compensation costs, and attract top talent.
Common De Minimis Benefits (Monthly Limits):
Rice Subsidy: Php 2,000
Clothing Allowance: Php 500
Medical Allowance: Php 250
Laundry Allowance: Php 300
Total: Php 3,050/month (if offered in full)
Total Employer Cost Example: ₱35,000 Salary
Here's a complete picture of the actual cost of hiring, assuming a Php 35,000 gross monthly salary and full de minimis benefits:
This represents a 33% increase above the base salary, or ₱11,446.67 extra per employee per month.
Benefits of Understanding Real Employment Costs
Knowing the true cost of hiring allows your business to:
Forecast payroll budgets accurately.
Ensure compliance with government mandates.
Avoid underestimating financial commitments.
Design competitive compensation packages.
Support data-driven HR and finance decisions.
How Upcloud Accounting Simplifies Payroll
Upcloud Accounting helps startups, small businesses, and growing companies in the Philippines manage payroll, taxes, and employee benefits efficiently.
With our outsourced payroll services, you get:
Automated 13th-month pay calculations and releases.
Accurate and timely filings with SSS, PhilHealth, Pag-IBIG, and BIR.
De minimis structuring and benefits management.
Transparent reports for HR and Finance teams.
Full compliance support, eliminating missed deadlines and penalties.
Hiring employees should be exciting, not stressful. With Upcloud Accounting, you can focus on growth while we handle the complexities of payroll and compliance.
Upcloud Accounting: Virtual Outsourced Accounting and Bookkeeping Services in the Philippines
Upcloud Accounting offers accounting, bookkeeping, tax compliance, and business licensing services specializing with startups and SMEs in the Philippines.
Our goal is to increase efficiency, automation, and transparency across the accounting and finance functions of our clients with our cutting-edge technology. If you want to move your company’s finance function online, contact our Team of Expert Accountants and Bookkeepers directly via [email protected] or visit www.upcloudaccounting.com to learn more about how Upcloud Accounting accounting services can support your PH business!
Disclaimer: This article or blog is only for general knowledge and guidance and is not a substitute for an expert opinion. For technical advice, please consult your tax / legal advisor for your specific business concerns. For comments, suggestions, and feedback, feel free to email us at [email protected].
