Every Filipino employee deserves to know exactly how their take-home pay is computed. Yet most payslips show only the final numbers — not the step-by-step logic behind them. This guide walks you through the complete 2026 Philippine payroll computation process, from gross salary all the way to your net take-home pay, with real examples using actual 2026 rates.
Step 1 — Determine Your Gross Monthly Income
What is Gross Income?
Your gross income is your total earnings before any deductions. For most employees this is your basic monthly salary. If you receive overtime, night differential, or allowances, those may be added here depending on whether they are part of your basic pay.
For semi-monthly employees (paid twice a month), your gross monthly income is your semi-monthly rate multiplied by 2.
📌 Example — Juan dela Cruz
Basic Monthly Salary: ₱25,000
Overtime Pay (this month): ₱1,500
Night Differential: ₱500
Gross Monthly Income = ₱27,000
Step 2 — Compute SSS Contribution (2026)
SSS 2026 Rate: 15% Total (Employee Share: 5%)
SSS contribution is based on your Monthly Salary Credit (MSC) — not your exact gross salary. The MSC is rounded to the nearest ₱500 bracket. The employee contributes 5% of the MSC, and the employer contributes 10%.
(MSC = nearest ₱500 bracket, max ₱35,000)
| Monthly Salary Range | MSC | Employee Share (5%) | Employer Share (10%) | Total (15%) |
|---|---|---|---|---|
| ₱4,250 – ₱4,749.99 | ₱4,500 | ₱225 | ₱450 | ₱675 |
| ₱10,000 – ₱10,499.99 | ₱10,000 | ₱500 | ₱1,000 | ₱1,500 |
| ₱15,000 – ₱15,499.99 | ₱15,000 | ₱750 | ₱1,500 | ₱2,250 |
| ₱20,000 – ₱20,499.99 | ₱20,000 | ₱1,000 | ₱2,000 | ₱3,000 |
| ₱25,000 – ₱25,499.99 | ₱25,000 | ₱1,250 | ₱2,500 | ₱3,750 |
| ₱30,000 – ₱30,499.99 | ₱30,000 | ₱1,500 | ₱3,000 | ₱4,500 |
| ₱35,000 and above | ₱35,000 | ₱1,750 | ₱3,500 | ₱5,250 |
📌 Juan's SSS (Gross: ₱27,000)
MSC = ₱27,000 → rounded to ₱27,000 bracket
SSS Employee Share = ₱27,000 × 5% = ₱1,350
Step 3 — Compute PhilHealth Contribution (2026)
PhilHealth 2026 Rate: 5% Fixed (Employee Share: 2.5%)
PhilHealth is computed based on your basic monthly salary only — not including overtime or allowances. The 5% premium is split equally: 2.5% employee + 2.5% employer. The salary ceiling is ₱100,000/month (meaning those earning above ₱100,000 still only pay based on ₱100,000).
(Salary ceiling: ₱100,000 | Minimum: ₱500)
| Monthly Basic Salary | Employee Share (2.5%) | Employer Share (2.5%) | Total Premium (5%) |
|---|---|---|---|
| ₱10,000 | ₱250 | ₱250 | ₱500 |
| ₱15,000 | ₱375 | ₱375 | ₱750 |
| ₱20,000 | ₱500 | ₱500 | ₱1,000 |
| ₱25,000 | ₱625 | ₱625 | ₱1,250 |
| ₱30,000 | ₱750 | ₱750 | ₱1,500 |
| ₱50,000 | ₱1,250 | ₱1,250 | ₱2,500 |
| ₱100,000+ | ₱2,500 (max) | ₱2,500 (max) | ₱5,000 (max) |
📌 Juan's PhilHealth (Basic: ₱25,000)
PhilHealth is based on basic salary only (₱25,000), not gross.
PhilHealth Employee Share = ₱25,000 × 2.5% = ₱625
Step 4 — Compute Pag-IBIG Contribution (2026)
Pag-IBIG 2026: Employee Share Capped at ₱200/Month
For most employees, Pag-IBIG (HDMF) contribution is 2% of monthly salary — but the employee share is capped at ₱200 per month regardless of how high your salary is. The employer contributes an additional 2% (also capped at ₱200).
📌 Juan's Pag-IBIG (Basic: ₱25,000)
₱25,000 × 2% = ₱500 → but capped at ₱200
Pag-IBIG Employee Share = ₱200
Step 5 — Compute Taxable Income
Taxable Income = Gross Income Minus Non-Taxable Deductions
SSS, PhilHealth, and Pag-IBIG contributions are non-taxable deductions — they reduce the amount of income subject to BIR withholding tax. De minimis benefits (rice allowance, laundry allowance, etc.) are also excluded from taxable income up to their annual limits.
📌 Juan's Taxable Income
Gross Income: ₱27,000
Less: SSS ₱1,350 + PhilHealth ₱625 + Pag-IBIG ₱200 = ₱2,175
Taxable Income = ₱27,000 − ₱2,175 = ₱24,825/month
Step 6 — Compute BIR Withholding Tax (TRAIN Law 2026)
BIR TRAIN Law Monthly Tax Table (2026)
Under the TRAIN Law, employees earning ₱250,000 annually or less (₱20,833/month) pay zero income tax. Above that, graduated rates apply based on your monthly taxable income.
| Monthly Taxable Income | Tax on Excess | Rate on Excess |
|---|---|---|
| ₱0 – ₱20,833 | ₱0 | 0% |
| ₱20,834 – ₱33,332 | ₱0 | 15% of excess over ₱20,833 |
| ₱33,333 – ₱66,666 | ₱1,875 | 20% of excess over ₱33,333 |
| ₱66,667 – ₱166,666 | ₱8,541.80 | 25% of excess over ₱66,667 |
| ₱166,667 – ₱666,666 | ₱33,541.80 | 30% of excess over ₱166,667 |
| ₱666,667 and above | ₱183,541.80 | 35% of excess over ₱666,667 |
📌 Juan's BIR Tax (Taxable Income: ₱24,825/month)
Juan falls in the ₱20,834 – ₱33,332 bracket.
Excess over ₱20,833 = ₱24,825 − ₱20,833 = ₱3,992
Tax = ₱3,992 × 15% = ₱598.80
BIR Withholding Tax = ₱598.80/month
Step 7 — Compute Net Take-Home Pay
Final Take-Home Pay Computation
Your take-home pay is your gross income minus all mandatory government deductions and any additional company deductions (loans, union dues, etc.).
📊 Complete Payroll Computation — Juan dela Cruz (₱25,000 Basic)
Loans & Additional Deductions
Beyond mandatory government contributions, the following may also be deducted from your payroll depending on your situation:
| Deduction Type | Who Applies | Amount |
|---|---|---|
| SSS Salary Loan | SSS members with existing loan | Based on loan amortization schedule |
| Pag-IBIG Housing/Multi-Purpose Loan | Pag-IBIG members with loan | Based on loan amortization |
| Company Loan | Employees with employer cash advance | Per company policy |
| Union Dues | Union member employees | Per CBA agreement |
| Late / Absent Deductions | Non-exempt employees | Daily rate × days absent |
De Minimis Benefits — Reduce Your Taxable Income
De minimis benefits are small allowances that are 100% tax-free up to their annual limits. These are NOT included in your taxable income computation, which means they effectively increase your take-home pay.
| Benefit | Tax-Free Limit |
|---|---|
| Rice Subsidy | ₱2,500/month (₱30,000/year) |
| Laundry Allowance | ₱300/month |
| Medical Cash Allowance to Dependents | ₱1,500/semester (₱3,000/year) |
| Uniform/Clothing Allowance | ₱6,000/year |
| Employee Achievement Awards | ₱10,000/year |
| 13th Month Pay & Other Bonuses | ₱90,000/year combined |
Semi-Monthly Payroll Computation
Many Philippine companies pay employees twice a month — typically on the 15th and last day of the month. Here's how to adjust the computation:
Semi-Monthly Adjustment Rules
- SSS: Deduct half the monthly amount each cutoff (₱1,350 ÷ 2 = ₱675 per cutoff)
- PhilHealth: Deduct half the monthly amount each cutoff (₱625 ÷ 2 = ₱312.50 per cutoff)
- Pag-IBIG: Deduct ₱100 per cutoff (₱200 total monthly cap)
- BIR Tax: Compute on monthly basis, then deduct half per cutoff
Frequently Asked Questions
Is overtime pay subject to SSS and PhilHealth?
SSS contributions are based on your Monthly Salary Credit which considers all compensation, so overtime may affect your MSC bracket. PhilHealth however is based on basic salary only — overtime pay does not increase your PhilHealth contribution.
What if I have zero income tax?
If your monthly taxable income is ₱20,833 or below (annual ₱250,000), you pay zero BIR withholding tax under the TRAIN Law. This applies to minimum wage earners and low-income employees.
Can my employer deduct more than what's shown here?
Yes — employers may also deduct company loans, cash advances, SSS/Pag-IBIG loan amortizations, and authorized deductions per your employment contract. All deductions must be authorized under the Labor Code.
How do I verify if my employer computed my payroll correctly?
Use our free 2026 salary calculator at SmartSalaryTool.com. Enter your basic salary and the tool automatically applies the correct 2026 SSS, PhilHealth, Pag-IBIG, and BIR rates. Compare the result with your payslip.