Cost Breakdown: Employer of Record Philippines Fees Explained

Executive summary

• Most of the invoice is not the fee. Take-home salary, statutory contributions, withholding tax, and the 13th-month accrual make up the large majority of the monthly cost. The flat EOR fee is a minority slice.
• The fee is flat, so it shrinks as a share. Because the EOR fee is a fixed amount per employee rather than a percentage, it represents a smaller portion of total cost as the salary rises.
• Every peso maps to a rule. SSS at 15% of the salary credit, PhilHealth at 5% of basic, Pag-IBIG at 2% each side, the TRAIN withholding tables, and the 13th-month pay law each set a specific, checkable figure.
• Employee deductions are not extra cost to you. Employee statutory contributions and withholding tax come out of the gross salary, not on top of it. Only the employer contributions, the 13th-month accrual, bank fees, and the EOR fee sit above the gross.

Where Every Peso Goes in an Employer of Record Philippines Invoice

The monthly cost of one employee has a clean internal logic once you separate what comes out of the salary from what sits on top of it. The gross salary itself divides three ways: the employee's take-home pay, the employee's share of statutory contributions, and the withholding tax, all of which are already inside the gross figure. On top of the gross, the employer adds its own share of statutory contributions, the monthly accrual toward the 13th-month pay, a nominal bank or disbursement fee, and the flat EOR fee. Add those together and you have the total the client funds each month. Move the salary slider below and hover or tap any slice to see its exact peso value and share.

Net Salary: What the Employee Actually Takes Home

The largest slice of any employer of record philippines invoice is the employee's net pay, and it is simply the gross salary minus the employee's own statutory contributions and withholding tax. Nothing here is an EOR charge; it is the salary you agreed to, routed correctly. What makes the net figure worth understanding is that it is the number your hire sees, and getting the deductions right is what keeps that number accurate and your payslip compliant. An error in the contribution or tax computation does not save you money, it creates a liability, which is one reason the calculation is handled by the legal employer rather than improvised.

Mandatory Statutory Contributions: SSS, PhilHealth, and Pag-IBIG

Three government programs take a defined share of every salary, each split between the employee and the employer. These are not negotiable and not unique to an EOR; any compliant employer in the country remits them. The 2026 rates are set out below.

The combined SSS rate rose to 15% in 2025 and holds in 2026, split 10% employer and 5% employee on a monthly salary credit capped at ₱35,000. PhilHealth sits at its final Universal Health Care rate of 5%, shared equally, on basic salary between ₱10,000 and ₱100,000. Pag-IBIG is 2% from each side on a maximum fund salary of ₱10,000, so both shares top out at ₱200. The practical point for budgeting: the employer's statutory share, not the employee's, is the part that adds to your cost above the gross salary, and at most salary levels it lands in the high single digits to low double digits as a percentage of gross.

Taxes and Withholdings

Withholding tax on compensation follows the graduated tables introduced by the TRAIN Law, which the BIR administers through its revenue regulations and circulars. The schedule in force since 2023, and unchanged for 2026, exempts the first ₱250,000 of annual taxable income entirely, then applies rates from 15% up to 35% on the brackets above it. Two features matter when reading a payslip. First, the employee's mandatory SSS, PhilHealth, and Pag-IBIG contributions are deducted from gross before tax is computed, which lowers the taxable base. Second, the tax is the employee's, withheld from the gross and remitted to the BIR, so it is not an additional cost to your company. A hire earning ₱20,000 a month, for instance, falls below the monthly equivalent of the exemption once contributions are deducted and may have little or no withholding at all.

The 13th-month pay carries its own tax treatment. Under the rules, the 13th-month pay together with other benefits is exempt from income tax up to ₱90,000 per year, with only the excess taxed. For most outsourcing Philippines roles the full 13th-month falls within that exemption, which is part of why it is an efficient, expected component of Philippine compensation rather than a discretionary bonus.

The Flat EOR Fee

The EOR fee is the only line on the invoice that pays for the service itself, and it is structured as a flat amount per employee rather than a percentage of salary. That structure has a consequence worth seeing in the donut: as the salary rises, the fee stays the same in pesos and therefore falls as a share of total cost. On a ₱40,000 salary it is roughly a fifth of the monthly total; on a ₱150,000 salary the same flat fee is a far smaller fraction. What the fee covers is the entire employer apparatus, the compliant contract, the statutory enrollments and remittances, payroll and payslips, tax filing, and the legal responsibility of being the employer, which is the subject of its own breakdown in the services overview. A flat fee is also the easiest to audit, because it does not move when the salary does.

The 13th-Month Pay and Other Costs

Two smaller components round out the invoice. The 13th-month pay is a statutory benefit under Presidential Decree No. 851: every rank-and-file employee is entitled to an extra month's pay, computed as one-twelfth of the basic salary earned during the calendar year and released on or before 24 December. A compliant EOR accrues it monthly rather than presenting it as a year-end surprise, which is why it appears as a steady slice in the allocation above. The remaining item is the bank or disbursement fee, a nominal per-payroll cost of moving funds and issuing pay. It is the smallest slice on the chart and rarely material, but it belongs in an honest breakdown because the goal is a figure with no unexplained remainder.

Frequently Asked Questions