Registration with the SSS, PHIC, and HDMF

Registered companies in the Philippines are required to register and submit their employees to 3 government agencies, namely, the Social Security System (SSS), Home Development Mutual Funds (HDMF), and the Philippines Health Insurance Corporation (PHIC). These government agencies handle the status of private company’s employees’ contributions and their benefits. These benefits are administered by the respective government agencies through their monthly salary basis to avoid penalties due to delay of monthly contributions.

Social Security System (SSS)

All private companies must apply to SSS to ensure the protection of the employees and their families as well.

Companies in the Philippines must register first in order to register their employees to SSS

What are the documentary requirements?

• SSS R1 Form (Employer Registration Form) – This form includes the company data such as Company name, office address, start of operation, contact details (telephone number and email address), and original signed by the Authorized signatories.
• SSS R1A Form (Employment Report Form)- This form contains the list of hired employees alongside their registered SSS number, date of hiring, and their monthly compensation.
• SSS L-501 Form (Specimen Signature Card)- This form needs to be signed by the appointed signatories and approved by the Authorized Signatories.
• SSS Web Registration for Employer – This form is provided after the registration of the company in SSS containing the details like company name, address, and name of the signatories with the original sign of the Authorized Signatories.
• Other Documents are as follows:
  • SEC registration documents, such as but not limited to SEC Certificate of Incorporation, Articles of Incorporation and By-Laws, etc.
  • Secretary’s Certificate or any equivalent document authorizing a third party to process the registration, if applicable
  • Original and Photocopy of valid IDs of Authorized Signatory/ies
  • Original and Photocopy of valid IDs of Authorized Representative.

Home Development Mutual Fund (HDMF)

The Government Agencies are responsible for collecting contributions used for funding salary loans, housing loans, and other benefits to ensure the protection of employees and their families as well.

What are the documentary requirements?

• Employer’s Data Form – This form is needed in order to register in Home Development Mutual Funds also known as Pag-IBIG funds, In this form, you need to fill out the important details referring to the company such as Company name, Address, Tax Identification Number (TIN), Company SSS number and Date of Operation, Originally signed by the Authorized.
• Specimen Signature Form – This form needs to be signed by three (3) appointed signatories and approved and authorized by the Authorized Signatories (President, Chairman, Corporate Secretary).
• eSRS Employer Enrollment Form: This form is needed in order to access the online status and updates of the company contributions and loans, Fill out the form with these details: Company name and address, authorized signatories contact and email address, and signature of the authorized signatories.

Note: The Home Development Mutual Fund (HDMF) must be registered second to the Social Security System (SSS) after registration.

Philippine Health Insurance Corporation (PHIC)

Philippine Health Insurance Corporation also known as PhilHealth with the assistance of the Department of Health (DOH) is a government corporation that provides health insurance assistance and affordable health care to the beneficiaries that may occur during their employment.

The Company is required to register with the PHIC, register their employee, and remit the monthly contribution based on their monthly salary.

What are the documentary requirements?

• PHIC ER1 Employer Data Record- Fill up this form with complete details: Company Name, Office Address, contact number/Email Address, Number of employees, and Signed by the Authorized Signatories.
• PHIC Er2 Report of Employee-Members – In this form, the company must declare the list of employees alongside the SSS/PhilHealth number, monthly salary, and date of employment in the company, signed by the authorized signatories
• PhilHealth Online Access Form (POAF) – This form is processed in order to access the online status of contributions and update, Fill out this form with the company name and contact details of the authorized signatories with its original sign.

Remember:

• All the documents must be printed at least (3) three copies and originally signed by the Authorized Signatories.
• Contact details and Email Addresses must be active and updated for receiving emails from these government agencies.

List of Valid Identification Card (ID)

Expanding a business internationally can be a lucrative venture, and the Philippines has emerged as a promising destination for foreign investors due to its strategic location, growing economy, and large English-speaking workforce. If you’re considering establishing a presence in the Philippines, registering a foreign branch or representative office is one of the viable options to explore. In this article, we’ll guide you through the process of registering a foreign branch/representative office in the Philippines.

Understanding the Difference between a Foreign Branch and a Representative Office:

Before proceeding with the registration, it’s crucial to understand the distinction between a foreign branch and a representative office, as each has its purpose and limitations:

1. Foreign Branch: A foreign branch is an extension of the parent company and carries out commercial activities similar to those of the parent company. It can engage in profit-generating activities, enter into contracts, and conduct business operations on behalf of the parent company. However, a foreign branch is subject to regular corporate income tax.
2. Representative Office: On the other hand, a representative office is limited to non-revenue-generating activities, mainly acting as a liaison or coordinating office. It serves to promote the interests of the parent company, conduct market research, and facilitate communication with clients and affiliates in the Philippines. A representative office cannot enter into contracts, make sales, or generate revenue. As a result, it is generally subject to a lower tax burden.

Step-by-Step Guide to Registering a Foreign Branch/Representative Office:

1. Pre-Registration Requirements:

• Reserved Name: Choose a unique name for your branch or representative office and reserve it with the Securities and Exchange Commission (SEC).
• Local Representative: Appoint a resident agent or representative in the Philippines who will act as the liaison between your office and local authorities.
• Bank: A treasurer-in-trust (TITF) account with the required paid-up capitalization shall be maintained with the bank as proof of such capitalization evidenced by a bank certificate and inward remittance, if applicable. TITF account is for deposit only and restricted for withdrawal except upon approval of the Securities and Exchange Commission (SEC) of the registration papers.

2. SEC Registration:

• Draft application to the Securities and Exchange Commission (SEC) online platform.
• Submit the necessary documents to the SEC, which may include:
  • i. Authenticated copy of the parent company’s board resolution approving the establishment of the branch/representative office in the Philippines.
  • ii. Authenticated copy of the Articles of Incorporation/Partnership with an English translation thereof if in a foreign language other than English
  • iii. Authenticated Audited Financial Statement or if unaudited, with a certification signed under oath by an officer of a responsible regulatory institution or by the applicant’s legal counsel that the applicant is not required to prepare and submit an audited financial statement with citation of the law or regulation on which it is based.
  • iv. Notarized proof of inward remittance such as bank certificate of inward remittance or credit advances
  • v. Endorsement or clearance from regulatory agencies, if applicable (e.g., Bangko Sentral ng Pilipinas for financial institutions).
• Pay the required registration fees and obtain the SEC Certificate of License to do Business here in the Philippines.

3. Other Registrations:

• Tax Identification Number (TIN): Register with the Bureau of Internal Revenue (BIR) to obtain a TIN for tax purposes.
• Local Business Permits: Obtain necessary business permits from the local government unit (LGU) where your branch/representative office will operate.
• Employer Registration: Register with the Social Security System (SSS), Philippine Health Insurance Corporation (PhilHealth), and Home Development Mutual Fund (Pag-IBIG) if you plan to hire employees.

4. Bank Account Opening:

• Open a local bank account in the Philippines to facilitate financial transactions.

5. Post-Registration Compliance:

• Books of Accounts: Comply with accounting and bookkeeping requirements and maintain books of accounts in accordance with Philippine accounting standards.
• Annual Reporting: Submit annual reports to the SEC and other government agencies, as required.
• Renewal of Permits: Ensure timely renewal of business permits and registrations to operate legally in the country.

A Corporation is a legal entity that is separate and distinct from its owner or incorporators. It has legal rights and obligations similar to an individual. It can enter into contracts, loans, hire employees, pay taxes, etc. The ownership of a corporation is divided into shares of stock.

A Corporation issues the stock to individuals or other businesses, who then become owners or stockholders, of the corporation.

Advantages of a Corporation

• The risk and liability is limited only to the corporation. Owners are not personally liable.
• It is easy to increase capital through the issuance of stocks to investors
• It can be passed on to different owners
• It can exist indefinitely
• It has the capacity to act independently similar to individual
• The management or decision-making is shared by the board of directors, not the sole individual.

Disadvantages of a Corporation

• More costly to set up than a sole proprietor
• It is mandated by more government reportorial requirements and laws
• Higher capital requirements and operating cost
• Higher tax rates

Where to Register a Corporation?

Here are the government agencies where the corporation are required to register in the Philippines:

• Securities and Exchange Commission (SEC)
• Local Government Units (LGU) where your business is located:
  • Barangay
  • Mayor’s Office
• Bureau of Internal Revenue (BIR)
• If you have employees, you need to register with the following:
  • Social Security System (SSS)
  • Philippine Health Insurance Corporation(PHIC)
  • Home Development Mutual Fund(HDMF)
  • Department of Labor and Employment(DOLE)

Who may form a Corporation?

Any person, partnership, association, or corporation, singly or jointly with others but not more than fifteen (15) in number, may organize a corporation for any lawful purpose or purposes. Provided, that natural persons who are licensed to practice a profession, and partnerships or associations organized for the purpose of practicing a profession, shall not be allowed to organize as a corporation unless otherwise provided under special laws. Incorporators who are natural persons must be of legal age.

Each incorporator of a stock corporation must own or be a subscriber to at least one (1) share of the capital stock.

How much is the Capitalization?

Stock corporations shall not be required to have a minimum capital stock, except as otherwise specifically provided by special law. However, some highly regulated companies or corporations are required to have a minimum capitalization based on the industry or equity of that certain entity.

Some domestic corporations with more than 40% foreign equity are required to have at least U$200,000.00 minimum paid-up capital if the registering corporation intends to operate as a Domestic Market Enterprise

Basic Documentary Requirements

• Name Verification Slip (may be secured online or at SEC Name Verification Unit)
• Articles of Incorporation (AI) and By-laws (BL)
• Treasurer’s Affidavit
• Joint affidavit of two incorporators to change the corporate name (not required if already stated in AI)

Additional Requirements

• Endorsement/clearance from other government agencies, if applicable
• Clearance from other Department of the Commission*
• For Corporations with more than 40% foreign equity: Application Form for registration under the Foreign Investments Act of 1991 (R.A. 7042, as amended)
• Endorsement/clearance from (a) Philippine Economic Zone Authority (PEZA) for the applicant under R.A. 7916, (b) Subic Bay Metropolitan Authority (SBMA) or Clark Development Corporation (CDC) for the applicant under R.A. 7227 and (c) Cagayan Economic Zone Authority (CEZA) for the applicant under R.A. 7922

References:
Republic Act 11232 or Act of Providing for the Revised Corporation Code
Republic Act No. 7042, as amended, also known as the Foreign Investment Act of 1991 (FIA)

There are two ways to process SSS employer web portal registration: online or manually.

1. Online Registration
   Access the SSS home page using this link: Employer Login

Kindly move your cursor to the lower middle option with the name “Register” and choose “Regular
Employer”. This will direct you to the online employer user ID registration. You must supply all the
needed information, preferably those with an asterisk.

Below will serve as a guide for supplying the information for the initial registration.

1. Employer ID: SSS Employer No.
2. Date Coverage: This must be the employment date of the company’s first employee. The SSS R1-A form will serve as a guide to this.
3. Address: The registered company address
4. Company Email Address: It must be an active email address since in this email the SSS will be sending
   the link for the final registration.
5. Preferred User ID: This will be the company’s permanent user ID.

You may now click the “Submit Button” once you have successfully supplied all the needed information.
The screen will show you the status of the registration, which is under validation. The company will be
informed of the result of the registration through the company’s email address. Once the company has
received the email, the authorized representative must access the link to proceed with the final
registration.

Below will serve as a guide for supplying the information for the final registration.

1. For employer information, the same information should be used from the previous registration.
2. For the employer-authorized signatory, the information should be the same as on the SSS L501 form.
   The email to be registered must be an active email and must not be the same as the registered
   company’s email address in the initial registration.
   Once you’re done supplying the information, click the “Submit” button and then “Ok”.

The employer or representative will receive the status of the registration through the registered
company’s email address. If successful, SSS will give the temporary password to the employer or
representative, and the former should set up the preferred password to be used.

2. Manual registration
   There will be times when the online registration is not functional due to the company’s poor internet
   connection or other factors that cause difficulties in using the online registration. Thanks to the SSS for
   allowing us to process the registration through manual filing. All we need to do is secure the form we
   will be using for the registration.

The below form is used for manual registration:

Below will be your guide for filling out the form:

1. Employer ID: Employer SSS No.
2. Employer Name: The company’s registered name
3. Date Coverage: The date coverage will be the first employment date of the company’s first employee.
   The SSS R1-A form will serve as a guide to this.
4. Business Address: The company’s registered address
5. Company Email Address: Again, it must be an active email address since in this email the SSS will be
   sending the company’s login details.
6. For the employer-authorized signatory, the information should be the same as on the SSS L501 form.
   The email to be registered must be an active email and must not be the same as the registered
   company’s email address.
7. Employer Log-in Details: The company’s preferred user ID. This will become your permanent user ID
   once it is approved.
8. For the authenticity of the form, always make sure to secure the signatures of the employer’s
   authorized signatory and the person granting authority to the authorized signatory.

Once you’re done with the required information, the representative must submit the form to the
company’s SSS Servicing Branch together with the SSS L501 form. To prove that the representative has
been given permission by the employer to handle the registration, they must obtain an authorization
letter.

Online or manual registration will never be that difficult as long as you have this guide to process the
registration. All you need to do is follow these very simple guides above and comply with the additional
requirements as needed.

Making mistakes is normal, but making the same mistake repeatedly is unreasonable. Most payroll and HR personnel experience these common errors when preparing their company’s payroll register. Even tenured payroll and HR personnel may tend to be complacent due to the repetitive work and overlook some items when doing the payroll of employees. They may forget to check the timesheet of every employee, excluding overtime, or include undertime. They may forget the treatment of de minimis benefits or the excess of the Php 90,000 limit of the other benefits. They may incorrectly compute the net pay of employees.

Payroll registers are easy to prepare, but intricate in terms of the principles or basis used to produce an accurate payroll report. Payroll-related technical knowledge from government agencies should be updated once in a while to avoid common errors in payroll preparation. In this article, we will tackle three of the most common payroll errors and discuss ways to avoid them.

1. A lack of timesheet validation may affect the computation of gross compensation.

In order to avoid incorrect timesheet records applying to the payroll register, the company could establish a payroll manual that would include timesheet validation before the generation of the payroll register. The payroll department could assign a staff member to review the timesheet before using it for generating payroll registers. The staff should be able to review the factor or number of working or paid days in a year, the absences, undertime, lateness, overtime, night shift differential, premium, or holiday pay.

2. Erroneous specifications of taxable and non-taxable compensation may affect the computation of the withholding tax on compensation.

In order to classify the taxability of the compensation correctly, the Payroll and HR Personnel should be well-informed about the general rules and exemptions on payroll-related taxable items. Generally, all forms of compensation are taxable except for the items identified in BIR Form 2316, such as:

1. Basic Salary (including the exempt P250,000  & below) or the Statutory Minimum Wage of the MWE
2. Holiday Pay (MWE)   
3. Overtime Pay (MWE)
4. Night Shift Differential (MWE)                       
5. Hazard Pay (MWE)   
6. 13th Month Pay and Other Benefits (maximum of P90,000)
7. De Minimis Benefits   
8. SSS, GSIS, PHIC & PAG-IBIG Contributions and Union Dues (Employee share only)
9. Salaries and Other Forms of Compensation

Apply the proper taxability of compensation based on the regulation reflected in RR 11-2018. If not sure about the items, whether the allowance or incentive is taxable or not, identify first if the allowance or incentive is included in the non-taxable compensation enumerated above. If not, this may be deemed taxable. Then, you may also assign a staff to review the specification of taxable or non-taxable compensation if this is not a recurring incentive or allowance.

3. Miscalculating the payroll computation, formula, contributions, or withholding tax on compensation may produce an incorrect payroll.

In order to be cautious about the calculations of the payroll register, the Payroll and HR Personnel should be well informed about the new updates for the SSS, PHIC, HDMF table of contributions, and the BIR revised tax table. Use the proper formula and computation if you are doing a manual payroll. Double check the reflected amount of government contributions if correct and recompute the withholding tax on compensation of employees. The company may also assign a staff to review the formula of the payroll computations, the amount of the contributions, and withholding tax on compensation. In summary, common payroll errors may be avoided by being well-informed about the technical knowledge of each government agency related to payroll preparation. A consistent and strict peer review may also prevent typo or formula errors and incorrect classification of taxability of allowances or incentives, or other types of compensation. A payroll manual may also help the payroll department since all important policies and processes reflect on it. Cautiousness and consciousness are the keys.

Summary: Most of the payroll associates may forget to review the timesheets of every employee, excluding overtime, or including undertime. They may forget the inclusions and treatment of de minimis benefits or the excess of the Php 90,000 limit of the 13th month’s pay and other benefits and may miscalculate the net pay of employees. This article will tackle three of the most common payroll errors and discuss ways to avoid them.