Whether you’re a freelancer or a new entrepreneur flying solo, sooner or later as your business grows, you may want to consider hiring employees. And when you do hire your first employee, you would have to start thinking about payroll, and payroll tax rates.
For both aspiring and existing business owners, 2018 comes with big changes specifically with implementation for payroll taxes. When it comes to handling payroll, it’s important to understand the current payroll tax rates. Not all employees under an organization have the same salaries and there are those who have different tax brackets as well. Meaning, each individual can have varying tax rates depending on their job position and company.
Income Tax and Tax Status
Income tax is the tax levied on an employee’s salary. It’s the percentage of a person’s income that is deducted and received by the government. The rate will automatically increase when the taxable income of the employee also increases. Aside from the income tax, it’s also essential to keep in mind that tax rates may vary depending on the type of tax payer.
This 2018, under the TRAIN Law (RA No. 10963+veto message) how income tax is levied on employee salary now changes. Unlike the previous tax table, employees who earn P685 per day or P20,833 per month will be exempted from with holding tax. Withholding tax rates are now standardized and exemptions are applied to all whether and employee have or don’t have dependents.
Payroll Tax Rates in the Philippines
Below is the revised withholding tax table that will be effective from January 1, 2018 until December 31, 2022:
For Semi-Monthly only.
Compensation Range Prescribed Withholding Tax
10,417 and below 0.00
10,417 – 16,666 0.0 +20% over 10,417
16,667 – 33,332 1,250.00 +25% over 16,667
33,333 – 83,332 5,416.67 +30% over 33,333
83,333 – 333,332 20,416.67 +32% over 83,333
333,333 and above 100,416.67 +35% over 333,333
What Does This Mean for your Employee’s Compensation?
With the revised withholding tax rates, employees can enjoy a higher net income after all government mandated fees have been deducted. The key takeaway with this new withholding tax table is that your employees would now have higher take-home pay compared to the old tax tables.
If you don’t have employees, Taxumo wrote a TRAIN LAW PRIMER to help self-employed individuals understand the implications of the tax reform.
If you’re a small business owner, or just starting a business with a few employees, tackling payroll can be a confusing task to do. Luckily there are platforms like TAXUMO that can help you easily file for your taxes.
Let’s also not forget the challenges that come with searching and recruiting the right employee for your growing business. If you want an easy and affordable recruitment solution for your company, you can check out Jobayan.