Which Salary Deductions Are Legal in the Philippines?
Know the difference between mandatory deductions like SSS and PhilHealth and illegal deductions like uniform deposits and damage penalties.
When you look at your payslip, there is often a big gap between your gross salary and what you actually take home. Some of those deductions are required by law and fund benefits you will use later. Others may be illegal. Understanding the difference protects your earnings and helps you push back when your employer crosses the line. This guide breaks down every common salary deduction in the Philippines.
Mandatory government deductions
Three government agencies require monthly contributions from every employed Filipino, and these deductions are non-negotiable. SSS (Social Security System) contributions are shared between you and your employer — roughly 5% from your salary and about 10% from your employer, plus an Employees' Compensation contribution from the employer. PhilHealth (health insurance) uses a 50/50 split between employee and employer, with the total rate reaching 5% of your monthly salary. Pag-IBIG (Home Development Mutual Fund) deducts 1% to 2% from your salary, with your employer contributing 2%. These deductions are legal, mandatory, and fund your social security, health insurance, and housing loan eligibility.
Withholding tax under the TRAIN Law
Your employer is required to withhold income tax from your salary based on the graduated tax table under the TRAIN Law (RA 10963). The good news: if your annual taxable income is PHP 250,000 or below, your tax rate is zero — you pay no income tax at all. Above that threshold, rates range from 15% to 35% depending on your income bracket. Your employer computes and remits this automatically. Check your BIR Form 2316 at the end of each year to verify that the correct amount was withheld.
Deductions that require your written consent
Under the Labor Code, certain deductions are allowed only if you give written authorization. These include union dues (if you are a union member and have signed a check-off authorization), loans from the company or company-affiliated lending institutions, insurance premiums you opted into, and salary advances. The key word is "written." A verbal agreement or a clause buried in a 40-page employee handbook is not sufficient. You should sign a specific, separate authorization for each type of deduction, and you have the right to revoke it.
Deductions that are illegal
Articles 113 to 115 of the Labor Code set strict limits on what employers can deduct from your wages. The following deductions are generally illegal: "training fees" for basic onboarding or orientation, "uniform deposits" or charges for company-required clothing, "equipment charges" for tools needed to do your job, "damage penalties" deducted without due process, cash bonds or deposits as a condition of employment, and shortages or losses automatically deducted from your pay. Employers cannot simply take money from your salary to cover business losses or operational costs. Even if company property is damaged, your employer must follow due process — meaning a proper investigation and a finding that you were clearly responsible — before any deduction can be made.
The due process requirement for loss deductions
If your employer claims you are responsible for lost or damaged property, they cannot simply deduct the amount from your next paycheck. Due process requires that you be informed of the specific loss or damage in writing, given an opportunity to explain your side, and that a fair finding of responsibility be made before any deduction. Even then, the deduction must be authorized in writing by you. Many employers skip this process entirely and just dock your pay — that is a Labor Code violation regardless of whether you were actually at fault.
How to check your payslip
Every pay period, review your payslip line by line. Verify that SSS, PhilHealth, and Pag-IBIG deductions match the published contribution tables for your salary bracket. Check that withholding tax matches the TRAIN Law rates. Look for any unfamiliar deductions and ask HR to explain each one in writing. If a deduction appeared without your written authorization and is not a government-mandated contribution or tax, it may be illegal. Keep copies of all your payslips — they are your primary evidence if you ever need to file a complaint.
Check your contract with PlainDoc
Want to make sure your employment contract does not authorize questionable deductions? Upload it to PlainDoc for an analysis. Our AI flags deduction clauses that may violate Articles 113 to 115 of the Labor Code, compares your compensation terms against legal standards, and highlights anything that could reduce your take-home pay beyond what the law allows.