How to Compute Take‑Home Pay in the Philippines

Step 1: Determine Gross Pay

Your gross pay is your total regular earnings for the period before any deductions. This typically matches the "basic salary" or "regular pay" on your payslip.

Step 2: Calculate Mandatory Employee Contributions

The government requires deductions for three main agencies:

1. SSS: Based on the official contribution schedule (effective Jan 2025). The employee share is 5% of your matching Monthly Salary Credit (up to a ₱35,000 cap).

2. PhilHealth: 5% of your Monthly Basic Salary (with a ₱10,000 floor and ₱100,000 ceiling), split 50/50 between employer and employee (so the employee pays 2.5%).

3. Pag-IBIG: 2% of your fund salary, up to a maximum fund salary of ₱10,000 (meaning a maximum employee share of ₱200).

Step 3: Compute Taxable Compensation

A common misconception is that tax is computed on your full gross pay. According to the BIR (RMC 50-2018), mandatory employee contributions (SSS, PhilHealth, Pag-IBIG) are deductible to arrive at your taxable compensation.

Formula: Taxable Compensation = Gross Pay — Mandatory Contributions

Step 4: Determine Withholding Tax

Find your pay frequency (monthly or semi-monthly) and look up your Taxable Compensation in the BIR Annex E withholding tax table. The table will give a base amount plus a percentage of the excess over the bracket threshold.

Step 5: Calculate Final Take-Home Pay

Formula: Take-Home Pay = Gross Pay — (Mandatory Contributions + Withholding Tax)

Remember that real-world payslips might have additional non-statutory deductions like company loans, union dues, or HMO premiums, which will further lower your net pay.