What Is a Payslip?

A payslip is a vital document that details an employee’s earnings, deductions, and net pay. It ensures salary transparency and compliance with labor and tax laws. In the Philippines, these are governed by DOLE Labor Advisory No. 11-14, which mandates their issuance every payday, and the Bureau of Internal Revenue (BIR), which requires accurate tax reporting and record-keeping. Failure to comply can result in penalties and labor disputes, making proper payroll management essential for businesses.

Payslip Compliance: DOLE & BIR Regulations

Pay slip compliance is not just about issuing documents. It’s about adhering to strict labor and tax policies that protect both employees and businesses.

DOLE Mandate

The Department of Labor and Employment (DOLE) requires employers to provide pay slips to employees each payday. These must clearly outline basic salary, overtime pay, deductions, and net earnings. Non-compliance can lead to employee complaints, fines, and legal action, emphasizing the importance of transparency in payroll processing.

Here’s an example of a pay slip that is compliant and how to read it:

1. The Header

> Company Logo

> Pay Run: Payroll Disbursement Schedule

> Attendance: Timekeeping Cut Off

2. Employee Details

> Employee Name

> Employee ID

> Hire Date

> Government Mandated Numbers

> Position

3. Year to Date Figures

Year-to-date (YTD) figures refer to the cumulative totals of employees’ various earnings and deductions from the beginning of the current calendar year up to the present date.

Taxable Income: Year-to-date figures of the taxable income

Non-Taxable Income: Year-to-date all the De Minimis Benefit and other allowable earnings are deducted from the Gross Income.

Gross Income: Year-to-date total income before taxes which includes basic pay, overtime, and other allowances.

SSS EE: Year-to-date figures of the total SSS Employee Share

HDMF EE: Year-to-date figures of the total Pagibig Employee Share

PHIC EE: Year-to-date figures of the total Philhealth Employee Share

WTAX: Year-to-date figures of the total Tax withheld

Other Deductions: Year-to-date figures of deductions such as Statutory Employee and Employer Share, Withholding Tax, Loans, HMO deductions, etc.

Net Pay: Year-to-date figures of the total take-home pay

4. Gross Income

The gross income is your total income before taxes which includes the basic pay, overtime, and other allowances.

Here are the most notable changes:

Basic Pay:

Before: The amount labeled as “basic pay” was actually the total pay indicated in the contract (basic pay + de minimis).

After: The amount labeled as “basic pay” now accurately reflects the actual basic pay. De minimis benefits are now enumerated separately below the basic pay, along with other additional pay such as overtime and night differential.

5. Non-Taxable Income

The Non-Taxable Income which includes all the De Minimis Benefit and other allowable earnings is deducted from the Gross Income.

6. Mandatory Deductions

Government-mandated benefits such as SSS, Philhealth, and PAGIBIG employee share.

7. Taxable Income

Taxable Income = Gross Income – Non-Taxable Income 

8. Withholding Tax

It is required to withhold a certain percentage of the employee’s compensation, based on the standard withholding before disbursing the remaining amount to the payee.

9.  Deductions

Includes loans, HMO, and other deductions

10. Net Pay

The total amount of take-home pay.

11.    Hours and Remarks

The automated hours shown on the pay slip are based on the employee’s complete time logs, while the manually entered remarks correspond to assumed NDs and approved OTs.

BIR Tax & Record-Keeping Rules

Pay slips must align with BIR tax regulations, ensuring that withholding taxes are properly computed and documented. Companies must securely store payroll documentation for no fewer than three years. Accurate payroll documentation safeguards businesses against tax audits and legal repercussions, reinforcing financial integrity.

Pay Slips for Different Employment Types

Not all employees receive the same type of pay slip. Understanding how different employment categories affect pay slip issuance is crucial for accurate payroll processing.

Regular vs. Contractual Employees

Regular employees receive pay slips reflecting government-mandated deductions, such as SSS, PhilHealth, and Pag-IBIG contributions. Contractual or project-based workers may have varying tax deductions, depending on employment duration and contract terms. Employers must clearly indicate these differences to avoid payroll disputes.

Freelancers, Gig Workers & Outsourced Employees

Unlike traditional employees, freelancers and gig workers do not receive employer-issued pay slips. Instead, they must secure alternative proof of income, such as invoices or remittance statements. For outsourced employees, pay slips are issued by the contracting agency, ensuring payroll compliance under Philippine labor laws.

Remote Workers with Global Employers

Remote employees working for foreign companies may receive pay slips from their overseas employers. However, if these employees are registered taxpayers in the Philippines, their income must comply with local tax laws. Employers and workers alike must be aware of cross-border tax obligations to avoid legal complications.

Digital Pay Slips & Payroll Automation

With the shift toward digital transformation, electronic pay slips are becoming the norm. Employers must ensure compliance while leveraging technology for efficiency.

Legal Validity of E-Pay Slips

The shift toward digital payroll is gaining traction. DOLE allows electronic pay slips as long as they are accessible, verifiable, and secure. Employers must ensure that e-payslips comply with data privacy laws and are readily available to employees upon request.

Common Pay Slip Issues & Payroll Disputes

Errors and disputes related to pay slips can lead to employee dissatisfaction and potential legal issues. Addressing these concerns proactively can help maintain a healthy work environment.

Payroll Errors

Incorrect deductions, overtime miscalculations, and missing allowances are common payroll errors. These mistakes can lead to employee dissatisfaction and potential labor disputes, making it crucial for businesses to implement robust payroll verification processes.

Fake Pay Slips & Fraud

Pay slip fraud is a rising concern, with fabricated documents being used for loan applications, visa approvals, and credit verification. Employers must implement anti-fraud measures, such as digital pay slips with security features, to combat this issue.

“No Payslip, No Pay” Disputes

Some employers withhold salaries due to administrative lapses in pay slip issuance. However, DOLE strictly prohibits this practice. Employees are entitled to their wages, regardless of pay slip availability, reinforcing the importance of efficient payroll management.

Resolving Pay Slip Errors & Disputes

Addressing payroll disputes effectively prevents prolonged legal battles and ensures workplace harmony.

Preventing Payroll Issues

To prevent disputes, employers must adopt clear payroll policies, conduct regular audits, and provide accurate pay slips. Transparent payroll processes build trust, reduce conflicts, and improve employee satisfaction.

Understanding your pay slip is essential, but so is knowing how your salary should be structured. Check out the 2025 Penbrothers Philippine Salary Guide to ensure you’re being paid fairly.

Employer’s Guide to Payroll Compliance

Ensuring payroll compliance protects businesses from financial risks and enhances employee trust.

DOLE & BIR Compliance Resources

Employers must stay updated on labor and tax regulations by referring to DOLE advisories and BIR guidelines. Keeping up with compliance updates ensures smooth payroll management and prevents costly penalties.

Automate & Stay Compliant

Payroll errors and compliance lapses can be costly. By adopting compliant payroll systems, businesses can streamline processes, reduce risks, and ensure seamless pay slip management. Employers must act now to stay compliant and protect their workforce.