Payslip basics
Net Pay vs Gross Pay in the Philippines
"Gross pay" and "net pay" (also called take-home pay) are the two numbers on every Philippine payslip, and the gap between them can be confusing the first time you see it. Gross pay is the number in your job offer; net pay is what actually lands in your bank account. This guide breaks down exactly what happens between the two, with real numbers, so you know precisely where every peso goes.
Gross pay: the starting point
Gross pay is your total compensation before ANY deduction: your basic monthly salary, plus any regular allowances that are considered part of your taxable compensation (transportation, representation, etc., depending on your employer's pay structure). It's the number usually quoted in a job posting or offer letter, and it's the figure your income tax and government contributions are calculated FROM, not the amount you actually receive.
The four deductions between gross and net
For a typical regular employee, four things get subtracted from gross pay before you see your net pay:
- SSS contribution (employee share): 5% of your Monthly Salary Credit, between PHP 250 and PHP 1,750/month depending on your salary bracket.
- PhilHealth contribution (employee share): 2.5% of your monthly basic salary, between PHP 250 and PHP 2,500/month.
- Pag-IBIG (HDMF) contribution (employee share): 1% or 2% of monthly compensation, capped at PHP 200/month.
- Withholding tax: computed on what's LEFT after the three contributions above are subtracted, using the BIR's official TRAIN Law monthly tax table. This is why withholding tax is calculated on your "taxable income," a smaller number than your gross salary.
Worked example: PHP 40,000 gross salary
Here's exactly where the money goes for a PHP 40,000/month gross salary:
| Step | Amount |
|---|---|
| Gross monthly salary | PHP 40,000.00 |
| − SSS contribution | PHP 1,750.00 |
| − PhilHealth contribution | PHP 1,000.00 |
| − Pag-IBIG contribution | PHP 200.00 |
| = Taxable income | PHP 37,050.00 |
| − Withholding tax | PHP 2,618.40 |
| = Net take-home pay | PHP 34,431.60 |
In this example, about 13.9% of gross pay is deducted before it reaches your bank account. Try your own salary in our tax calculator to see your exact numbers.
A second example: PHP 80,000/month
To see how the ratio shifts at a higher salary, here is the same breakdown for a PHP 80,000/month gross salary:
| Step | Amount |
|---|---|
| Gross monthly salary | PHP 80,000.00 |
| - SSS contribution | PHP 1,750.00 |
| - PhilHealth contribution | PHP 2,000.00 |
| - Pag-IBIG contribution | PHP 200.00 |
| = Taxable income | PHP 76,050.00 |
| - Withholding tax | PHP 10,887.55 |
| = Net take-home pay | PHP 65,162.45 |
Here, about 18.5% of gross pay is deducted, compared to about 13.9% at PHP 40,000/month. The three government contributions actually SHRINK as a share of gross pay at this level (they are already near their ceilings), while the withholding tax share grows because more of the income sits in the 25% bracket instead of the 20% bracket.
Why net pay is a lower percentage of gross the more you earn
Because income tax is progressive (see our TRAIN Law tax brackets guide), the ratio of net pay to gross pay generally decreases as your salary rises: higher earners lose a larger SLICE of their income to tax, even though every peso up to each threshold is still taxed at the same rate as everyone else's. Meanwhile, SSS, PhilHealth, and Pag-IBIG contributions are capped at fixed ceilings, so at high salary levels they become a shrinking percentage of gross pay; it's the withholding tax portion that grows.
What's usually NOT included in this comparison
A few things sit outside the simple gross-to-net flow described above:
- 13th month pay is computed and taxed separately, with its own PHP 90,000 exemption ceiling; see the 13th month pay calculator.
- Overtime pay, night-shift differential, and holiday premium pay are usually itemized separately on a payslip and computed with their own rules.
- Optional deductions (a company loan, HMO co-payment, union dues, etc.) further reduce net pay below the "take-home pay" figure shown by this or any tax calculator; those are employer/employee-specific and can't be estimated generically.