The new Charter of the Social Security System (SSS) took effect on March 5 with the passage into law of Republic Act (RA) No. 11199 or the “Social Security Act of 2018.”
The law aims to strengthen the state pension fund through the introduction of a new monthly contribution rate of 12% (with gradual increases up to 15% by 2025), the setting of minimum and maximum monthly salary credits, and the expansion and mandatory coverage of the fund for certain individuals, i.e., self-employed persons and OFWs, among others.
More importantly, the law introduces a condonation program, which allows employers with delinquent SSS contributions to settle their delinquencies without the imposition of penalties.
Following the passage of the SSS Charter, the Social Security Commission (SSC) issued Circular No. 2019-004, which implements the Transitory Clause of RA No. 11199, granting a six-month period for qualified employers or covered persons to settle their delinquencies and apply for a condonation of penalties. In general, the penalties offered to be waived under the program are the 3% penalty (2% beginning April 2019) per month, possible initiation of litigation, and damages, among others.
Notably, the offer period for the condonation is set to end on Sept. 6 (after its commencement on March 5).
Given that the window closes in less than two months, it now becomes worthwhile for employers to check on possible delinquencies that would call for an application for condonation. To an employer, questions like “am I or my employees covered by the requirement to contribute?,” “are there any missed contributions for covered employees?” would need some answers before a decision can be made. Here are some points to consider.
Basically, all employers, acting on behalf of covered employees, are required to withhold and remit monthly employer-employee contributions to a Social Security authorized agent or bank — and any employer or covered person who has not remitted all contributions due and payable to the SSS may avail of the Program.
Under the law, the types of employees covered include contractual or permanent employees not more than 60 years old, regardless of citizenship or nationality, the nature and duration of employment, and the manner of payment of compensation.
Even foreign nationals or expatriates under a local employment contract are considered covered “employees” in the absence of an explicit exemption under bilateral agreements. While the Philippines has Bilateral Social Security Agreements with 13 countries possibly providing exemptions from the mandatory coverage, the exemption is, however, not automatic. To be exempt, there needs to be a submission of a Certificate of Continuing Liability from the employees’ home country Social Security Office and approval of the Philippine SSS.
Other than the said general coverage, the following employers or covered persons are specifically included in the list of those who may apply for condonation:
– Those not yet registered with the SSS, including household employers;
– Those with pending or approved proposals under the existing Installment Payment Scheme Program of the SSS;
– Those with pending or approved applications under the SSS Program for the Acceptance of Properties Offered Through Dacion En Pago;
– Those with pending cases involving the collection of contributions and/or penalties or non-reporting of employees before the SSC, the regular Courts or the Department of Justice or Office of the Prosecutor;
– Those against whom judgment had been rendered either by the SSC or the regular Courts but have not complied with the judgment;
– Those who settled all contributions before the effectivity of RA No. 11199 but with unpaid or partially paid penalties for late or non-remittance; and
– Those against whom a Warrant of Distraint/Levy/Garnishment (WDLG) or Encumbrance had been issued.
The program also extends the entitlement to a condonation to those who have already paid contributions, partially or in full, before the effectivity of RA No. 11199, but are still faced with accrued penalties.
Now that the condonation program is about to close on Sept. 6, the SSS is making a final call on all employers to revisit their compliance and settle all past due SSS contributions, if any, without the pain of penalties.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the authors and do not necessarily represent the views of SGV & Co.
Elena D. Manuel is a Tax Senior Director of SGV & Co.
