The new law is effective March 11, 2019 and it requires private firms to pay "Salary differential" to employees for the duration of employee maternity leave. Salary differential is the difference between the actual salary of the employee and the SSS Maternity Benefit paid by SSS.
How do we implement this in payroll?
1) We pay the employee's SSS Maternity Benefit in advance. This is paid in advance by the employer and reimbursed by SSS to the employer. The amount is non-taxable.
2) We pay the salary differential in advance. The amount is taxable. The law states that employee will still have gov't statutory contributions during ML period. This means we also reduce the advance by the employee share on gov't statutory contributions. This way, we don't incur negative net pay during ML period. The law is silent on the handling of government loans on SSS and Pag-ibig. I think it is prudent to continue the deduction hence we also reduce the advance by the government loans.
3) During ML period, we do the following:
a. Base pay or salary will remain the same where we pay the full amount.
b. We divide the SSS Maternity Benefit paid in advance by 3.5 (if normal or CS), 4 (if solo parent), 2 (if miscarriage) to arrive at deduction per month. This should be configured as an earning pay item and taxable. The amount is negative and it should reduce the taxable income of the employee. Total deduction for the ML duration should tally with the total SSS Maternity Benefit paid to the employee.
c. We divide the Salary differential paid in advance by 3.5 (if normal or CS ), 4 (if solo parent), 2 (if miscarriage) to arrive at deduction per month. This can be configured as a deduction pay item similar to a cash advance/loan. The total deduction for the ML duration should tally with the total salary differential paid in advance.
d. Government statutory contributions remain the same.
e. Government loans continue to be deducted if employee/employer agrees on this.
Written by Janet de Lara and is based on SSS Circular no 2019-009 from SSS. The implementing steps are purely the opinion of the author and companies may follow a different route.
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