Pag-IBIG is the smallest of the three statutory contributions and the one with the tightest cap. For most employees it is a flat ₱200 a month from each side. The details that matter are the ₱1,500 rule at the bottom, the ₱10,000 cap at the top, and how voluntary upgrades are handled.
Who is covered
Membership in the Home Development Mutual Fund (Pag-IBIG) is mandatory for all employees covered by SSS or GSIS, which in practice means every private-sector employee on your payroll, regardless of employment status. Self-employed persons, overseas Filipino workers, and others are covered under their own rules. Employers register each employee and remit both shares monthly from the first month of employment.
The rates and the ₱1,500 rule
Under the rates currently in effect, the employee share depends on monthly compensation:
- ₱1,500 and below: 1% of monthly compensation.
- Above ₱1,500: 2% of monthly compensation.
The ₱1,500 threshold is a legacy of the fund's original law and affects very few regular employees today, but it still applies to anyone whose monthly compensation falls at or under it, for example some part-time or piece-rate arrangements.
The ₱10,000 cap
The percentage is applied to monthly compensation capped at ₱10,000. Anyone earning ₱10,000 or more has the same contribution base, so the mandatory employee share tops out at ₱200 (2% of ₱10,000). A ₱12,000 employee and a ₱120,000 executive both pay ₱200.
Employer share
The employer contributes 2% of the same capped compensation, regardless of whether the employee is in the 1% or 2% bracket. The maximum employer share is therefore also ₱200 a month, for a combined mandatory maximum of ₱400 per employee.
Bracket table
| Monthly compensation | Base used | Employee | Employer | Total |
|---|---|---|---|---|
| ₱1,500 and below | Actual | 1% of actual | 2% of actual | 3% of actual |
| Above ₱1,500 to below ₱10,000 | Actual | 2% of actual | 2% of actual | 4% of actual |
| ₱10,000 and above | ₱10,000 (cap) | ₱200.00 | ₱200.00 | ₱400.00 |
Reference points: ₱1,500 compensation is ₱15 employee and ₱30 employer; ₱5,000 is ₱100 each; ₱8,000 is ₱160 each; ₱10,000 and up is ₱200 each.
Worked example
Employee with a ₱28,300 monthly basic salary
| Monthly compensation | ₱28,300.00 |
| Contribution base (capped) | ₱10,000.00 |
| Employee share (2% × ₱10,000) | ₱200.00 |
| Employer share (2% × ₱10,000) | ₱200.00 |
| Total remitted for this employee | ₱400.00 |
For comparison, an employee earning ₱8,000 would pay ₱160 with the employer matching ₱160, and an employee earning ₱1,400 would pay ₱14 (1%) with the employer paying ₱28 (2%).
Voluntary upgrades and MP2
An employee may choose to contribute more than the mandatory amount. Two routes are common:
- Upgraded regular savings. The employee asks payroll to deduct a higher employee share (for example ₱500 or ₱1,000 a month) into the regular Pag-IBIG savings account. The employer's mandatory share is unchanged unless the company decides to match more as a benefit.
- MP2 (Modified Pag-IBIG II). A separate voluntary savings program with its own account, term, and dividend rate. Some employers accommodate MP2 as a payroll deduction remitted alongside regular contributions; others leave it to the employee to pay directly. Check the current HDMF guidelines for enrollment and remittance mechanics.
Either way, the upgraded amount is a distinct line from the mandatory ₱200 so the remittance report stays reconcilable.
Common payroll mistakes
- Forgetting the cap. 2% of a ₱35,000 salary is ₱700, but the correct mandatory deduction is ₱200. This is the single most common Pag-IBIG error in spreadsheets.
- Applying 2% employee to someone at ₱1,500 and below. The employee rate there is 1%. The employer rate stays 2%.
- Mixing voluntary upgrades into the mandatory column. An employee contributing ₱1,000 should show ₱200 mandatory and ₱800 voluntary so the report reconciles and the employer share is not accidentally matched at ₱1,000.
- Skipping the first month for new hires. Contributions apply from the month of hire, not from regularization.
- Missing a rate change. Pag-IBIG rates and caps have changed before. Confirm what is currently in effect rather than relying on a template built years ago.
Remittance timing
Employers remit monthly according to the Pag-IBIG payment schedule, which is tied to the employer's name or ID under the current rule, using the membership contribution remittance form and Pag-IBIG's electronic channels. Check the current HDMF circular for the exact dates, forms, and payment options in effect; late remittance carries penalties.
How AppDeep Payroll handles this
- The employee rate, the ₱1,500 threshold, the employer rate, and the ₱10,000 cap are master data, updated once when HDMF issues a change.
- The mandatory share is computed automatically from the employee's compensation, and an additional Pag-IBIG amount is a separate per-employee field for voluntary upgrades, so the two never get mixed.
- The deduction schedule controls which cutoff the deduction lands on, and the monthly total reconciles to the contribution.
- The payroll summary exports mandatory and additional amounts per employee for the remittance report, and the payslip shows the employee both lines.
- Every Pag-IBIG line is reconciled against your current system in the free parallel run before you go live.
Frequently asked questions
What is the Pag-IBIG contribution rate?
Under the rates currently in effect, the employee contributes 2% of monthly compensation (1% if monthly compensation is ₱1,500 and below) and the employer contributes 2%. Both are computed on compensation capped at ₱10,000.
What is the maximum Pag-IBIG contribution?
Because the salary base is capped at ₱10,000, the maximum mandatory contribution is ₱200 from the employee and ₱200 from the employer, ₱400 a month in total. Employees earning ₱10,000 or more all pay the same ₱200.
Can an employee contribute more than ₱200 to Pag-IBIG?
Yes. An employee can voluntarily increase the employee share above the mandatory amount through payroll, and can separately save under the MP2 program. The employer's mandatory share stays at 2% of the capped base unless the company chooses to match more.
Is Pag-IBIG computed on basic salary or gross pay?
On monthly compensation, which for most payrolls means the basic salary. Because of the ₱10,000 cap the distinction rarely changes the amount for regular employees; check the current HDMF circular for the definition it applies.
When are Pag-IBIG contributions remitted?
Employers remit monthly according to the Pag-IBIG schedule, which is tied to the first letter of the employer's name or the employer ID depending on the current rule. Check the current HDMF circular for the exact dates and channels.
Not tax or legal advice. This guide is general information based on the rules currently in effect as we understand them. Verify every figure against the current HDMF issuance and consult your accountant or counsel for your situation.