Payroll Management has been continually innovating in the Philippine payroll system. Payroll is not only the administration of a company’s employee salaries, wages, bonuses and deductions.
The Bureau of Internal Revenue mandates employers to also collect withholding tax from employees and document it.
This mandate is called taxation and documentation. Now, assuring that your taxation and documentation is in accordance to the law and as well as, the added responsibility of making these documents prepared and accomplished in a certain period of time required by the BIR needs a lot of work and patience to do. And not having enough evidences or documents and error in taxation can result to tons and tons of penalties.
What you should do?
1. Keep documents that shows employer employee relationship.
As imposed in the law, here are four factors that can establish employer employee relationship in the company:
a) Selection and engagement of the employee which can be represented by an identification card or contract.
b) Payment of wages and benefits which can be shown by the agreed amount of compensation to be given to the employee and the copy of employee’s payroll history.
c) Power of dismissal which can be shown in the discontinuance memorandum.
d) Employers power to control the employee with respect to the means by which the work is to be done that can be represented through Bundy cards.
These are the documents that can prove the existence of the employer employee relationship. Incomplete documentation may lead to higher withholding tax of the employees.
2. Monthly and yearly basis of how much the company spent on compensation must be reported and compiled
Bureau of Internal Revenue (BIR) requires all businesses in the Philippines to submit End of the Year Statement Reports. This report will declare the employers monthly computation on its employee’s salary, benefits, and deductions.
Documents, involved in the report, are:
a) the current financial year dates
b) employees’ personal data such as name, address, birth date, tax status, specific dependents, etc.
c) cumulated results of taxable income which are the subjected tax in compensation.
d) cumulated results of non taxable income which are the amount of contributions paid to government agencies like SSS, PhilHealth and HDMF e) tax due and withheld are the remaining or additional tax in the company.
Why you should keep records? These things should be filed and submitted completely or else penalties can be imposed by the government on you. Another reason why companies have the burden of proof, firms must be able to prove where are your operating expenses are coming from in order to deduct them. Payroll is an expense and if you can’t present a documentation of it, you cannot deduct them.
This is exactly why most companies Outsource payroll processes to build, maintain and organize a master file to lessen withholding tax and penalties.
The beauty of Payroll Outsourcing is not only to process your employee’s payroll but your supplier will also manage to prepare an accurate documentation at the same time.
TrendStatic Corporation is also a payroll outsourcing provider located in Ortigas Centre, Pasig Philippines.
We are happy to meet with you for us to assess your company’s payroll requirements.
For more detailed information about this topic or you want assessment for your company, please feel free to contact us by filling up the blue form, and we will contact you as soon as we read your message.Â
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