Pag-IBIG Contributions to Double in February 2024 | Sprout Solutions (2024)

Starting February 2024, the Home Development Mutual Fund (HDMF), commonly known as the Pag-IBIG Fund, will increase its members' monthly contribution rates by 100%.

Currently, the contributions are based on a monthly fund salary (MFS) capped at P5,000, with a 2% contribution rate. This setup means members and their employers each contribute ₱100 monthly towards the member’s savings.

However, from February, the MFS will rise to P10,000, meaning both employee and employer Pag-IBIG contributions will be ₱200.

Don't get caught off guard — inform yourself now about the Pag-IBIG Fund changes coming in 2024.

Everything You Need to Know About Pag-IBIG Contributions

What Is an HDMF Contribution?

The Home Development Mutual Fund, better known as the Pag-IBIG Fund, was established on June 11, 1978 through Presidential Decree 1530. The goal was to tackle two crucial needs for Filipino workers — promoting savings and making shelter more accessible.

Pag-IBIG creates a way for employees to steadily build up savings over time through mandatory contributions deducted from their pay. This provides financial security along with the chance to earn dividends on the amounts set aside.

The other main aim of Pag-IBIG is to offer affordable home loans so that average Filipino workers have the opportunity to purchase or improve housing for their families. The Fund provides this financing at more reasonable interest rates compared to private banks.

How Much is Your Pag-IBIG Contribution?

The Pag-IBIG contribution rates in 2024 have gone up by 100% (₱200) to make the program even more beneficial for Filipino workers. If you earn ₱1,500 or less per month, you now contribute 1% of your total pay to Pag-IBIG. For those earning over ₱1,500 monthly, your personal share increases to 2% of your income.

Pag-IBIG Contribution Table for Employee and Employers 2024.

Regardless of how much an employee makes, employers always contribute 2% to match the funds being set aside.

Why Is There an Increase in Pag-IBIG Contribution?

The Pag-IBIG Fund has increased the contribution rate to provide members with higher retirement savings and larger loans during emergencies. Under the new rates, members can expect double the savings upon maturity, plus increased annual dividends.

For instance, under the old contribution rates, a member would receive around ₱87,000 upon reaching membership maturity after 20 years. However, with the new rates, they can expect to receive double that amount, around ₱174,000, after the same period.

Higher savings will also make members eligible for increased multi-purpose and calamity loan amounts, providing additional financial assistance.

How to Calculate Your Pag-IBIG Contribution?

Calculating your monthly Pag-IBIG contribution is straightforward once you know your income and the right percentage to apply. The contribution rate is 1% of your pay if you earn ₱1,500 or less per month. For salaries above ₱1,500 the rate goes up to 2%.

You can use this simple formula:

Monthly salary x your contribution rate = Your monthly Pag-IBIG contribution

Let's say your monthly income is ₱10,000. Since that's over ₱1,500, your contribution rate would be 2% of your pay.

You can calculate it like this:

₱10,000 x 0.02 = ₱200

Since you and your employer would contribute, then you would have ₱400 to your Pag-IBIG Fund account.

Note: Despite having small calculated contributions, the minimum contribution now is set at ₱200 in 2024 for all employed Pag-IBIG members.

When Is the Pag-IBIG Contribution Deadline?

The due date for Pag-IBIG contribution payment depends on the first letter of the company or business name. Here’s a list of the deadlines:

Where Can You Pay Your Pag-IBIG Contribution?

If you are employed, paying your Pag-IBIG contribution is easy — your employer handles it for you. They deduct the amount from your paycheck and submit the funds on your behalf.

If you are self-employed or working abroad, you can submit Pag-IBIG contributions through the following channels:

• Via Virtual Pag-IBIG
• Any Pag-IBIG Fund branch near you
• Via digital non-bank and online banking platforms
• Debit or credit card payments (Visa, Mastercard, or JCB cards are accepted.)
• Payment via Maya (formerly PayMaya)

To make this remittance process even simpler for micro and small enterprises, Pag-IBIG Fund has launched a new Electronic Submission Of Remittance Schedule (eSRS) system.

Here's a quick rundown of how employers can use eSRS:

1. Enroll and Register
   1. Step 1: Visit the Pag-IBIG website and click “Downloadable Forms” to download the eSRS Employer Enrollment Form.
   2. Step 2: Fill it out with the company details and name an authorized user from your workforce. This person needs an existing Pag-IBIG Member’s ID (MID) number.
   3. Step 3: Submit the completed form to your Pag-IBIG branch office.
   4. Step 4: Pag-IBIG will email you the enrollment status and provide a User ID and password.
      
2. Prepare the Remittance File
   1. Step 1: Log into the Virtual Pag-IBIG portal and access eSRS.
   2. Step 2: Update your employee roster — add, remove, edit as needed.
   3. Step 3: Select “Create Payment Instruction”.
   4. Step 4: Generate a Payment Instruction Form (PIF) with a unique PIN number.
   5. Step 5: Print the PIF to use for payment. (PIN is valid for 30 days)
      
3. Make Payment
   1. Step 1: Pay through an accredited Pag-IBIG Fund partner like Bayad Center, ECPay, Moneygment App, UCPB, or AUB.
   2. Step 2: Present the PIF with PIN at payment.
   3. Step 3: Pay the corresponding amount.
   4. Step 4: Get the payment slip validated as proof.

With eSRS, businesses have a safer, more efficient process to handle employee Pag-IBIG funds. It's easy, convenient, and provides 24/7 visibility into account status.

How Will the Doubled Pag-IBIG Contributions Affect Employers in 2024?

The 100% increase in Pag-IBIG contributions that will take effect this February 2024 will have various implications for employers. Here is a detailed breakdown:

Increased Financial Burden

Employers will be required to contribute a higher amount towards each employee's Pag-IBIG fund, doubling their current contribution. This will increase the overall cost of employment.

In addition, to cope with the increased cost, employers may have to reallocate funds from other areas of their business. This could affect investment decisions, salary increases, or bonus allocations.

Payroll Adjustments

The increased Pag-IBIG contribution rate will require employers to make changes to their payroll systems and processes.

Specifically, they will need to update the parameters in their existing payroll software or tools to reflect the new 100% increase. This may involve additional costs related to vendor or internal IT support fees for the adjustments.

Beyond updates to the technical systems, employers may need to invest time and resources in testing the revised configuration and validating accurate contribution calculations. Failing to update payroll tools could expose organizations to penalties and other risks.

Employee Compensation Considerations

Although the Pag-IBIG fund contributions are meant for long-term savings, some employees may view the increased contributions as a reduction in their take-home pay. Employers might need to manage their expectations and communicate the long-term value of financial security.

Compliance and Legal Concerns

With new regulations come new compliance measures. Employers will have to ensure that they are fully compliant with the new contributions to avoid penalties. The penalty for late Pag-IBIG contribution is 1/10 of 1% of the amount due.

To calculate your Pag-IBIG penalty for delayed contribution payment, use the following formula:

Total Penalty = Amount Due X 0.001 X Number of Days Delayed

If you're an employer with 50 employees and there's a 30-day delay in making the payment contribution, this is how your situation will unfold.

• Total Number of Employees: 50
• Monthly Contribution per Employee: ₱200
• Daily Penalty Rate: 1/10 of 1%, which equals 0.001
• Days Delayed: 30 days

First, calculate the total amount due for all employees:

Total Amount Due = Number of Employees X Monthly Contribution per Employee

Total Amount Due = 50 X ₱200

Total Amount Due = ₱10,000

Then, using the penalty formula:

Total Penalty = Amount Due X 0.001 X Number of Days Delayed

Total Penalty = ₱10,000 X 0.001 X 30

Total Penalty = ₱300

For an employer with 50 employees, the total penalty incurred would be ₱300. Therefore, to settle the delayed month's contribution, the employer would need to pay the total amount of ₱10,300, which includes the original due plus the penalty.

Overall, employers will need to thoroughly evaluate their financial plans. They must also ensure continued compliance with the new Pag-IBIG fund to sustain fiscal stability and competitiveness.

4 Tips to Help Navigate the Increase in Pag-IBIG Contributions

To successfully navigate Pag-IBIG Fund’s new contribution rate, follow these guidelines outlined below.

Build Financial Resilience Through Proactive Planning

To lessen the financial hit, employers should start preparing as early as now. Take a close look at next year's budget to find room for the extra HDMF payments.

Also, examine existing expenditures to identify potential savings, freeing up resources to offset additional costs without hurting operations.

Getting a head start on planning and managing costs efficiently will help cushion the impact of the increased contributions. The key is to be proactive and strategic.

Achieve Seamless Payroll Integration

When it comes to managing the increased HDMF contributions, a smooth-running payroll system will be crucial.

First, make sure to talk to your payroll service provider ahead of time to get their systems updated for the new rates. You want to prevent any glitches that could delay payments or cause headaches for your staff.

Second, train your payroll team on the changes so they’re equipped to handle the new changes. Investing in your payroll personnel will pay dividends through this process.

Enhance Employee Financial Understanding

Employee perception plays a crucial role in shaping workplace morale, so it pays to be transparent about the increased Pag-IBIG contributions. By clearly explaining the benefits and reason behind these changes, you can maintain trust and prevent any dissatisfaction among employees.

Promoting financial literacy through financial wellness programs can also help employees understand the long-term advantages of Pag-IBIG savings. By emphasizing these advantages, you can help employees see beyond the immediate impact on their net pay.

Ensure Compliance with Laws and Regulations

Legal compliance is crucial for any business, and staying ahead of complex legal issues requires proactive measures. To maintain an updated understanding of regulatory requirements, it's essential to regularly consult with legal professionals.

Investing in government compliant payroll software can also help streamline the compliance management process, ensuring your business stays on the right side of the law. By taking these steps, you can minimize the risk of non-compliance and avoid any potential penalties.

By embracing these strategies, employers can turn the challenge of the new Pag-IBIG contribution rate into an opportunity for enhancing organizational stability and employee financial well-being.

Manage 2024 Pag-IBIG Contributions Seamlessly with Sprout Payroll

The 2024 Pag-IBIG contribution increase poses challenges for employers. However, planning for financial resilience, educating employees on finance, and integrating payroll systems can facilitate adaptation.

One solution that can do all of these is Sprout Payroll.

Sprout Payroll automates compliant payroll processing and reporting, including updated Pag-IBIG contribution computations. Choosing our solution positions your business for long-term success despite unexpected regulatory changes.

Take control of your payroll processes today and reap the benefits of a more efficient and compliant payroll system.

Book a consultation and start managing this change with confidence.