Few announcements about different payments and contributions increasing have been circulating since the past year. To give you a concrete example, last year was when the Social Security System (SSS) deferred the contribution increase to this year. This means that altering the original plan of increasing it last year was moved to this year. However, the increase rate of 12 percent remained.
The Social Security System (SSS) members and contributors (employees and employers) would have an increase in their contributions that they give on a monthly basis.
How much is the increase?
As mentioned in the above statement, the rate will have a staggering 12 percent increase. Quite a fair amount that is to be added up to the total contributions people pay.
This move, according to the government, would replenish the fund life of the SSS by a good six (6) years. Having this significant increase in the contributions can dramatically save the life of the SSS in maintaining premium and benefits as well as helping employees and employers with their needs.
Why does the SSS need a replenish in their funds?
Due to the increase in the pension of pensioners as per President Rodrigo’s adjustment, Emmanuel F. Dooc, Chief Executive Officer (CEO) and President of the Social Security System (SSS) said that this increase can see the year 2032 as its final year.
This is why they decided to have an increase in the contributions of at least twelve (12) percent to both employees and employers; technically the total contributions that they pay in a month.
A telephone interview that happened last Saturday, the 16th of February 2019, Emmanuel F. Dooc told the Daily Inquirer that the second (2nd) tranche of the pension increase has low chances of being in effect and implemented this year even if our dear President Rodrigo Duterte announces it.
Dooc said that Duterte signed amendments to the charter of the security system last 7th of February, according to a source they have.
In addition, Dooc added that the SSS will swiftly compose the law which implements the rules and regulations (IRR) in order for the provision to mandate a one (1) percent point increase in the contribution rate every two (2) years until it reaches a certain point or a certain percentage of fifteen (15) percent. Hence, this can be started to be implemented this year.
How much is the current contribution rate of the SSS?
After adjustments in contributions and taxes, and in the TRAIN Law, the current contribution rate of employees and employers currently stand at a staggering eleven (11) percent. So, following the announcement that Dooc said, this year’s contribution will be followed by four more one (1) percent point increases in the years 2021, 2023, and lastly, 2025.
The SSS Rationalization Act
Under this specific act established by the SSS, the Social Security Commission (SSC) can implement contribution rate increases even without the approval coming from the President. The SSC, take note, is the pension fund’s highest body of making policies. Unlike the current charter where only the Chief Executive can give a go signal to rate adjustments, the rationalization act can allow the SSC to implement adjustments in the rates.
So, what we can expect in this is that contribution can continuously be modified based on the needs and the business priorities our country needs.
How will the increase work in relation to employee-employer contribution?
Most people would have a negative thought in this. However, the SSS said that two-thirds, almost all of the increase in the contribution rates will be shouldered STRICTLY by the employer, not the employee.
So, employees can be carefree with regard this issue because it is going to be the employer to shoulder a majority of the increase in the contributions.
As per the Social Security System, this higher contribution rate will not only assist the fund, it will also be a leverage in concocting more benefits that employees and employers have because in the coming years, the fund will slowly deteriorate, causing the lifespan of the agency to shorten.
How will pensioners enjoy this?
To be straight to the point, the pensioners are the people aimed to be helped by this contribution increase. Because of the fact that President Duterte announced the increase to happen, the SSS was forced to increase the contribution rate to suffice the need and to lengthen the lifespan of the agency.
To give you a short recap, the fund life of the SSS was shortened by ten (10) years to just 2032 from 2042 because of the P1,000.00 increase to pensioners last 2017.