Riding the fine line between employer obligations and employee perks can
feel a bit like a roller coaster for multinational employers. What’s
mandated in one country is optional in another.
And even when certain benefits are optional, cultural norms still influence
employer decisions.
Case in point, retirement saving schemes.
In the Philippines , retirement saving is discretionary. The Personal Equity and
Retirement Account , or PERA, is similar to an IRA program. It’s a
supplemental retirement fund.
What is the PERA fund?
The Personal Equity and Retirement Account (PERA) is a tax-advantaged
savings account intended to supplement social pensions. The PERA fund is
voluntary for both employees and employers in the Philippines.
Most working Filipinos receive a pension as their primary retirement income.
The Government Service Insurance System (GSIS) is how the aging Filipino
population covers their cost of living. But many choose to supplement that
pension with personal retirement savings.
And like many other forms of retirement savings, it’s capped at an annual
contribution limit due to the significant tax benefits of socking money away
in these accounts.
PERA accounts invest funds into:
- United investment trust funds
- Mutual funds
- Stocks from PSE-listed companies
- Government securities
- Insurance pension products
- Annuity contracts
What to know about employer contributions
First and foremost , employer contributions to PERA are optional —i
n every sense of the word. There are no government mandates requiring employer
contributions, and Filipino culture doesn’t set any clear expectations for
employers either.
A few more things to note:
- Employers are subject to the maximum annual contribution of PHP 100,000
- Employer contributions are tax-deductible
- Contributions have no impact on social security requirements
- Employer contributions are not calculated as taxable income for the employee
Sure, there are clear benefits for the employees. But if employer
contributions are voluntary, should global employers contribute? It’s a
decision each company must make for themselves.
The benefits of PERA contributions in the Philippines
On the upside, when it comes to compensation, PERA contributions may be
better for employees than a wage increase . Employees are not taxed on
employer contributions to their PERA accounts, while they are taxed on
additional wages.
Adding PERA contributions to your benefits package also helps your
multinational business to:
- Attract and retain top talent
- Increase engagement and incentivize performance
- Reduce tax liabilities
Companies that offer voluntary contributions like these are generally viewed
favorably by their workforce. This perk often leads to a more engaged
workforce, higher productivity rates and less turnover.
So, there are both specific benefits and broad scope benefits at play when global employers choose to contribute to PERA funds in the Philippines.
Keep in mind that the Filipino population is generally ill- prepared for
retirement. Contributing to PERA in the Philippines could be a little thing for your
company—that turns out to be a big, life-changing thing for your multinational
workforce.
What to consider before adding PERA contributions as a benefit
However, offering PERA contributions does add another step in your payroll
processing.
Like other types of investments, PERA contributions can also be risky
. The amount of money that an individual can net from these investments is
variable. It depends on where the money is invested and how well that
investment performs over time.
There are a few restrictions on PERA withdrawals, so this money isn’t
immediately available to your employees. It’s a retirement account, so the
55 and 5 rule is generally applied . This means that the beneficiary must be at least 55 years old, and the account must be open for at least 5 years before funds can be withdrawn.
However, if the beneficiary is suffering from a long-term illness,
disability, or is deceased, the 55 and 5 rule may not apply. Employers
aren’t simply providing a cushion for retirement. PERA contributions can
provide a safety net for workers who suffer severe injuries or illnesses, or
for their families in the event of an untimely death.
The bottom line on PERA funds in the Philippines
Contributing to PERA funds in the Philippines is voluntary.
There are plenty of other mandates that already drive up the payroll burden
in
countries around the world. Many global employers are looking to justify their
decision to contribute—or not contribute—to these retirement vehicles.
It can be easy to say no to voluntary contributions, but make sure you
understand the full scope of what you’re declining. Yes, investments are an
expense for your business, and they don’t offer a guaranteed rate of return
for your employees. But some could argue that fighting the global talent
shortage with slim benefits packages is even more expensive and risky.
If you’re worried about adding more steps to your global payroll process,
we can help. Keep it simple with Payroll 360
services.
安排免费咨询
我们的全球解决方案顾问可以评估您所面临的挑战，并向您推荐有利于您达成目标的后续步骤
联系我们