PhilHealth on the Upturn: How Will it Affect Local Businesses?

February 1, 2021

The Philippine Health Insurance Corporation’s (PhilHealth) announcement of a contribution adjustment for the year 2021 has sparked varied opinions from its members. The adjustment raises the current 3.0% premium to 3.5%. This is aimed, as PhilHealth announces, “to ensure sufficient funding for the health care of its 110 million members as mandated by Republic Act No. 11223 or the Universal Health Care Law."


After being riddled with a major controversy just past year, there is reason why justifiable doubts and mistrust persists from it contributors. The fraud allegations totaling to 15 Billion PHP has also led President Rodrigo Duterte to support the deferment of said adjustment. Consequently, Philhealth shall continue to collect contributions at the old rate of 3% until a new law is passed by Congress.

While there is a rational hesitance towards the proposed rate hike, there are also benefits in untangling its aftereffects. On the employee’s side, PhilHealth assures that the contributions will lead to expanded assistance such as immediate eligibility to PhilHealth’s benefits, assignment to a primary care provider, and lifetime coverage to name a few. As clear as this message, employees are not the only ones that will have to endure the effects of this change.

Too often, the other side of the calculation table, has not been scrutinized enough. What about its possible effects on local businesses? How will this proposed increase in contribution affect employers? The following are the likely scenarios for businesses:

Effects on Payroll Management

Payroll management is obviously the first thing that will be altered once the rate hike is implemented. As soon as the new contribution table is enforced, payroll managers and human resources personnel are expected to fine-tune their systems in accordance with the proposed rate. While this may sound easy, fine-tuning payroll systems present a number of challenges.

As the system is being adjusted, they can be prone to processing incorrect payments due to parameter variations. This is a common occurrence when new regulations or amendments are imposed. This possibility applies in the implementation of the new PhilHealth contribution rate. This furthermore stresses the fact that payroll calculations need to be done with pinpoint accuracy to avoid incurring possible loses for both employers and employee. It is imperative therefore to employ a reliable payroll management system that will help in avoiding such risk.

Furthermore, payroll personnel will also have to deal with making sense of the new net pay to their employees. Even with the clear announcement by PhilHealth, employees are likely to receive this change undesirably. Thus, employee dissatisfaction may be a highly probable issue that companies may run into so effective communication between employer and employee is crucial.

Effects on Budget Revisions

Proper allocation of resources is imperative to keep any business running. However, amid new government policies, previously approved budgets for the year are at risk of falling short. The same can be said about local businesses and the impending implementation of the increased PhilHealth contributions.

As mentioned previously, the reduced employee net pay can bring about several issues for employers. To make amends, employers are likely to recompensate their employees. Nonetheless, this will involve reallocation of resources and approval of budget revisions to cover for the expected discrepancy.

Budget revision approvals, although achievable, can be difficult especially to small businesses. Since small to medium enterprises work on a specific and limited resources, it can be a challenge to reallocate funds from other spending categories. Rebudgeting almost always entails cost-cutting efforts to counterbalance the effects. This is something that many Philippine businesses should anticipate as the new implementation inches closer. It is imperative that local companies produce action plans and financial strategies to allow for an easier transition.

Effects on Company Sustainability

This COVID-19 pandemic has put a lot of local businesses to the edge. In their fight for sustainability, a large percentage of companies have utilized a variety of approaches to cut costs while simultaneously continuing operations. Local businesses have been forced to offset business hours and operate with employees in alternating schedules. Unfortunately, some are forced to face the reality of laying off employees.

In the transition to a new contribution table, employers may be compelled to employ new strategies as they begin another fight for survival. Simply stated, the question on company sustainability should be recognized by business owners. Key strategies in commercial, financial, administrative, and human resources should be proactively laid out in anticipation of the coming changes.


The new PhilHealth premium rates clearly present several possible outcomes not only for employees but for local employers as well. As it continues to gather different sentiments from the masses, local business owners are handed with distinct impacts that can and should be addressed. By understanding and anticipating these likelihoods, local businesses are better equipped to solve these challenges and continue to thrive in these most unprecedented times.

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