Higher SSS contributions harmful to business – PMAP

The People Management Association of the Philippines ( PMAP) warned yesterday of the harmful implications of the impending increase in Social Security System ( SSS) premiums to employees and employers.

PMAP president Ramon Segismundo cautioned that an increase in employee contribution would translate in small take home pay, which could prompt workers to de- mand higher wage from their employers.

“But taxes and additional contributions will take up a bigger portion of any wage increase,” Segismundo said.

He also pointed out that the rise in contributions on the part of the employer would raise overhead costs, which could increase the pressure to restructure the business and eventually lead to possible layoffs or workforce reduction.

President Duterte approved earlier this month the P1,000 hike in monthly pension of retired SSS members.

The hike also corresponds to an increase in some 34 million SSS members and employers’ contribution from 11 percent to 12.5 percent starting May this year. This came after the warning of the country’s economic managers that higher contributions without corresponding raise in contributions could cut the actuarial life of the fund.

The other half of the pension hike is expected to be given by 2022.

Instead of a hike in the contribution, the PMAP suggested a three- pronged action plan

to ensure the continued viability of the SSS fund.

“Increase profitability in the investment of the funds, increase collection efficiency in contributions and credit loan payments, and reduce administrative fixed cost,” Segismundo said.

“There is also no substitute for a high level of governance for any fund more so social security funds. We have to benchmark SSS with GSIS ( Government Service Insurance System) and social security funds in other emerging and advanced economies. That way, lessons can be learned to determine ways on how to improve the management of the fund,” he added.

SSS president Emmanuel Dooc earlier assured that the SSS leadership would intensify its collection efforts, and improve the investment of its funds.

The House of Representatives also recently approved in its third and final reading House Bill 2158, which rationalizes and expands the powers of SSS, including the ability to determine contribution rates and monthly salary credits, and allows it to condone firms which failed to pay their monthly contributions, among others.

PMAP said its current stand does not take into consideration the Department of Finance’s Comprehensive Tax Reform Program, which focuses on the reduction of the personal income tax rate from 32 percent to 25 percent.

Should the CTRP get approved by the Congress, wage earners would get higher take home pay, increasing their capacity to spend.

“It’s better if we wait for the public presentation of Finance Secretary Carlos Dominguez this week to have a more concrete understanding of the possible ramifications,” PMAP former president Herminio Coloma said, referring to Dominguez’ public presentation of the tax reform program.