Claire Fuerte, Consultant of Human Resources division shares her views on the importance of hiring a Compensation and Benefits Manager during the initial launch of the TRAIN Law in the Philippines.
At the tail end of 2017, companies have been actively seeking advice on how to comply with new personal income tax regulations which impact its employees, and for some, business cost.
What is TRAIN law?
Since taking effect in January 1, 2018, the Tax Reform for Acceleration and Inclusion (TRAIN) law has launched its first phase of the Philippine government’s initiatives to simplify and make its tax system more efficient. One of the biggest changes is its influence on employees’ net salary income for different annual salary brackets, especially those in the mid to senior levels.
TRAIN lowers personal income tax (PIT) for majority of tax payers. Those with annual taxable income below PHP250,000 are exempted from paying these personal income taxes, while others earning an annual income of below PHP8 million will see lower tax rates ranging from 15% to 30% by 2023. Top individual taxpayers whose annual taxable income exceeds PHP8 million face a higher tax rate from the current 32% to 35%.
How is it going to affect the companies and the hiring market in the Philippines?
In a tax advisory on 31 January 2018, the Bureau of Internal Revenue clarified that the preferential treatment for the personal income tax rates of employees of regional headquarters (ROHQ) and regional operating headquarters of multinational companies (ROHQ), offshore banking units (OBU), and petroleum service contractors are now under the new tax regime.
“All employees of regional headquarters and regional operating headquarters of multinational companies; offshore banking units; and petroleum service contractors and subcontractors, enjoying preferential tax treatment prior to 2018, are now subject to regular income tax rates. Thus, withholding taxes on compensation of these employees shall be enforced based on withholding tax table per Revenue Memorandum Circular No. 1-2018.” - BIR tax advisory
The special tax rates had been a big incentive for multinational companies to bring certain business processes in the country. It affects managerial employees and their superiors, including presidents and chief executive officers. And in the last few months, some business groups reportedly warned of closure of some regional headquarters and loss of jobs following the removal of tax incentives.
How is having a C&B Manager going to be beneficial to the companies in the initial launch of the TRAIN law in the country?
In light of this, companies are looking at skilled Compensation & Benefits professionals to help them adhere to the new policies without losing the key talents of their organisation.
Their role is to come up with creative strategies to balance both the organisation and employees’ interests, by recommending new salary schemes and unique benefits as part of an attractive compensation package.
These are key factors in employee retention. Businesses will need a dedicated professional that will oversee all of these changes and adjust salary structures to ensure that their company can stay competitive.
How do you identify the right person to fit into a C&B Manager role?
Compensation and Benefits Managers must be resourceful, analytical, critical, and have excellent stakeholder management skills.
Their job is to look for the right market data from news, salary surveys, Recruitment Consultants, their HR Business Partners and Talent Acquisition teams, line managers, and professional network to see what aspects of compensation can help in retention and driving performance in their organisation.
Moreover, they need the ability to communicate all these data to decision makers and employees from all levels to help them understand why their plans are beneficial.
For more customised consultations on recruitment, please contact Claire Fuerte at +63 2 841 9314 or email firstname.lastname@example.org.