The Philippine Social Security System: Accountability and Informal Sector Coverage

and Compliance Issues

Summary
The implementation of the Philippine Social Security Law for private sector and selfemployed workers typifies that of most other laws in the country the creditable intention is
not matched by similar execution. The Social Security System (SSS) has been in place for
over 50 years, and while its financial sustainability and growth appear to have been
strengthened after some years of floundering, there are continuing concerns related to
accountability and informal sector coverage and compliance. Informal sector workers, who
comprise a significant percentage of the labor force, continue to be underrepresented in its
membership roster. For workers of this sector who are already members, there is the critical
issue of non-remittance of monthly contributions. Those under voluntary coverage but are
just as vulnerable, such as overseas Filipino workers (OFWs) and non-working spouses of
SSS members, are likewise underrepresented. The SSS, being a government-controlled
financial institution, also has not been immune to issues of politics, with a questionable
appointment to its leadership, and charges of proposals forwarded to use funds for programs
not specified in its Charter.
Introduction
The Philippine Social Security Act of 1954 (or the Social Security Law) was
implemented in 1957 with the founding of the Social Security System (SSS). The mandate
of the SSS is to provide meaningful protection to private sector workers and their families
against the real life contingencies of old age, disability, death, sickness, maternity and
employment injury. (Public sector workers are covered by the Government Service
Insurance System or GSIS.) This mandate is based on Section 2 of the Social Security Law
(Republic Act No. 1161), as amended by the Social Security Act of 1997 (Republic Act No.
8282), to wit:
It is the policy of the State to establish, develop, promote, and perfect a sound and viable
tax-exempt social security system suitable to the needs of the people throughout the
Philippines which shall promote social justice and provide meaningful protection to the
members and their beneficiaries against hazards of disability, sickness, maternity, old age,
death and other contingencies resulting in loss of income or financial burden. Towards this
end, the State shall endeavour to extend social security protection to workers and their
beneficiaries.
With the implementation of the Social Security Law, the government adopted the social
insurance approach to social security, covering the employed segment of the labor force in the
private sector. (SSS Primer) RA 7655 (1993), An Act Increasing the Minimum Wage of
Househelpers extended compulsory social security coverage to household helpers earning at
least P1,000 a month. RA 8282, The Social Security Act of 1997 expanded compulsory
coverage to include self-employed workers, agricultural workers who are not paid any regular
daily wage or who do not work an uninterrupted period of at least six months, household
helpers, parents employed by children, and minors employed by parents. They are
compulsorily covered under the new Social Security Law and eligible for the benefits covered
under various SSS programs.
Under the law, the employer is obliged to deduct from the employees their monthly
contributions, pay his/her share of contributions and remit these to the SSS. Self-employed
/voluntary members pay their own monthly contributions.

The SSS has the necessary mechanisms in place. The crucial issues are how effectively it
has reached out to and served its informal sector constituent base, as well as how it has
addressed compliance with and shirking from social security obligations by members of this
sector.
Benefits and Loan Privileges
The SSS administers two programs, the Social Security Program and the Employees
Compensation Program (EC). The Social Security Program provides replacement income for
workers in times of death, disability, sickness, maternity, and old age, and funeral cash
benefits to whoever shoulders the burial expenses of a deceased member or pensioner. The
Employees Compensation Program, started in 1975, provides a second compensation to the
worker when the illness, death, or accident occurs during work-related activities. EC benefits
are granted only to members with employers.
The loan privileges for all active SSS members are salary loans, house repair/
improvement loans, individual housing loans, and assumption of mortgages.
The Social Security Commission
The SSS is directed and controlled by the Social Security Commission composed of the
Secretary of Labor, the SSS President, and seven appointive members, three of whom
represent the workers group, another three represent the employers group, and one of whom
represents the general public.
The President of the Philippines designates the Chairman of the Commission from among
its members and appoints the SSS President and CEO.
Credibility and transparency need to be brought to the fore, given the recent appointment
of a controversial political figure very close to the President to the SSS leadership, and the
past scandals involving questionable investments and expenditures which have hounded the
SSS. (See Serrano, 2006). The immediate past President of the SSS, Corazon de la Paz,
admitted that during her term, she had to resist proposals to use SSS funds for pro-poor
government projects which are not defined in the Charter. (Malaya)
Institutional Performance
After being in the red for five years, the SSS posted its third consecutive contributionbenefit surplus year in 2007 attributed to the one percentage point increase in the SSS
contribution rate, and improved collections. In the same year, the SSS posted higher returns
on its investments and managed prudent control of its operating expenses. Further, based on
2007 actuarial updates, the actuarial life of the SSS fund has been extended by more than 20
years to 2036. (SSS 2007 Annual Report)
Coverage
Compulsory Coverage
Workers with compulsory coverage fall into three categories, viz., employees, employers,
and self-employed persons.
1. Employees: private employees (permanent, temporary, or provisional), household
helpers, Filipino seafarers, employees of foreign governments, international
organizations based in the Philippines.

2. Employers: in business, trade, industry, or any undertaking; social, civic,

professional, charitable, and other non-profit organizations; foreign governments,
international organizations
3. Self-employed persons: self-employed professionals; partners, single proprietors of
businesses and board directors of corporations; actors, actresses, directors,
scriptwriters, and news correspondents; professional athletes, coaches, trainers, and
jockeys; farmers and fisher folk; workers in the informal sector
Voluntary Coverage
Workers with voluntary coverage fall into three categories, viz. separated members,
overseas Filipino workers (OFWs), and non-working spouses of SSS members.
1. Separated members: separated from employment or ceased self-employment/OFW
employment/non-working spouse status
2. OFWs: Filipino recruited in the Philippines by a foreign-based employer for
employment abroad; Filipino having a source of income in a foreign country;
permanent resident in a foreign country
3. Non-working spouses of SSS members: legally married to a currently employed and
actively paying SSS member who devotes full time in the management of household
and family affairs
R.A. 8282 has a penal clause for failure to comply with the provisions of the Social
Security Act, failure to register employees or himself/herself, in the case of the covered selfemployed. The penal clause specifies punishment of fines and imprisonment.
Actual Coverage
Type of Member
Employee
Regular
Househelper
Self-employed
Regular
Expanded
Farmers & Fishermen
Voluntary
Overseas Worker
Non-working Spouse
Total

Number
as of Mar. 2008

21,527
21,413
114
5,159
1,270
3,373
517
694
688
6
27,380

Table 1. Source: Nora Mercado, Head of the SSS Membership Program Management Department 1

Symposium on The State of Social Insecurity of Workers, the Informal Sector, Urban and Rural
Poor: Structure, Benefits, Funding and Universal Coverage of the SSS and GSIS, 5 August 2008,
College of Social Work and Community Development, University of the Philippines

The total SSS membership of 27.38 million as of March 2008 as reflected above is close
to ten million more than the membership in 1996, prior to the enactment of the new Social
Security Law. (SSS 2007 Annual Report)
SSS Coverage (1959 2007)
Year
1959
1969
1979
1989
1999
2000
2001
2002
2003
2004
2005
2006
2007

Number of Workers
401,769
2,329,315
7,381,193
11,775,459
21,325,966
22,630,832
23,532,666
24,308,033
25,051,234
25,666,386
26,227,636
26,739,282
27,241,220

Table 2. Source: SSS 2007 Annual Report

In the years 2000-2007, membership has grown at an average rate of 3.12 per cent per
annum. There was an 81.1 per cent jump in membership from 1989 to 1999.
Employed Persons by Class of Worker (In Per Cent)
Employed Persons (in thousands)
Total
Wage and Salary Workers
Private Households
Private Establishment
Government/ Government Corporation
With pay (family-owned business)
Own Account
Self-employed
Employer
Unpaid Family Workers

33,536
100
52.8
4.7
39.5
8.0
0.5
34.7
30.1
4.6
12.5

17,707
1,576
13,247
2,682
168
11,637
10,094
1,543
4,192

Table 3. Source: National Statistics Office, April 2008 Labor Force Survey

An analysis of the figures in tables 1 and 3 show the predominance (79 per cent) of
workers in formal private employment in SSS membership. They comprise 48.7 per cent of
the total employed population outside of government. The self-employed sector, to which the
informal workers belong, constitutes only 19 per cent of SSS membership despite the total
share of own account workers to the total employed population outside of government being
37.7 per cent.
Women as a group are also disadvantaged in terms of SSS coverage considering that
majority of employed women are in the informal sector. They also comprise the
overwhelming majority (two-thirds to three-fourths) of newly hired Overseas Filipino
Workers (OFWs) and domestic workers. There are less women (11,871,770) than men
(17,670,345) in the membership roster2.
2

FromthepresentationofSSSCommissionerJoseMatuladuringtheMultiStakeholderForumon
SocialProtectionforWomeninInformalEconomy,1415August2008,BayviewParkHotel,
sponsoredbytheNationalCommissionontheRoleofFilipinoWomen(NCRFW)andCIDA.

Similarly, there are some disturbing membership figures: Only 680,000 of the millions of
OFWs are SSS members; 114,000 out of the 1.58 million domestic workers (NSO LFS, April
2008); and only 6,000 out of millions of Filipino housewives (almost half of all Filipino
women) who could be classified as a non-working spouse. 3
It has been reported that only eight million of the more than 27 million SSS members are
actually continuing their payments. Paying members comprise just one-third of the total
membership and one-fifth of the self-employed membership. (Mercado) This indicates a
serious evasion and compliance problem.
Non-continuation of payments has implications on benefits that may accrue, particularly
retirement benefits which require at least 10 years of continuous payment, and even maternity
benefits which assume that at least three monthly contributions during the 12-month period
prior to the semester of delivery have been paid. Again, women who are less covered, who
live longer, and who face sex-specific contingencies such as maternity, are more
disadvantaged.
There is the issue of whether informal sector workers, in particular, are willing to be
covered in the first place. If they are, there are additional concerns of whether the irregularity
of their income flows will allow them to meet the qualifying conditions for membership and
sustain their monthly contributions. (de la Paz, 2006)
Acknowledging the dismal membership figures of the informal sector, in 2009, the SSS
will embark on an intensive information and recruitment campaign for workers in this sector.
The value of benefits for SSS members and the importance of saving will be further
emphasized. (Lagaste)
SSS Servicing
In response to pressure from informal workers and other groups, and to enhance its own
viability, the SSS in recent years has expanded its payment channels in order to provide more
access to informal workers, overseas workers, and other underserved groups. Monthly
contributions are based on the compensation of SSS members and may now be remitted,
together with loan payments, through various modes, viz.:
1. Over-the-counter with SSS (88 branches nationwide with tellering facilities), 117
accredited banks, non-bank collection agents
2. For self-employed and voluntary members, farmers, fishermen, and other informal
sector workers, non-working spouses, and OFWs only: SM Payment Centers (26
nationwide)
3. For OFWs: PNB overseas bills payment system
4. For employers: Electronic data interchange (EDI)
5. Automatic Debit Arrangement (ADA) with eight accredited banks
6. BancNet Online with 18 banks in its network
7. Collection is also done by account officers and cluster legal units.
There are 49 self-service information terminals (SS IT) nationwide and one in Hongkong,
for checking SSS records such as contribution payments and status of applications for benefits
and loans. The SSS website also provides the aforementioned information though the website
has been down for months.
Despite its efforts to expand its payment channels, the SSS still has a long way to go in
terms of reaching out to informal workers and other vulnerable groups. The ADA program, a
3

This even assumes that there are no male non-working spouses who are members.

payments facilitation scheme conceptualized to serve this segment, and under which workers
can make their monthly SSS contributions through accredited banks via automatic debit from
their savings accounts (opened with a minimum deposit of P100) or over-the-counter
transactions, has not been that successful on the ground. SSS leaders report that just over a
thousand ADA members remain active.4
There have been reports that some banks no longer accept SSS payments under the ADA
scheme. There were also reported difficulties in transacting with an ADA-accredited bank:
payments were accepted only on Fridays, deposit slips for SSS payments were sometimes not
available, the teller in charge of processing payments was sometimes not present, other
depositors in line were given priority. It appeared that the ADA participants were being
discriminated against.5
An ADA implementation reviewed was marked by irregularity in monthly contributions
and a high default rate. There was a generalized admission that it was difficult for selfemployed workers to make their monthly contributions or to fund their savings accounts.
From the combination of irregular monthly payments and insufficient account balances, the
ADA program seems ineffective, given the expectation that these payments were to be debited
from the accounts.
There were contrary views expressed with respect to continuing the ADA program. On
the one hand, some said that with the now relative ease of enrolling in the SSS as selfemployed workers, as well as the ease of payment, the ADA program is unnecessary. On the
other hand, it was averred that it is still difficult for the self-employed to enrol in the SSS
their ability to make monthly contributions is questioned, they must have a viable business,
and front-line workers of the SSS are intimidating and not customer-oriented. The ADA
program can still be of help because the processing of the membership applications is
facilitated by the Department of Labor and Employment (DOLE).
Ways Forward
The SSS must exert maximum effort to ensure that informal sector workers are
effectively covered and efficiently served with respect to their social security needs. Their
vulnerability and marginalization make these imperative. The following are
recommendations:
1. NGO-PO consultations highlighted the need for the SSS to be more inclusive, to
reach out to underserved sectors of the working poor such as tricycle drivers, fisher
folk, vendors, domestic workers, seasonal workers, and housewives/ spouses, and to
devise more programs that ensure equality of access to benefits among people of
different socio-economic classes.
2. There must be an intensification of enforcement and monitoring efforts by the SSS
with respect to membership and monthly contributions compliance .
3.

Unemployment insurance must be provided and the youth included in the scope of
coverage.

4. Sponsorships and subsidies from the national and local governments should be
extended to those who cannot afford to pay the full SSS premiums particularly for
those who enroll as self-employed and therefore pay both the employer and the

MAGCAISAdialoguewithSSSofficialsledbyVicePresidentforPublicAffairsMarissuBugante,
SSSGallery,12August2008.
5FGDconductedwithADAparticipantsinBalingasa,QuezonCityon3August2008.

employees share.5
Local government units where various organizations are registered for accreditation
as well as permits to operate can also provide subsidies to fully or partially cover SSS
payments of their constituents.
5. Informal workers, in addition to formal labor, should be represented in the SSS
Commission. Since SSS contributions come from workers, workers representatives
should decide how best to use them based on the principles of democratic control,
transparency, and accountability. 6
6. In order to facilitate universal membership, cooperatives, womens and peoples
organizations should be accredited as collecting agents of premiums.
7. Other collection mechanisms (through cellphones, couriers, etc.) should also be
developed.
8. Funds should be set aside to meet the immediate needs of SSS pensioners.
9. Monitoring of compliance by employers, especially in the provinces, needs to be
improved and if possible be conducted by an independent body.

InHouseBill1955foraMagnaCartaforWorkersintheInformalEconomy,itisproposedthat
theshareoftheemployerfortheselfemployedmemberswillbepaidbygovernment.
Fromtheresultsoftheworkshoponnationalpoliciesandprograms,NCRFWMultiStakeholder
ForumonSocialProtectionforWomeninInformalEconomy,1415August2008,BayviewPark
Hotel.(Currently,formallaborisalreadyrepresentedintheSSSBoard.Thereisalsoonewoman
member.)Previousrecommendationsgoasfarasworkersandtheirorganizationsparticipating
directlyinchoosingtheirrepresentativestotheSSSBoard,insteadofthelatterbeingappointedby
thePresidentoftheRepublic.(Serrano,2006).

1. Social Security System Primer (recently updated, yet to be published)

2. Social Security System 2007 Annual Report
3. Calapati, Jimmy. Safeguard funds, outgoing SSS head calls on members.
Malaya News, July 11, 2008. available at
http://www.malaya.com.ph/jul11/news4.htm, accessed November 18, 2008.
4. National Statistics Office. April 2008 Labor Force Survey. Available at
http://www.census.gov.ph/data/sectordata/2008/lf080228.htm, accessed
November 17, 2008.
5. de la Paz, Corazon. The Challenge of Covering the Informal Sector: The
Philippine SSS Experience. Available at
http://siteresources.worldbank.org/INTTHAILAND/Resources/3332001089943634036/475256-1151398840534/s3_2_Philippines_Corazon.ppt.,
accessed November 17, 2008.
6. Interview with Ms. Delia Lagaste, SSS Senior Communications Analyst. 8
November 2008
7. Focused group discussion with nine ADA program participants. Balingasa,
Quezon City, August 3, 2008