The 2023 Withholding Tax Tables: How Take-Home Pay Changes

The withholding tax table your payroll ran on all through 2022 stopped being correct on January 1. The second and final step of the TRAIN law's personal income tax cuts is now in force, which means the first payslip you release this month computes differently from the last one you released in December. Most employees will notice something, and the questions land on HR and payroll, not on the BIR. Here is exactly what changed, why the peso amount differs from person to person, and how to explain it without opening a spreadsheet.

What actually changed on January 1

TRAIN was written with two schedules in it from the start. The one that applied to compensation earned from 2018 through 2022 taxed nothing up to ₱250,000 a year, then 20% of the excess up to ₱400,000; ₱30,000 plus 25% up to ₱800,000; ₱130,000 plus 30% up to ₱2,000,000; ₱490,000 plus 32% up to ₱8,000,000; and ₱2,410,000 plus 35% above that.

For income earned in 2023 and onwards, the schedule is: still nothing up to ₱250,000; 15% of the excess up to ₱400,000; ₱22,500 plus 20% up to ₱800,000; ₱102,500 plus 25% up to ₱2,000,000; ₱402,500 plus 30% up to ₱8,000,000; and ₱2,202,500 plus 35% above that.

Two things did not move. The ₱250,000 annual exemption threshold is the same, and the top marginal rate is still 35%. Everything between them came down — by five percentage points in the lower and middle brackets, and by two at the second-highest. That is the whole change: no new deduction, no new exemption, no new form.

The table your payroll run actually applies

Annual brackets are the law; the withholding table is the operational version of it. The BIR's revised withholding tax table on compensation, effective January 1, 2023 and onwards, is Annex E of Revenue Regulations No. 11-2018, and it is published per payroll period, so you apply the column that matches how you pay.

On the monthly column, compensation of ₱20,833 and below is withheld nothing. From ₱20,833 to ₱33,332, it is 15% of the excess over ₱20,833. From ₱33,333 to ₱66,666, it is ₱1,875.00 plus 20% of the excess over ₱33,333. From ₱66,667 to ₱166,666, ₱8,541.80 plus 25% of the excess over ₱66,667. From ₱166,667 to ₱666,666, ₱33,541.80 plus 30% of the excess over ₱166,667. And from ₱666,667 up, ₱183,541.80 plus 35% of the excess over ₱666,667.

The figure you run against that table is taxable compensation for the period, not gross pay — the mandatory SSS, PhilHealth and Pag-IBIG employee shares come out first, and so do the benefits that are excluded from gross income.

Why the change is bigger for some people than others

Because the schedule is marginal, the size of the increase tracks where an employee sits in it. Someone whose taxable compensation is below the ₱20,833 monthly threshold had no withholding tax line in December and still has none now — for them, nothing about this change is visible on the payslip at all. Minimum wage earners are in the same position for a different reason: their statutory minimum wage, along with holiday pay, overtime pay, night shift differential and hazard pay, is exempt from income tax and withholding regardless of which table is in force.

Just above the threshold, the benefit is a five-point drop applied only to the slice of pay above ₱20,833, which is a modest peso figure. Further up the ladder the savings accumulate, because each completed bracket is re-priced and the fixed amount carried into the next bracket is lower than it was. This is why "how much more will I get?" has no single company-wide answer, and why quoting one employee's increase to everyone creates a problem you then have to walk back.

The other January changes landing on the same payslip

Withholding tax is not the only line that moved. The SSS contribution rate rose to 14% effective January 2023 under SSS Circular No. 2022-033, split 9.5% employer and 4.5% employee, with the minimum monthly salary credit now ₱4,000 and the maximum ₱30,000. The employee's own rate is unchanged, but the maximum MSC moved up from ₱25,000, so higher earners see a larger SSS deduction than they saw in December — partly offsetting the tax cut for exactly the people whose tax cut is largest.

PhilHealth is the opposite story. A Memorandum from the Office of the President suspended, for calendar year 2023, both the scheduled increase from 4% to 4.5% and the increase in the income ceiling from ₱80,000 to ₱90,000, and the PhilHealth Board formally affirmed that on January 4. Premiums therefore stay at 4% with a ₱80,000 ceiling. Pag-IBIG is likewise steady, with the maximum fund salary still ₱5,000, capping the member share at ₱100 a month.

How to explain it to your team

The clearest framing is the shortest one: this was scheduled in a law passed in 2017, it applies automatically, and nobody has to file anything to receive it. Employees do not need to submit a new form, update a civil status, or request a recomputation. If their withholding tax line dropped, the table did that.

Set expectations on the amount before the payslips go out, not after. Say plainly that the increase depends on salary level, that the SSS change moves in the other direction for some people, and that net pay is the result of both. If your announcement gives a figure at all, give it as a range.

Getting the new table into your payroll run

The mechanical risk this month is easy to miss: a payroll system still holding last year's brackets produces arithmetic that looks perfectly consistent and is wrong on every payslip. Whatever you run on, the first January cutoff deserves a manual check of two or three employees at different salary levels against the table above before anything is released.

It is worth checking what the payslip itself says, too. In ERPat's Compensation module, earnings, deductions and allowances are itemised on the payslip the employee receives, so the withholding tax line, the SSS line and the PhilHealth line appear separately instead of being netted into a single figure. That turns "why is my pay different?" into a question an employee can largely answer by reading, and it gives payroll a per-employee record to point at when someone escalates.

Remember as well that the ₱90,000 annual exclusion for 13th month pay and other benefits is a yearly reckoning, and that the annual income tax return remains due on or before April 15. This month's table change alters neither.

Where this leaves the January run

Most of the work here is communication rather than computation. Confirm the table your system is using, spot-check a few payslips across salary bands, and tell employees plainly that the tax cut was legislated years ago and arrived on schedule — while their SSS deduction may have moved the other way. Getting that message out before the first cutoff is considerably cheaper than answering it one desk at a time afterwards.