HR TALK: What to Do with Employees’ Long Overdue SSS Loans?

Did you get SSS’ love letter earlier this month?

SSS has upgraded its systems to inform Employers the current status of their employees’ outstanding loans as of October 2020. Most employers got a bill similar to the below last week:The email was NOT a hoax. It is a legitimate email from SSS informing employers to pay for their employees’ total loan amortization.

Many employers were surprised because the list reflects all the loans incurred by their employees even before they were employed within the company. In my list, the oldest outstanding loan was dated June 1998, way back when I was in high school!

So today, my blog post is all about SSS overdue loan payments. Flow is as follows:

1. How to Check if Your Staff Has Outstanding Loans Overdue?
2. What are the Consequences of Employers NOT Following their SSS Obligations?
3. Whose Fault is It That Loans Has Ballooned?
4. What to Do About Staff Who Are No Longer Connected in the Company?
5. Can Employees Still Restructure their Loans with SSS?
6. Are the SSS Loan Overdue Amounts Correct? I Only Loaned Php 15,000. How Did the Overdue Balloon to Over Php 130,000++ in Just 10 Years?
7. What Can Employers Do to Help Employees Solve this Exploding Loan Problem?

8. What Happens if It’s My Employer Who Deducts and Does Not Pay for My Loans?

Let’s start shall we?

1. How to Check if Your Staff Has Outstanding Loans Overdue? 

If you have not received any love letter yet, please check your SSS Employer Portal ASAP to find out how much you have to pay by the end of the month. Steps are as follows:

  1. Log onto SSS Employer Portal at https://employer.sss.gov.ph/employer/
  2. Go to INQUIRY and click LOANS.
  3. SSS has upgraded its system that Employers can now see its Employees’ outstanding loans:
  4.  If you click on the latest dates, you can see the breakdown of the loans:
  5. Talk to each of your staff regarding the loans and how to pay for them: While many employers may be shocked to see how much outstanding loans their staff has — The largest loan one staff had was a whopping Php 120,000! — the rules regarding employers and their responsibilities regarding their staffs’ loan payments are clear:
  • Register the staff for company coverage 30 days from date of hiring. Accomplish the Employer Registration Form (R-1) and report all employees to the SSS for coverage using the Employment Report Form (R-1A). These forms must be submitted together at the nearest SSS branch.
  • Deduct EE contributions, pay the ER share of contributions including Employees’ Compensation, and remit these to the SSS within the prescribed schedule of payments.
  • Deduct from his employees’ salaries monthly loan amortizations based on the scheduled payment deadlines for SSS member loans and remit the same to the nearest SSS branch with tellering facility, or through accredited banks using the Member Loan Payment Return Form (Form ML-1) on the scheduled payment date. Submit a monthly report of his employees’ loan amortizations through an accomplished Member Loan Billing Statement (Form ML-2) in electronic media together with the validated monthly Member Loan Payment Return Form or the SBR and Form ML-1.  The Member Loan Billing Statement (Form ML-2) may also be submitted online if the employer is registered in the My.SSS facility.
  • The employer is required to maintain true and accurate work records of his employees, which include monthly contributions and loan amortizations, if any, and record of sickness, injuries, death of employees in manual or electronic logbook for work-connected accident. Such records shall be open for inspection by the SSS or its authorized representatives quarterly or as often as the SSS may require.

2. What are the Consequences of Employers NOT Following their SSS Obligations?

Failure to fulfill the above-mentioned legal obligations of the employer is penalized as provided under Section 28 of Republic Act 8282, or the Social Security Act of 1997.

Screwing with SSS is a criminal act which not only leads to penalties but also to imprisonment of up to 12 years. There are also Civil and Administrative Liabilities as follows:Source: Legal Obligations of Employers

3. Whose Fault is It That Loans Has Ballooned?

Both Employer and Employee.

EMPLOYEE’S PROBLEM

It is employee’s responsibility to inform his new employer about his existing loan balance as he may allow his new employer to deduct loan payments from his salary, including any interest or penalty incurred due to late remittances from his previous employer.

It is the responsibility of SSS member to regularly check and monitor his records so he can immediately call the attention of employer or report discrepancies to SSS. SSS sends SMS notification to members whenever a loan payment is posted in their accounts.

EMPLOYER’S PROBLEM

It is the employer’s responsibility to deduct from his employees’ salaries monthly loan amortizations based on the scheduled payment deadlines for SSS member loans and remit the same to the nearest SSS branch with tellering.

It is the employer’s responsibility to deduct the outstanding loan balance of his resigning employee. Employer must remit the amount and inform SSS of employee’s departure. If amount was deducted from employee’s separation pay, any proof that the remitted amount was equivalent to the employee’s outstanding loan balance will mean he has fully paid his SSS loan. Employer must present the loan transaction receipt (SSS ML2 Payment Form) and corresponding Loans Collection List (LCL), with employee name, as proof of payment. Otherwise, the loan will continue to incur interest and penalties.

In cases where employer failed to remit the deducted amount to SSS, employee may complain at any SSS branch. SSS will investigate. If the claim is valid and employer is still operational, SSS will bill employer and collect the deducted amount in favor of member-borrower. Employee must present proof that the amount was deducted from him to help establish his complaint where employer may be at fault.

Computation of a member’s outstanding loan obligation depends on payor’s (member or employer) compliance with payment schedule. Any payment made after due date incurs interest and penalties. Our loan system calculates remaining loan balance based on posted payments, date of payments, and amount paid at time of inquiry. Therefore, non-payment of loans will incur corresponding interest and penalties until loan has been fully settled.

4. What to Do About Staff Who Are No Longer Connected in the Company? 

According to the SSS, employers must submit a Notarized Affidavit informing SSS that Employees A to D are now separated. The affidavit must be signed by the Company’s signatory and include the date on when the employee was separated. Submit the Notarized Affidavit on the dropbox of their assigned SSS branch.

SSS said that there is no specific template Employers are to follow. Hence, sharing with you my company’s template for your reference. You can download the form for free here: AFFIDAVIT OF Separation of Employment – General Form:

For EMPLOYEES WITHOUT ANY LOANS, SSS instructs us to use the R1-A File, which you can download here: SSS Employment Report.

5. Can Employees Still Restructure their Loans with SSS? 

Yes but not now.

Unfortunately, SSS has NOT yet offered any Loan Restructuring Program this year. As of the moment, SSS officers cannot confirm when the next schedule of restructuring will be.

Their last restructuring program was two years ago, lasting April 2 to October 1, 2018. The Loan Restructuring Program (LRP) with penalty condonation was then extended for another six months or until April 1, 2019. However, many of our fellowmen ignored the offering and continued to be delinquent on their loans.

Sayang talaga! The program covered all member-borrowers with past due loans (e.g., Salary Loan, Emergency Loan, Educational Loan (old), Study Now Pay Later Plan, Voc-Tech Loans, Y2K Loans and Investments Incentive Loan). To qualify under the second LRP, the loan must be past due for at least six months from the start of the second implementation of LRP.

Key Features of a Restructured SSS Loan

  • Pay only the loan principal and interest
  • Waived penalty
  • Lower annual interest rate of 3% (versus the 10% annual rate of the SSS Salary Loan)
  • Pay off the SSS loan in full or by monthly installments for up to five years

In other words, the SSS Loan Restructuring Program is a wonderful initiative by the government.  Employees get a reprieve from paying the penalty fee they’ve accumulated after many years of non-payment. The penalty for non-payment is 1% per month.

However, there is NO Loan Restructuring Program yet so employees have to wait until the next round, and continue seeing their loans balloon as the interest payments pile up.

6. Are the SSS Loan Overdue Amounts Correct? I Only Loaned Php 15,000. How Did the Overdue Balloon to Over Php 100,000 in 10 Years? 

This my friend is the beauty of compounding.

When it comes to loan repayments, interest rate matters. Very quickly, SSS Salary Loans incur an average of 10% interest, while Calamity Loans usually incur around 6% of interest. This does not include the 1% PER MONTH penalty when you don’t pay your loans on time.

Here is a very simplified SSS Loan Calculator I have created to show you the dangers of not paying your amortizations on time. You can download the SSS Loan Calculator and input your initial loan amount and to see how it can quickly balloon to ridiculous amounts in over a few short years:

Given the example of Php 15,000 Salary Loan, if unpaid, the 10% annual interest and 1% monthly interest can quickly explode the total due to a whopping Php 132,705 in just a matter of 10 years.

The numbers do not lie. Do NOT incur any loans unless you are willing to pay for them on time. If you can’t, don’t make that loan unless you want to see your SSS retirement fund whittle away into nothingness. Baka may utang ka pa sa SSS once you retire.

7. What Can Employers Do to Help Employees Solve this Exploding Loan Problem?

I see THREE (3) concrete solutions to the problem:

Option A. Employers Can Help their Employees by Advance their Overdue Payments to SSS and Do a Salary Deduction Without Interest.

I am doing this with my Office Staff who only has Php 4,000 of overdue loan payments due to the ECQ. We already talked about it and I have agreed to advance her SSS overdue loan payments. She has signed Authority to Deduct (ATD) for Php 1,000 in November 2020, Php 1,000 in December 2020, Php 1,000 from her 13th Month Pay and Php 1,000 in January 2021. This ensures her loan amortization is updated.

Option B. Deduct Regularly a Certain Amount from the Payroll and Remit Some while Holding the Rest in Trust for the Purpose of Paying the Loan Upfront During an SSS Loan Restructuring.

My friend will deduct Php 2,000.00 from the payroll. Breakdown as follows:

  • Php 500.00 will pay for the current loan amortization
  • Php 1,500.00 will be held in trust for the purpose of SSS Loan Repayment

Given that most of the payments made today will only go to penalties, the Employer and Employee have both agreed to set aside a portion for the purpose of paying the SSS Loan once SSS opens up its restructuring program. If the staff leaves the company, the money held in trust will be used to pay for the SSS Loan on the last month of their employment.

Here is the downloadable Agreement and Authority to Deduct for SSS Overdue Loan:I I
I honestly think it’s a brilliant idea as it helps people save money to pay off their SSS Overdue Loans. By themselves, people may not have the discipline to save up the money and pay off the loan. Hence, they will be forever indebted to SSS and will most likely not see a penny of their retirement fund kasi naubos na sa pambayad ng SSS loans and penalties.

Option C. Deduct Aggressively a Fixed Amount Until the Loan is Fully Paid.

This is actually the correct most legal way — Employers will aggressively deduct a fixed amount from the salary and pay off the loan as SSS is already billing the company of their staff’s overdue loans.

8. What Happens if It’s My Employer Who Deducts and Does Not Pay for My Loans?

Talk to your employer first.

I have cases when the employer DID remit but there was just a boo boo from the side of SSS in posting the contribution payment. There are cases they remitted but was not recorded. If so, inform your employer so the SSS can correct your records.

If they did deduct and did not remit — AND YOUR EMPLOYER DID NOT TAKE ACTION AFTER MULTIPLE FOLLOWUPS — you can report them to SSS directly with proof of deduction (payslip). Report your delinquent employer to the SSS for a possible legal action.

Bring your payslip as a proof of deduction and your Company ID, Employment Contract, Income Tax Return as a proof of your Employment in the Company.

Look for the Accounts Management Section of the SSS Branch and SSS Accounts Officer will take your complaint about non-remittance.

FINAL WORDS

Let this be a good lesson for everyone — When someone offers you a loan, only take it when you know you can afford to pay for it ON TIME.

So many employees fall into the trap of applying for a loan and then forgetting about it. They forget that even when they forget to pay off their loans, SSS never forgets and given that everything is already automated, loans from two decades ago will still come back to haunt them until it gets paid.

Check out the loan amounts!

Did Christy ever think that her Salary Loan of Php 15,000 made last August 2001 would now ballooon to a whopping Php 84,000 in 2020? Ben’s loan of only Php 7,000 in 2004 is now at Php 70,000. And Lord help me how Maricel got her loan up to Php 120,000!

Pag nangutang, kailangan magbayad. Pag hindi kayang magbayad, huwag mangutang. 

And if your employer deducts your salary now to pay off your SSS Loan, huwag sumimangot. They are just doing their legal obligation as your employer because failure to do so is a criminal, civil AND administrative offense. If you don’t want to have your salary deducted, stop borrowing. And if you do, pay for it timely. That way, nobody’s in this muck.

For those who are complaining about the penalties, SSS is actually not mukhang pera. The agreement was all written when people apply for a loan. It’s on the back of the form. People should have read it before applying and taking the money they freely borrowed. The rules are clear:

1. Interest rate: 10% per annum for Salary Loan, 6% per year for Calamity Loan

2. 1% penalty per month if you paid late

The rules are clear —- bakit hindi binasa ng tao when nag apply sila ng loan? Dapat on time kasi sila magbayad para walang penalty.

If people want free money, they can always ask from their family. Otherwise the other alternative is the local loan shark that charges 10% interest PER MONTH.

Just my two cents. Have a very good weekend everyone!

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19 thoughts on “HR TALK: What to Do with Employees’ Long Overdue SSS Loans?

  1. Hi Ma’am! What if the resigning employee does have enough to pay for the SSS loan, e.g. voluntary resignation hence, no separation pay, refused to pay the loan because he wouldn’t have any pay to take home, AWOL, or left the company with loans (from employer)?

    1. He cannot refuse as:

      RESPONSIBILITIES OF EMPLOYER

      1. The employer shall be responsible for the collection and remittance to the SSS of the amortization due on the member-borrower’s salary loan through payroll deduction.

      2. The employer shall deduct the total balance of the loan from any benefit/s due to the employee and shall remit the same in full to SSS, in case the member-borrower is separated voluntarily (e.g., retirement or resignation) or involuntarily (e.g., termination of employment or cessation of operations of the company).

      3. The employer shall report to the SSS the effective date of separation from the company and the unpaid loan balance of the employee, through the collection list, if the benefit(s) due the employee is insufficient to fully repay his loan.

      https://www.sss.gov.ph/sss/appmanager/pages.jsp?page=salarydetails

      1. Hi Ms Tina! Thank you for this post. I just want to ask how about for companies under temporary close and employees under forced leave or temporary lay-off with loans. Since we are not operating due to the pandemic, they dont have salary and they can’t pay their SSS salary loan. Will they still be penalised? Do they still have to pay their salary loans on schedule?

        1. Yes they will still be penalized. But SSS waived some penalties if paid within a deadline.

          The circular states that regular employers may pay their employees’ contributions from February to October 2020 until November 30, 2020.

          Moreover, contribution payments from January to September 2020 of self-employed, voluntary, and non-working spouse (SE/VM/NWS) members and household employers for their employees may also be paid until the said deadline.

          Likewise, employers with SSS-approved installment proposals are given until November 30, 2020, to deposit their post-dated checks, which fall due from March to October 2020.

          Contribution payments of employers for the said applicable periods would not incur penalties if paid within the deadline.

          Since November 30 is a holiday, payments may be made on the next working day.

          https://www.google.com.ph/amp/s/pia.gov.ph/news/articles/1056280.amp

  2. Hi, Tina! Great info once again. Thank you! I was appalled to see unpaid loans from employees who were employed with us 6-12 years ago. Thank you for your template re the Affidavit of Employee Separation. That’s very helpful. Question…what if data on date hired and end of employment are no longer accessible i.e. staff misplaced the data, no turnover of files, or we can no longer find the files, etc.. Can we just indicate in the affidavit that we no longer have the data but to the best of our knowledge, the concerned staff has resigned a long time ago. Is that possible?

  3. Good day! Thanks for always having very informative topic like this mam.
    What if the employee resigning has only around 3k for his last pay as 13th month. And his loan balance is still 10k.
    Does the employer not liable for any labor issue if it was automatically paid to sss as loan payment. (Means no more any amount can be claimed by resigning employee.)
    What does the employer need to do to inform sss as he still has the loan balance even they deducted all of his last pay? Thanks!

    1. Present staff with copy of proof of payment na lang:

      RESPONSIBILITIES OF EMPLOYER

      1. The employer shall be responsible for the collection and remittance to the SSS of the amortization due on the member-borrower?s salary loan through payroll deduction.
      2. The employer shall deduct the total balance of the loan from any benefit/s due to the employee and shall remit the same in full to SSS, in case the member-borrower is separated voluntarily (e.g., retirement or resignation) or involuntarily (e.g., termination of employment or cessation of operations of the company).
      3. The employer shall report to the SSS the effective date of separation from the company and the unpaid loan balance of the employee, through the COLLECTION list, if the benefit(s) due the employee is insufficient to fully repay his loan.

  4. Hi maam,what if si employee is still connected to company but refuse to have deduction for salary loan they will just wait for the loan restructuring program would that be possible or allow?

    1. Option B. Deduct Regularly a Certain Amount from the Payroll and Remit Some while Holding the Rest in Trust for the Purpose of Paying the Loan Upfront During an SSS Loan Restructuring.

      My friend will deduct Php 2,000.00 from the payroll. Breakdown as follows:

      Php 500.00 will pay for the current loan amortization
      Php 1,500.00 will be held in trust for the purpose of SSS Loan Repayment
      Given that most of the payments made today will only go to penalties, the Employer and Employee have both agreed to set aside a portion for the purpose of paying the SSS Loan once SSS opens up its restructuring program. If the staff leaves the company, the money held in trust will be used to pay for the SSS Loan on the last month of their employment.

      There is the downloadable Agreement and Authority to Deduct for SSS Overdue Loan in the post.

  5. Hi Tina, Thank you for very informative topic. Is there a way for us to know that they receive the affidavit of separation tru dropbox? Employees who was separated two months ago are still reflecting in our loan payment even if it was reported separated.

  6. Hi Tina. Thank you for this, Just wanted to clarify if we submit a R1A form of our employees excluding employees with loans even if they are still employed?

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