Is the Maternity Leave Salary Differential Taxable? RA 11210 and RMC No. 105-2019

The salary differential an employer pays a female employee under Republic Act No. 11210, the 105-Day Expanded Maternity Leave Law, is exempt from income tax and withholding tax. Revenue Memorandum Circular No. 105-2019, issued October 9, 2019, confirmed this expressly — the differential rides on the same tax-exempt treatment as the underlying SSS maternity benefit itself, rather than being treated as ordinary taxable compensation just because the employer, not SSS, is the one writing the check.

What is the salary differential, and who pays it? #

RA 11210 entitles a qualified female worker to full pay during her 105 days of maternity leave (extended further for solo parents and in cases of complications), and where the SSS maternity benefit alone falls short of her full regular salary, the employer must pay the difference — the “salary differential.” The SSS benefit is computed based on the employee’s average daily salary credit under the Social Security Act, which is often lower than her actual take-home pay, particularly for employees earning above the SSS contribution ceiling. RA 11210 closes that gap by law: the employee is meant to receive her full pay throughout maternity leave, with SSS and the employer together funding the total.

This creates two distinct payment streams for the same leave period: the SSS maternity benefit (a statutory social insurance payment) and the employer’s salary differential (a payroll disbursement that supplements it). Before RMC No. 105-2019, the tax treatment of the employer’s portion specifically wasn’t settled the same way the SSS benefit’s exemption already was.

What did RMC No. 105-2019 actually clarify? #

RMC No. 105-2019 settled that the salary differential is exempt from income tax and withholding tax, treating it as a benefit tied to the same maternity-leave entitlement as the SSS payment, rather than as separate taxable wages the employer happens to be paying. As tax alerts summarizing the circular describe its holding:

The salary differential is considered as a benefit exempt from the Income and Withholding Taxes.

The reasoning tracks the structure of RA 11210 itself: the law frames “full pay” during maternity leave as a single benefit made up of two funding sources (the SSS benefit plus the employer’s differential), not as ordinary salary continuation that happens to be topped up by SSS. Because the SSS component was never taxable, and RA 11210 treats the differential as part of the same full-pay entitlement, RMC No. 105-2019 extends the same tax-exempt treatment to the employer-funded portion.

SSS benefit vs. salary differential: side by side #

Worked example: computing and reporting the differential #

An employee earns a regular monthly salary of ₱40,000 and goes on 105 days of maternity leave. Her average daily salary credit under the SSS system computes to an SSS maternity benefit equivalent to roughly ₱30,000/month over the leave period (illustrative figure — actual SSS computation depends on her salary credit history).

• Full pay entitlement over 105 days (at her ₱40,000/month rate, prorated): approximately ₱140,000
• SSS maternity benefit paid directly to her: approximately ₱105,000 (illustrative)
• Employer salary differential (the shortfall the employer must cover): approximately ₱35,000

Under RMC No. 105-2019, the employer does not withhold income tax on the ₱35,000 differential when it disburses that amount, and reports it — together with the SSS-funded portion, if routed through payroll — as exempt compensation on her BIR Form 2316 for the year, alongside her regular taxable salary for the months she was actively working. See How to Fill Out BIR Form 2316 and Year-End Withholding Tax Adjustment for how exempt items like this factor into an employer’s annual reconciliation before issuing the certificate.

Frequently asked questions #

Is the SSS maternity benefit itself taxable? #

No. The Social Security System maternity benefit is a statutory social insurance benefit, not compensation for services, and it is not subject to income tax or withholding tax on compensation.

Is the employer-paid salary differential under RA 11210 taxable? #

No. Revenue Memorandum Circular No. 105-2019, issued October 9, 2019, clarified that the salary differential an employer pays under the 105-Day Expanded Maternity Leave Law is exempt from income tax and withholding tax, the same treatment given to the SSS maternity benefit itself.

What is the salary differential under RA 11210? #

It’s the amount an employer must pay a qualified female worker to make up the difference between the SSS maternity benefit she actually receives and her full regular salary for the duration of her maternity leave, so that she receives full pay during the leave period.

Does every employer have to pay the salary differential? #

RA 11210 requires it from covered private-sector employers, with the law specifying limited exceptions (such as for certain distressed establishments meeting defined criteria under the law’s implementing rules). Most private employers with SSS-covered female employees are expected to shoulder the differential as a matter of course.

Should the salary differential appear on BIR Form 2316 as exempt compensation? #

Yes. Since RMC No. 105-2019 treats the salary differential as exempt from income tax and withholding tax, an employer should report it as non-taxable/exempt compensation on the employee’s BIR Form 2316, consistent with how other statutorily exempt pay items are reported on that certificate.

Summary #

The maternity leave salary differential an employer pays under RA 11210 is not ordinary taxable wages — RMC No. 105-2019 exempts it from both income tax and withholding tax, mirroring the tax-exempt treatment the SSS maternity benefit already had. Payroll teams should exclude the differential from withholding computations and report it as exempt compensation on BIR Form 2316, the same way other statutory exemptions like the minimum wage earner exemption are handled — see Is Overtime Pay Taxable for Minimum Wage Earners? for a comparable statutory-exemption pattern in payroll.