Strengthening Social Protection for Nanoenterprises or the Informal Sector in the Philippines: A SEDPI Policy Paper

Strengthening Social Protection for Nanoenterprises or the Informal Sector in the Philippines: A SEDPI Policy Paper

I. Executive Summary

This paper calls for urgent legislative intervention to address the exclusion and inequity of the current SSS contribution structure, particularly for self-employed individuals and nanoenterprise operators. While Republic Acts 1161, 8282, and 11199 mandate the government to provide universal and equitable social protection, implementation remains heavily skewed against the poor. The increase in contribution rates and salary credit floors from 2018 to 2025 has resulted in a 591% spike in actual out-of-pocket monthly contributions for the lowest earners, deterring compliance and threatening long-term fund viability.

Immediate government action is needed to fulfill its legal obligations and prevent systemic pension exclusion.

II. Policy Context and Legal Mandates

The Social Security System (SSS) is grounded in social justice, equity, and universal coverage:

• RA 1161 (1954) – Declares as policy “to establish… a viable… social security service… to covered employees and their families… with a view to promoting their well-being in the spirit of social justice”.
• RA 8282 (1997) – Affirms that the State “shall endeavor to extend social security protection to workers and their beneficiaries;” establishes that SSS benefits “shall not be diminished,” and that “the government guarantees the solvency of the SSS”..
• RA 11199 (2019) – Emphasizes the responsibility “to ensure meaningful social security protection to members and their beneficiaries… Towards this end, the State shall endeavor to extend social security protection to Filipino workers, local or overseas”.

These provisions affirm the legal obligation of the State to protect even the most economically marginalized sectors from financial insecurity—yet self-employed members remain unsupported and underrepresented.

III. The Problem

While contribution increases were essential to ensure the actuarial sustainability of the Social Security System (SSS), the current policy framework disproportionately burdens the self-employed, particularly those in nanoenterprises and the informal sector.

Unlike formally employed workers who contribute only one-third of the total amount—with the remaining two-thirds covered by their employers—the self-employed are required to shoulder 100% of the contribution cost on their own. This setup exposes a stark imbalance: the private sector subsidizes employee contributions, while low-income earners in the informal economy receive no counterpart support whatsoever.

Worse, despite existing legal provisions mandating government responsibility, the State has not contributed a single peso to subsidize nanoenterprises or the informal sector’s SSS contributions since its inception in 1954. This long-standing neglect effectively shifts the full financial burden onto the country’s most vulnerable workers—those least able to afford it.

Contribution Increases (2018–2025)

Year	Monthly Salary Credit (Lowest)	Contribution Rate	Monthly Contribution	Increase from 2018	% Increase
2018	₱1,000	10%	₱110	–	–
2025	₱5,000	15%	₱760	₱650	+591%

Note: Employment Compensation remains ₱10 in both periods.

This 591% increase burdens nano-enterprises or the informal sector, many of whom earn ₱250/day or less. This sharp rise excludes many from coverage, violating the SSS’s universal and equitable mandate.

IV. Gaps in Coverage and Government Inaction

• Only a fraction of nanoenterprises or the informal sector are active contributors despite constituting the majority of the labor force.
• The Philippine government has not fulfilled its legal obligation to contribute on behalf of low-income Filipinos, despite clear provisions in the law.
• This results in regressive taxation: the poor pay more (in proportion to their income) than formal employees.
• Fund sustainability is threatened by non-contribution, not just increased benefits.

V. Legislative and Executive Action Points

We urge Congress and the relevant Executive departments to adopt the following actionable measures:

1. Mandate SSS to Report Disaggregated Contribution Data

• Action: Direct the SSS to submit a report to Congress detailing:
  • Number of contributors who are contributing at the 1,000 to 15,000 monthly salary credit, Disaggregated further by voluntary and contributing as employees
  • Average contribution levels vs. minimum threshold.
  • Reasons for non-contribution and drop-outs from the program.

2. Institutionalize Government Subsidy or Set up a Special SSS Contribution Scheme for Nanoenterprises or the Informal Sector

• Action: Amend RA 11199 to mandate a government subsidy equivalent to the employer share (10%) for voluntary members earning below the minimum wage or classified as nanoenterprises or the informal sector.
• This is supported by RA 11199’s Section 4(a)(10), which allows special programs for workers “with unique economic, social, and geographic situations”.

3. Conduct Oversight Hearings on SSS Compliance with Universal Mandate

• Action: The Senate and House Committees on Labor and Social Services must investigate SSS’s alignment with its universal and equitable protection mandate. Assess whether current policies actively marginalize the poor.

VI. Conclusion

The current trajectory of SSS reforms inadvertently excludes millions of Filipino workers—particularly the self-employed and nanoenterprises. These sectors embody resilience and entrepreneurship, yet are left to bear full contribution burdens with no counterpart from the State.

To comply with constitutional mandates on social justice and the legal obligations in the SSS Charter, Congress must act now to legislate equity into our pension system. Protecting the poor is not just a moral imperative—it is a constitutional and statutory duty.

Government support for nanoenterprises and the informal sector should prioritize long-term, dignity-affirming measures over short-term, dependency-prone assistance.

Rather than perpetuating ayuda programs that are often vulnerable to patronage politics and accused of rewarding inactivity, subsidizing social protection contributions offers a path to economic inclusion anchored in productivity, savings, and security.

Strengthening SSS coverage for low-income workers through government subsidies reflects a shift in public policy—from reactive aid to proactive empowerment.