Company Salary Loan Eligibility Rules in the Philippines

A practitioner-oriented legal article (2025 edition)

1. Concept and Sources of Law

Term	Core Idea	Primary Legal Anchors
“Salary loan” (generic)	A short-term, amortized loan whose repayment is tied to the employee’s future wages	• Art. 113–118, Labor Code (wage deduction, assignment, preference) • Civil Code on obligations, contracts, and compensation • Bangko Sentral ng Pilipinas (BSP) circulars on credit and interest ceilings (e.g., Circular 1133-2022 on salary loans) • Data Privacy Act (RA 10173) for processing HR loan data
Statutory salary-loan programs	Government-run schemes funded by compulsory contributions	• SSS Law (RA 11199) • GSIS Act (RA 8291) • Pag-IBIG Fund Charter (RA 9679)
Company-funded salary loans / cash advances	Loans granted out of the employer’s own treasury or through an in-house employees’ cooperative	• Labor Code (Art. 113–114) • BIR Revenue Regs. 3-2018 (fringe benefit tax on below-market loans) • Cooperative Development Authority (CDA) rules, if coursed through a coop

2. Eligibility Rules at a Glance

Program	Minimum Service/Contribution	Loanable Amount & Term	Net-Take-Home-Pay (NTHP) Rule	Unique Bars to Eligibility
SSS Salary Loan (private sector)	36 posted monthly contributions, 6 of which within last 12 months (1-month loan) or 72 posted (2-month loan)	1-month loan = average of last 12 MSCs; 2-month = double; 24-mo. term, 10% p.a. diminishing	No explicit statutory NTHP, but SSS requires employer to certify that amortization can be deducted without violating wage protection rules	• Final benefit claim filed • Employer delinquent in remittances
GSIS Conso-Loan Plus (gov’t sector)	15 years of service (for max bracket) and updated premium payments	Up to 14 times basic monthly salary; term 6–10 yrs.; interest 12% p.a.	Complied with DBM take-home-pay floor (₱5,000 under JO No. 2017-1)	• Pending administrative case for dishonesty/ graft
Pag-IBIG Multi-Purpose Loan (MPL)	24 monthly Pag-IBIG savings; active member	Up to 80% of Total Accumulated Value; 24–36 mo. term, 10.5% p.a.	Payroll deduction + post-dated checks allowed, but residual pay ≥ applicable minimum wage	• Existing housing loan in arrears
Company-Funded Loan (private firm)	Purely contractual—commonly 6 mos.–1 yr. regular employment	Documented cap (often 1–2 months gross pay); term ≤ 1 yr.; interest not usurious/beyond BSP’s 6%/month cap for salary loans	Mandatory: employee’s written consent and wage must not fall below statutory minimum after each deduction (Art. 113 & DOLE Advisory 13-2020)	• Incomplete liquidation of prior cash advances • Disciplinary suspension, if CBA or policy so provides

3. Why “Eligibility” Is Two-Layered

Regulatory layer – Government-imposed criteria protect public funds (SSS, GSIS, Pag-IBIG) and workers’ wages (Labor Code).
Contractual layer – The employer may impose stricter but never looser terms than the law. A CBA requiring only 20 contributions for an SSS loan cannot bind SSS; conversely, a company may insist on 2 years’ tenure for its own loan even if SSS would already grant one.

4. Detailed Legal Framework

4.1 Wage-Deduction and Non-Diminution Rules

Art. 113, Labor Code – No deduction unless:
1. The employer is required or authorized in writing by the employee.
2. Deduction is for insurance, union dues, or similar purposes approved by DOLE.
3. The employer is authorized by law (e.g., SSS, BIR).
  Violation makes the employer liable for illegal deduction and may trigger wage-theft prosecution under Art. 303.
Non-diminution doctrine – If a company has consistently granted salary loans with minimal requirements, it cannot unilaterally tighten them without valid reason (cf. San Miguel Corp. vs. NLRC, G.R. 100485, 16 Aug 1993).

4.2 Interest-Rate Governance

The old Usury Law ceilings are suspended, but BSP Circular 1133-22 set a 6%-per-month cap exclusively for salary loans by lending/fintech companies.
For employer-funded loans, DOLE regards rates above prevailing bank rates as prima facie oppressive (LAC-Case 06-2019).

4.3 Tax Treatment

Rank-and-file – Loan principal and interest are not compensation; no withholding.
Managerial employees – If the firm charges below 1%/month interest, the imputed interest is a fringe benefit subject to 35% FBT (RR 3-2018).
Loan condonation converts the unpaid balance into taxable compensation income.

4.4 Data-Privacy Compliance

Disclosure of salary-loan info (e.g., to a third-party lender) needs the employee’s informed consent under Sec. 12, RA 10173.
Access is limited to HR/Payroll, internal auditors, and regulators unless anonymized.

4.5 Cooperative Channels

Employee-owned co-ops follow RA 9520 and CDA Memo Circular 2020-13 on micro-lending:
- Member for ≥ 90 days + paid-up share capital (min ₱1,000)
- Loan factor ≤ 10 × share capital & deposits
- Net take-home pay floor same as Labor Code rule

5. Procedural Checklist for Employers

Adopt a written policy or CBA provision: scope, eligibility, interest, penalties, data-privacy clause.
Secure DOLE approval only if deductions go beyond the employee’s written consent (e.g., blanket blanket payroll-offsetting of future bonuses).
Use a standardized Promissory Note with arbitration clause compliant with the ADR Act (RA 9285).
Compute NTHP before each release; keep the DOLE-prescribed worksheet in the 3-year payroll file.
Remit statutory loan amortizations (SSS, GSIS, Pag-IBIG) on or before the 10th day of the following month; otherwise 2% penalty per month (SSS Sec. 22).
Handle separation cases: offset unpaid balance against final pay only up to the amount of accrued benefits; refund any excess within 30 days (Labor Advisory 6-2020).

6. Common Pitfalls & Jurisprudence

Pitfall	Leading Case	Doctrine
Deducting the whole loan in one payroll causing wage to dip below minimum	Geneva vs. NLRC, G.R. 213847 (2016)	Deductions must leave the prescribed minimum wage intact per pay period.
Terminating employee and applying total compensation to loan balance	Dacut vs. SSS, CA-G.R. SP 91731 (2018)	Offsetting can cover separation pay, but unused leave and 13th-month are protected unless expressly agreed.
Requiring resignation letter as a loan condition	Filminera Resources Corp. vs. Bundang, NLRC LAC-05-001702-20	Such condition is null for being contrary to public policy; loan remains valid, but resignation is voidable.

7. Best-Practice Design for Company Salary-Loan Policies (Private Sector)

Tiered eligibility – e.g., 1 wk. gross pay after 6 mos., 1 mo. after 1 yr., 2 mos. after 3 yrs.
Interest parity – Peg at prevailing 91-day T-bill plus 1% to avoid FBT issues.
Digital consent & escrow – Use e-signatures; automatically deposit net loan proceeds to payroll ATM, enhancing audit trail.
Built-in credit-life insurance – Shields the company from loss on death or permanent disability.
Hard stop on combined deductions – Keep total deductions (tax, SSS, loans, garnishments) ≤ 40% of gross pay to preserve morale and legal defensibility.

8. Key Takeaways

Eligibility is never just an HR rule; it is circumscribed by the Labor Code, sector-specific statutes, BSP circulars, DOF-BIR tax issuances, data-privacy rules, and often a CBA or coop policy.
For statutory salary-loan programs (SSS, GSIS, Pag-IBIG) the contribution record is the employee’s ticket; for employer-funded loans, written consent and minimum-wage after-deduction are the immovable pillars.
Non-compliance exposes the employer to DOLE monetary awards, wage-theft prosecution, SSS/GSIS collection suits, CDA sanctions, and tax deficiencies.

When drafting or updating a company salary-loan policy in the Philippines, anchor every eligibility item to a specific legal source. Doing so not only protects the employer from multi-front liabilities but also ensures that Filipino workers—already the most levied in ASEAN—maintain dignified take-home pay while accessing lawful credit.