Illegally Dismissed? Your Employer Owes SSS Contributions Too, Not Just Backwages

Backwages restore your pay. This ruling restores the contribution record that decides your pension.

Last reviewed: August 26, 2026General legal information, not legal advice
News hook: On August 11, 2026 the Supreme Court's Third Division, in a decision written by Associate Justice Maria Filomena D. Singh, held that employees who are illegally dismissed are entitled not only to full backwages but also to the remittance of their SSS contributions for the period covered by those backwages — and imposed a penalty of 3 percent per month on Lopez Sugar Corporation for failing to remit, running from the date the contributions became due until full payment.

Legal question

When an employee wins an illegal dismissal case and is awarded backwages, does the employer also have to pay the SSS contributions for the years the employee was out of work?

Applicable laws and rules

Why this matters

Backwages are calculated in pesos, and that is how they are usually litigated. But an employee's SSS record is not measured in pesos — it is measured in months of contributions, and eligibility for retirement, disability, sickness, maternity, and death benefits depends on hitting minimum contribution counts.

An employee who wins reinstatement and backwages after five years of litigation but comes back with a five-year gap in the contribution record has not been made whole. In the case that produced this ruling, that gap was precisely what stood between four employees and their retirement benefits.

The employer's argument — that the obligation to remit ends on separation regardless of whether the dismissal was legal — was not frivolous on the statutory text. Rejecting it required the Court to apply the legal fiction that underlies backwages in the first place.

What happened

Four employees of Lopez Sugar Corporation were illegally dismissed. LSC was ordered to reinstate them to their former positions and to pay them full backwages, and that ruling became final.

After finality, the employees asked LSC to remit their SSS contributions for the period covered by their backwages, so that they could qualify for retirement benefits. LSC refused. Its argument was textual: under the Social Security Act of 1997, an employer's obligation to pay SSS contributions ends upon the employee's separation from employment — and, on LSC's reading, that is true whether the separation was legal or illegal.

The Social Security Commission rejected that position and ordered LSC to pay. Its reasoning was that because the employees were illegally dismissed, the employer-employee relationship is deemed to have continued during the period they were prevented from working. The Court of Appeals affirmed, and so did the Supreme Court.

The reasoning: illegal dismissal is a legal nullity

The Court grounded the result in Article 294 of the Labor Code, under which an illegally dismissed employee is entitled to reinstatement without loss of seniority rights and to full backwages inclusive of allowances and other benefits.

The operative principle is that an illegal dismissal does not validly sever the employment relationship. The employee is considered to have remained employed throughout the period covered by the backwages, and is therefore entitled to the rights and benefits that would have accrued during that period. LSC therefore remained obligated to remit the employees' SSS contributions for that period.

This is the same fiction that makes backwages work. Backwages are not damages measured by what the employee lost in the market; they are the wages the employee would have earned had the dismissal not occurred. Once that premise is accepted, everything that attaches to wages — including the statutory contribution obligation — follows with it.

The 3 percent per month penalty

The Court also imposed a penalty of three percent (3%) per month on LSC for its failure to remit the contributions, reckoned from the date they became due until full payment. This is the statutory penalty on delayed remittance under the Social Security Act, and it is not discretionary.

Its magnitude deserves attention. Three percent per month is 36 percent per year, uncompounded, and it runs from each contribution's original due date — not from the date of the decision. Over the multi-year span typical of an illegal dismissal case, the penalty can exceed the contributions themselves. For employers, that converts a bookkeeping omission into a substantial liability; for employees, it means the claim is worth asserting even years later.

Where to bring this claim

This is the part that trips up both employees and counsel. An illegal dismissal case is decided by a Labor Arbiter and the NLRC. But a dispute over SSS coverage, contributions, benefits, and penalties falls within the jurisdiction of the Social Security Commission — which is exactly the route these four employees took after their labor case became final.

Two practical consequences follow:

What about PhilHealth and Pag-IBIG

The decision addresses SSS, and it should be cited for SSS. But the reasoning is not confined to it: the premise is that the employment relationship is deemed to have continued, and PhilHealth and Pag-IBIG contributions are likewise employer obligations attaching to that relationship. Each has its own governing statute, its own penalty regime, and its own forum, so a claim must be framed under the correct law rather than by analogy. An employee pursuing the point should raise all three in the labor case if possible, and pursue each with its own agency if not.

What individuals should know

If you have won or are pursuing an illegal dismissal case, treat your contribution record as part of the relief, not an afterthought. Ask for remittance of SSS contributions for the backwages period expressly, and check your SSS record — through the My.SSS portal or a branch — to identify exactly which months are missing and what the resulting contribution count is. The gap matters most if you are near a benefit threshold: retirement, for instance, generally requires a minimum number of monthly contributions, and a multi-year gap can be the difference between a pension and a lump sum.

If your case has already concluded and the judgment said nothing about contributions, you are not out of options. File with the Social Security Commission, attaching the final labor decision, the entry of judgment, and proof of the backwages period. The SSC has jurisdiction over contribution disputes, and this ruling supplies the controlling authority. The 3 percent per month penalty attaches to the employer, not to you.

If you are an employer facing a final illegal dismissal judgment, remit the contributions promptly. The penalty runs from each contribution's due date, not from the date a claim is made, so delay is expensive and the exposure grows every month. Treating the backwages computation as complete without the corresponding contributions is now clearly wrong.

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