G.R. No. L-17625; January 31, 1963
INSULAR LUMBER COMPANY, petitioner-appellant, vs. SOCIAL SECURITY SYSTEM, respondent-appellee.

FACTS

Petitioner Insular Lumber Company, a compulsory member of the Social Security System (SSS), had an employee, Pedro Primavera, who was a daily wage earner and SSS member. Primavera was on sick leave with pay until September 1957, after which he exhausted his sickness benefits and was placed on leave without pay for that month. The company informed the SSS that it did not pay the employer’s premium share for September 1957, as Primavera earned no wages. Initially, the SSS, through a Deputy Administrator, advised the company that it acted correctly and that contributions would resume upon the employee’s return to work. However, the SSS later issued a bill demanding payment of the employer’s 3.5% share based on Primavera’s average monthly salary, asserting the obligation existed as long as the employer-employee relationship was not terminated.
The company contested this demand before the Social Security Commission, arguing that no premium was due for a period with no actual earnings and that a subsequent SSS circular could not be applied retroactively. The Commission denied the petition, prompting the company to appeal to the Supreme Court.

ISSUE

Whether an employer is liable to pay its share of the Social Security System premium for a period when a covered employee is on sick leave without pay and receives no compensation.

RULING

Yes, the employer remains liable. The Supreme Court affirmed the Social Security Commission’s resolution, ruling that the obligation to pay SSS contributions is not contingent upon the employee’s actual receipt of wages during a given month. The legal foundation is derived from Sections 18 and 19 of Republic Act No. 1161 (the Social Security Act), as amended, which mandate monthly contributions from both employer and employee during the period of employment. The Court clarified that the law does not specify that contributions must be based on compensation “actually earned or received.”
The Court, citing its precedent in Elizalde Rope Factory, Inc. vs. Social Security Commission, held that the employer-employee relationship—not the actual payment of wages—is the determinative factor for coverage and contribution liability. Since an employee on leave without pay remains an employee, with the contractual relationship intact and the possibility of returning to work, the employer’s contribution obligation continues. The Court distinguished the Philippine system from the American model cited by the appellant, noting that in the United States, contributions are often treated as taxes collectible upon salary payment, whereas under Philippine law, they are considered premiums collectible irrespective of wage payment. Therefore, the employer’s duty to remit its share persists during periods of unpaid leave.