Philippines

Employer of Record in the Philippines

The decision to expand your business in the Philippines can be fruitful. The island country boasts a highly educated and skilled workforce in the fields of information technology, customer-related services, etc. 

People in the Philippines are flexible, warm, and have strong work ethics.

The Philippines at a Glance

Estimated Population: 119.1 million

Currency: Philippine Peso 

Capital: Manila

Official Language: Filipino (Tagalog) and English

Languages spoken: 12 other recognized languages

GDP: USD 7.6 billion

The country's manufacturing sector is one of the fastest growing among major economies worldwide, and there is also increasing opportunity in other sectors, such as life sciences and IT. 

To top it all off, Filipino and English are two of the most widely spoken languages in this country. This serves as an extra advantage for businesses that wish to expand in the Philippines. 

It significantly reduces the chances of miscommunication, which more often than not leads to disruptions in business operations and an overall decrease in productivity. 

Despite all these advantages, one of the many hindrances to business expansion is understanding the legal rules and regulations, employment laws, taxation structure, filings, payroll management, and other specific details of the country. 

This information is necessary to do business efficiently and effectively with a considerable cost mechanism.

The solution? Employer of record services in the Philippines.

Skuad’s Philippines EOR (Employer of Record) solution can help you establish, streamline, and expedite your business set-up and expansion process without forming a separate legal entity in the country.  

Its global HR platform helps you understand all business requirements in the Philippines while you are sitting in your home country.  

All you need is Skuad’s automated and unified platform, through which you can easily manage the Philippines' payroll, taxes, recruitment, training, development, and compliance. 

We also feature various resources to further facilitate this international hiring journey. They include an employee cost calculator (for employer of record Philippines cost), a global hiring library, a salary insights tool, and more.

Let us begin by taking you through some basic employment guidelines and details about the Philippines.

How To Hire Employees In The Philippines

Before discussing the details of employment law in the Philippines, let’s start with the basics. 

There are two main ways you can hire an employee in the Philippines.

• You can hire directly by setting up a subsidiary in this land,
• Or you can partner up with an employer of record in the Philippines, such as Skuad, to help you with the hiring journey. 

Direct Hiring: Setting Up A Subsidiary

For a Filipino subsidiary establishment, you need to file certain documents with the Securities and Exchange Commission and obtain the necessary licenses along with the following documents:

• Articles of Association
• Memorandum of Association
• Declaration from the Treasurer’s office
• Company name verification and approval paper
• Registration datasheet
• Obtaining a Tax Identification Number (TIN)
• Registration with the social security system

Incorporating a subsidiary in the Philippines will take around 30 days, after which you can easily do your business directly.

Hiring an exceptional team for the growth of your business is vital for success because a good team helps achieve the organization's desired objectives. 

Before hiring, you must evaluate the skills and competency of the candidates during the interview process according to the job description. 

All employment-related issues are governed by the Philippines Department of Labor and Employment (DOLE) regulations.  

The system of hiring in the Philippines for government positions is through civil services exams that take around two to six months. Vacancies in the private sector are filled through various job portals, namely, Google for Jobs, Pinoy Jobs, Jora, etc. 

Upon selection, the candidate needs to enter into a written employment contract with the company in accordance with compliance. 

But you must think, how will you stay compliant by sitting in your home country?

As Skuad is your global EOR solution provider, you don’t need to worry about how to fulfill the legal formalities including business compliances, training, development, and hiring of your employees in the Philippines. 

Our goal is to simplify your business process so that you focus on core areas of business expansion.

Consult with Skuad to understand the process in detail from experts.

Hiring Via EOR In The Philippines: Skuad

The Philippines Employer of Record (Philippines EOR) solution makes it easier to expand business accurately and compliantly without setting up separate legal entities in the Philippines. 

Choosing EOR can shape your business route in smooth payroll management, company compliance, attendance management, tax filings, and other employment-related tasks.

Skuad’s global HR platform will help to manage your business in a simplified way by removing complexities through its unified and automated platform, which is designed to handle monthly payroll, onboarding employees, drafting employment contracts, managing compliances, and all day-to-day HR functions for your employees in the Philippines. 

General Employer Of Record Service Terms

Talk to a Skuad expert now.

Onboarding And Agreements

Employee onboarding refers to the process through which new hires become familiar with the organization, its people, and its culture. 

The ultimate goal is to make them operational as quickly as possible so that they can do their jobs independently and efficiently. 

The first step in a successful onboarding process is to draft a proper employment agreement as per the onboarding policy in the Philippines. 

It should highlight all the essential elements of the working relationship. 

These include the working hours, compensation package, method of payment, leave entitlements, and termination conditions, among others. 

Under the employment law in the Philippines, a labor contract can be categorized into the following types:

• Fixed-term contracts: These refer to agreements in which the employee renders services for a definite period of time, and the employment relationship ceases to exist after such period expires.

• Project employment refers to employment contracts under which an employee agrees to work on a specific project for an organization. The employment duration is specified by the scope of the work and/or the length of the project.

• Seasonal contracts: These are agreements wherein an individual performs work only for a certain period of time or season of the year. This type of contract is very commonly used in the food and beverage, hospitality, and retail industries.

• Casual contracts: Casual contracts are usually used for employees who perform work that is not primarily related to the employer’s business or trade. The duration of this kind of employment relationship must be made known to the worker at the time they start rendering services. 

Once you have completed the necessary paperwork for the new hire, you can move on to the next stages of the employee onboarding process.

Taxes

Mentioned below is a detailed overview of the payroll tax in the Philippines.

Employer Tax in the Philippines

Employee Tax in the Philippines

Compliance

The employment rate in the Philippines stood at 95.5% in January 2024. Employment laws in the Philippines are governed by the Labor Code 1974, which defines the rules and standards regarding employment policies, wage rates, working hours, employee benefits, etc.

Provincial Rate / Minimum Wages Philippines

Minimum wage revision in IV-A - Calabarzon, the Philippines

The provincial rate of daily minimum wages for Calabarzon (Region IV-A), the Philippines, has seen an increase, according to Wage Order No. IVA-19, published on June 14, 2022. 

The increase, cutting across different private sector industries, is mandated in two tranches:

• 1st Tranche, where workers in the private sector will receive PHP 3 (USD 0.051)-PHP 49 (USD 0.83) per day, in addition to the current minimum wage rates
• 2nd Tranche (applicable six months after 1st Tranche), where workers in the private sector will receive up to PHP 48 (USD 0.81) per day, in addition to 1st Tranche.

The minimum wage increase applies to a typical working day of working hours not exceeding eight hours per day and to all private sector workers regardless of position, status, designation, or method of wage payment.

The minimum wage increase applies to five provinces in Calabarzon, including

• Cavite
• Laguna
• Rizal
• Batangas
• Quezon

The minimum wage increase is indicated as per Wage Order No. IVA-19, in Non-Agriculture and Agriculture sectors in each province, as follows:

Check Wage Order No. IVA-19 for a full record of wage increases across provinces, metropolitan areas, and municipalities (First-Sixth Class).

The Wage Order No. IVA-19 exempts certain organizations from compliance, including:

• Retail or service industries employing ten workers or less.
• Organizations affected by COVID-19 or natural or human-caused disasters.

Failing to comply with Wage Order No. IVA-19 will result in legal consequences as indicated in Section 12 of RA No. 6727, as amended by RA No. 8188. 

Effective date

Wage Order No. IVA-19 is effective 15 days from when published: June 30, 2022.

Reason for wage revision

There are four reasons the minimum wage limit in Calabarzon was raised, including:

• Periodic assessment, where the Regional Tripartite Wages and Productivity Board assesses minimum regional wages to determine if current wages are responsive to in-region economic conditions.

• General public complaints, where public hearings and consultations show a general discontent with extraordinary hikes in prices of oil products as well as basic goods and services.

• Unionized petitions: The Regional Tripartite Wages and Productivity Board received several petitions on recent price hikes from the Federation of Free Workers, Metal Workers Alliance of the Philippines, and the Association of Minimum Wage Earners and Advocates‍.

• Combined economic and social factors, including public discontent, socio-economic indicators,  the declining purchasing power of the Philippines peso, increased poverty, and the impact of COVID-19.

Skuad helps carry out business operations according to the laws of the Philippines and assists the individual or company in attaining the desired objectives accurately while complying with all the applicable employment laws in the Philippines. 

As a result, your business will grow faster and have the potential to survive for a long time.

Independent Contractor vs. Full-Time Employee

There are two primary employee categories in the Philippines that are protected through employment contracts in the Labor Code - full-time employees and contractor employees. 

Full-time employment involves the provision of statutory sick pay, paternity leaves, minimum notice periods, legal protection against illegal or unfair dismissal, pension, health insurance benefits, etc. 

Workers employed on a full-time basis are selected according to the nature of the work they conduct. They may be hired to perform activities necessary or desirable in the usual course of business.

Employees who serve for at least a year, whether continuous or interrupted, in respect of their business activity are also known as regular employees. They enjoy the security of tenure as per the Labor Code of the Philippines. 

Contractors have a fixed tenure for a specific project, after which their engagement comes to an end. They are not entitled to the benefits normally given to full-time employees.

People in the Philippines mostly prefer full-time employment. One of the main reasons for this is job security. Full-time employment provides attractive benefits and a high level of job security. 

Contact Skuad today to hire contractors and full-time employees with no hassles.

Fines/Penalties for Worker Misclassification

If found guilty of not maintaining the proper distinction between an employee and an independent contractor in the Philippines, you will be charged with worker misclassification and will be subject to the following fines and penalties,

• 25% surcharge
• 12% interest per annum.
• Compromise penalty up to a maximum of PHP 50,000.
• Social security fines range from PHP 5000 to PHP 20,000, imprisonment up to six years, one day to 12 years, or both.
• The Philippines Health Insurance Corporation fine is PHP 50,000 for every violation per affected employee, or jail time is six months to one year, or both.

IP Protection 

The Republic Act 8293, also known as the Intellectual Property Code, is the primary law governing all matters relating to intellectual property rights in the Philippines. 

Some of the many provisions of this law include,

Types Of Visas In The Philippines

The three categories of Visas in the Philippines are Immigrant, Non-Immigrant, and Special Visa, which are further classified into different types of visas as explained in the table below:

Immigrant Visas

Non-Immigrant Visa

Special Visa

Source: Visa Upon Arrival (SEVUA)

Work Permits

Skuad local partners in the Philippines can help you in managing work permits for your organization. 

As an EOR in the Philippines, Skuad manages all the employment requirements and responsibilities in a simplified and compliant manner. 

On Skuad’s HR platform, the client company can handle their employees’ day-to-day employment activities and operations. 

For a work permit in the Philippines, you are required to apply for Employee Visa 9G at the Bureau of Immigration Philippines. The documents required are as follows:

1. Copy of passport
2. Employment Contract
3. Alien Employment permit issued by the Department of Labor and Employment in the Philippines
4. Application Form
5. Additional information on the applicant’s children (if needed)
6. Notarized certification of the number of foreign and Filipino Employees

After preparing the document checklist, Skuad will help manage the application's further processes. Consult with us now.

Payroll

To manage payroll and taxation in the Philippines, you must be aware of the local employment rules and tax structure, which may vary from one category to another. 

In addition, if you are managing payments to your employees directly, either through bank transfers or paycheques, you must also be aware of the currency exchange rates. 

Needless to say, the process of direct payment to employees in the Philippines can be very complicated without the necessary expertise and knowledge. 

An efficient alternative to this approach is to partner with an EOR service in the Philippines, such as Skuad. 

Trusted by global leaders from all around the world, our unified platform enables you to manage the complexities of global payroll with ease. 

We feature numerous capabilities, such as,

• Multiple payment options
• Multi-currency payroll
• Data protection and security
• Built-in payroll compliance and
• Real-time reporting, among others.

Benefits and Compensation

The Social Security System was established to help employees and their families cope with disability, illness, and death. 

Contributing to the Social Security fund is mandatory for employees under the age of 60 who earn P1000 per month.

Under this system, employees in the Philippines are entitled to the following benefits:

• Sickness benefit: It comprises a daily cash allowance paid for the number of days a member has been unable to perform work due to sickness or injury.
• Maternity benefit: Any female employee who is unable to perform work due to childbirth, miscarriage, or emergency termination of pregnancy receives a daily cash allowance.
• Disability benefit: Disability benefit is disbursed either as a monthly pension or as a lump sum amount to a member who becomes permanently disabled, either partially or wholly.
• Retirement benefit: Similar to disability benefits, retirement benefits comprise a monthly pension or a lump sum amount provided to individuals who are unable to work due to old age.
• Death benefit: Beneficiaries of a deceased member are eligible for death benefit in the form of a monthly pension or a lump sum amount.
• Funeral benefit: A cash benefit is provided to the individual who paid for the burial expenses of the deceased member.
• Unemployment benefit: All covered employees are eligible for a cash benefit.

Worker Rights

The employment law in the Phillippines lays down a few obligations and terms of employment that both employees and employers must follow. They include,

Statutory Working Hours

A normal working week should not exceed 8 hours a day and 6 days a week.

Overtime Eligibility

Overtime is paid at 125% of the basic wage, 130% on a Sunday or paid holiday, and 200% on a public holiday.

Any employee who works during an emergency under Article 89 in the country will be eligible for overtime compensation.

Weekly Rest Period

Sunday is classified as a rest day in a 7-day week.

Probation Period

In the Philippines, every person new to the organization must undergo a probationary period of up to 6 months. However, the period may be extended if an apprenticeship agreement exists between the employer and the employee. 

After successfully completing this period, the employee must be considered a regular employee, whether a new contract is executed or not, as per the employment law in the Philippines.

Anti-Discrimination Laws/Acts

Employees are protected against discrimination under the Anti-Sexual Harassment Act and the Safe Spaces Act. This law applies to all categories of workers in the Philippines.

Health and Safety Acts/Laws

Republic Act No. 11058 is the primary law ensuring workers' rights against occupational hazards that can result in injury, sickness, or death.

Remote & Hybrid Work

When hiring employees in the Philippines, it is necessary to determine the readiness of your organization for remote work. 

Imagine spending a lot of time and resources after an employee, only to realize that your company does not have the required infrastructure or policies to facilitate remote & hybrid work. 

Two main factors will help you determine how well your organization, including its employees, can maintain productivity outside a traditional office environment. 

Firstly, make sure that you are investing in proper technology and infrastructure that will amplify remote work readiness, if not more. 

We mean a reliable internet connection, robust communication and collaboration tools/software, and suitable hardware, such as mobile devices and laptops. 

Secondly, formulate flexible work policies that will help you uphold clarity, relevance, and effectiveness. 

They must target some of the key areas of remote and hybrid work, including performance evaluation, time management, and communication expectations.

Salary

The salary of employees in the Philippines usually differ based on numerous factors, such as,

• The experience level of the candidate: A professional with many years of experience and expertise in a particular field will demand a higher salary than a fresher.
• The industry: Employees in the Philippines are compensated differently based on the type of industry they work in. The average salary of an individual in the finance domain is PHP 30,000 per month. Meanwhile, a healthcare professional earns an average salary of PHP 21,300 per month.
• The nature of work: Compensation packages can also differ depending on the nature of work. Individuals in highly specialized roles usually earn much more than those handling general or administrative tasks.

With this salary benchmarking tool, offered by Skuad, you can unlock the key to the latest salary trends and tap into robust compensation data.

Leave Policy

Here, we have highlighted some of the major leave entitlements for all employees in the Philippines.

Annual Vacation Leave

All employees are entitled to five days of paid leave after one year of service, called ‘service incentive leave,’ which can be used for vacation or illness, depending on the number of working days.

Employers also provide their employees 15 days of paid leave every year when they reach a professional level.

Medical Leave

There is no specific provision for sick leave for employees in the Philippines. However, some employment contracts or collective bargaining agreements might include employee sick leave benefits.

Employees are entitled to 90% of their average daily wages from employers in case of illness or injury. This benefit is provided to only those employees who have paid a three-month Social Security System contribution fund for 1 year prior to their illness or injury.

The above-mentioned clause is applicable when all the sick leave with payment due by the employer has been drained. In this case, the employer is entitled to a 100% reimbursement from the Social Security System.

Maternity and Paternity Leave

Female employees receive up to 105 days of fully paid maternity leave for each pregnancy while employed. However, as per paternity benefits in the Philippines, a male employee is entitled to seven days' leave until the birth of the first four children.

Employees can take leave within 60 days of the child's birth. The employer shall pay paternity leave after submitting documents to the Social Security Program for reimbursement.

Public Holidays

The following holidays in the Philippines are marked as paid holidays for employees:

• New Year’s Day (1 January)
• Chinese New Year (10 February)
• Maundy Thursday (28 March)
• Good Friday (29 March)
• Black Saturday (30 March)
• Araw ng Kagitingan (9 April)
• Labour Day (1 May
• Independence Day (12 June)
• Ninoy Aquino Day (August 21)
• National Heroes Day (26 August - last Monday of August)
• All Saints' Day (1 November)
• All Souls' Day (1 November)
• Bonifacio Day (30 November)
• Feast of the Immaculate Conception (8 December)
• Christmas Eve (24 December
• Christmas Day (25 December)
• Rizal Day (30 December)
• Last Day of the Year (31 December)

Background Checks

When hiring employees in the Philippines, it is always advisable to run a thorough background check pre-onboarding to safeguard your company’s assets and employees from unnecessary threats. 

Some of the most common types of verification checks performed in this country are,

• Criminal Record Check

When running a criminal record check in the Philippines, you need to obtain the NBI Clearance, which is the police clearance issued by the National Bureau of Investigation. 

It will help you uncover all key details related to the past criminal convictions (if any) of job applicants so that you can make better-informed hiring decisions. 

• Credit History Check

A credit history check involves scrutinizing an individual's credit report to understand how responsibly they manage their finances, their trustworthiness and reliability. 

In the Philippines, the primary body dealing with matters related to credit reports is the Credit Information Centre. 

Under the policies of this institution, a credit report can only be accessed with explicit authorization by the employees themselves. 

• Education Verification 

An education verification is performed to understand the accuracy of an individual's academic claims. 

These include their degrees or diplomas, certificates, or any other academic achievements. 

The employer may directly contact the educational institution and gather all the necessary information to verify whether the candidate has the required qualifications to handle the job role.

Termination And Offboarding

Cultural Considerations

Family, respect, and teamwork are some of the key elements of the cultural values in the Philippines. A thorough understanding of all these principles is extremely important when hiring employees in this country. 

Building strong relationships is crucial in the Philippines culture. Professionals of this country place great importance on personal connections and trust in their professional interactions. 

Building rapport and showing genuine interest in your colleagues and superiors are highly valued and contribute to overall success at the workplace.

Furthermore, Filipino cultural values are also characterized by a strong hierarchical system and respect for authority. 

Senior professionals are often regarded with high respect and deference. Additionally, informing and consulting high-ranking individuals before making significant decisions or changes is generally considered polite.

Professional Employer Organization (PEO)

Professional Employment Organization (PEO) is an outsourced HR department where organizations merge with small and medium-sized businesses to handle your company compliances, payroll management, tax filing, recruitment, and other services. 

So when you avail of the services of PEO, that organization smoothly handles your business operation without setting up any separate entity. PEO offers customized services according to the client requirements e.g. employee benefits, payroll processing, administration of workers compensation, business compliances, recruitment, and others.

With the Philippines’ EOR solution, you don’t need to associate with any small or medium-sized organization because you can directly become a legal employer. 

With Skuad’s EOR solution, you can easily handle employee benefits and compensation, tax filing, payroll, compliance, attendance management, and all other day-to-day activities related to HR.

Depending upon the nature, size, and operations of your business, you may opt to hire directly by becoming a legal employer or tie up with a Professional Employment Organization (PEO). Both options are available.

To decide, Book a demo with Skuad.

Conclusion

While setting up a business in the Philippines, you need to be aware of the local laws, rules, and regulations to expand your business line in an accurate manner. 

A business requires a one-stop source where an effective and efficient EOR solution can be provided to complete the outsourcing needs of the business. 

Therefore, Skuad is a one-stop source for handling payroll, compliances, tax filing, managing the hire-to-retire cycle, and more.

If you are still not sure how to begin, connect with Skuad to make the right choice for your business expansion dream in the Philippines with our automated and unified platform.

FAQs

1) What is an employer of record in the Philippines?

An Employer of Record (EOR), like Skuad in the Philippines, is a service provider that legally employs individuals on behalf of another company. The EOR solutions in the Philippines handle all HR responsibilities, including payroll, taxes, benefits administration, and compliance with local labor laws like labor code break time Philippines. This allows the client company to focus on core business activities without establishing a local entity.

2) Is employer of record legal in the Philippines?

Using an Employer of Record is legal in the Philippines. This service allows companies, especially foreign ones, to legally hire local employees without the need to establish a physical presence in the country, which is particularly useful for businesses looking to expand into the Philippine market.

3) How long do employers keep employee records after termination in the Philippines?

In the Philippines, employers are required to keep employee records for at least three years after termination. This period is mandated to ensure compliance with the Philippines labor laws and for audit purposes. Records include personal information, employment details, payroll, and contributions to government institutions.

4) What is the difference between employer of record and payroll?

An Employer of Record payroll Phillippines provides comprehensive employment services, including hiring, payroll, compliance, and HR management. In contrast, payroll services only calculate, distribute, and report employee salaries. While an EOR acts as the legal employer, a payroll service does not take on employer responsibilities.

5) How to set up an EOR in the Philippines?

Setting up an EOR in the Philippines typically involves selecting a reputable service provider, like Skuad, who understands local employment laws and can efficiently manage HR tasks. The process includes negotiating terms, defining service scope, and ensuring the EOR’s capabilities align with your business needs. Companies should ensure the chosen EOR can handle the specific requirements of employing staff in the Philippines, including legal compliance and payroll processing.

6) What is the difference between EOR and PEO?

One of the main differences between EOR services in the Philippines and PEOs is that when you partner up with a PEO, you are essentially entering into a co-employment relationship. This means that you will still be legally responsible for your employees, and the PEO is simply there to support your HR functions, such as managing payroll and employee benefits. On the other hand, an EOR in the Philippines becomes the legal employer on your behalf, handling everything from drafting contracts to ensuring compliance with local labor laws.

7)  What are the benefits of EOR?

Some of the many benefits of using an employer of record in the Philippines include reduced costs, simplified payroll, improved compliance, and access to expertise. For example, an EOR is how an American company hires employees in the Philippines without setting up a local entity.