Employment Law in the Philippines

Contracts

In the Philippines, employment contracts can be fixed-term or regular, depending on the nature of the job and the agreement between the employer and employee. Regular employment contracts must include benefits such as Social Security System (SSS), PhilHealth, Pag-IBIG contributions, 13th-month pay, and service incentive leave. Fixed-term employees are entitled to similar benefits as regular employees, provided the contract is not used to circumvent security of tenure laws.  

The Philippines also has apprenticeship contracts, mainly for training, which are governed by the Labor Code and Department of Labor and Employment (DOLE) regulations.

Termination and notice periods

In the Philippines, labor laws generally require a 30-day written notice for termination due to authorized causes or salary in place of notice. In most cases, terminated employees are entitled to a warning and a fair hearing. Just cause for a dismissal includes the following: 

• Serious misconduct 
• Willful disobedience 
• Gross and habitual neglect of duties 
• Fraud or willful breach of trust 
• Commission of a crime or offense against the employer or co-workers 
• Other analogous cases 

Employees terminated for authorized causes are entitled to separation pay of at least one month’s salary or one-half month’s salary for every year of service, whichever is higher. Employees dismissed for just causes are generally not entitled to separation pay, unless otherwise provided by company policy or collective bargaining agreement. As your Employer of Record (EOR) in the Philippines, we can assist you in managing employee terminations by providing legal guidance and a personalized process to ensure compliance with labor laws and minimize legal risks.

Probation periods

In the Philippines, probation periods are directly stipulated in the Labor Code, generally lasting up to six months in the private sector, and similarly up to six months in government roles, unless otherwise specified by agency-specific rules.

Working hours and overtime

The standard workweek in the Philippines is typically Monday through Friday, with eight hours per day, totaling 40 hours per week. Employees are prohibited from working for more than eight hours a day without appropriate compensation.

Any work beyond eight hours a day is considered overtime, and employees are entitled to an additional compensation of at least 25% over their regular hourly rate. For work performed on rest days or special holidays, the overtime pay rate is higher, as specified by the Labor Code.

Taxes

In the Philippines, withholding tax is known as Withholding Tax on Compensation and is deducted by employers before paying salaries to employees. Employers must deduct this tax from employee salaries based on applicable income tax brackets and submit it to the Bureau of Internal Revenue (BIR).

Employer payroll contributions

The Philippines’ social security system requires employer contributions that are dependent on the total number of employees, and these contributions cover pensions, medical care, disability insurance, and gratuity payments. In addition, workers’ compensation is financed by contributions from state governments, employers, and employees.