the Philippines Employer of Record

If a lack of speed or local expertise are among your top concerns when expanding to or employing workers in the Philippines, an employer of record may be the best option for achieving your global growth objectives.

An employer of record, sometimes known as an international PEO, enables you to quickly hire and onboard workers in the Philippines―often in as little as two weeks―without having to take on the cost and risk of establishing a local entity.

Learn about the hiring, employment, payroll and benefits requirements for workers in the Philippines and how our employer of record service, Global Employment Outsourcing (GEO), and local HR experts can help you manage your international employment needs.

Hiring in the Philippines

In the Philippines, labor relations are governed by a variety of regulations, from acts of Congress to the Labor Code. The constitution requires the state to protect employees, promote employment, ensure equal work opportunities, regulate employer-employee relations and ensure workers’ rights. The Department of Labor and Employment is responsible for creating employment policies and enforcing employment laws.

In circumstances where there is a question about how to interpret the Labor Code, the constitution requires a judgement in favor of the employee.

Since employment in the Philippines is highly regulated, it is essential that your employment practices are compliant. As your employer of record and PEO in the Philippines, we can ensure that every contract, for every worker, meets all requirements. We can also provide you with guidance about cultural norms and hiring best practices and keep you up-to-date with employment regulations as they change.

Employment contracts in the Philippines

As you look to hire employees in the Philippines, here are some common regulations you’ll need to know to create a compliant contract, as well as how an employer of record and PEO can provide support for your unique HR needs.

Working hours
The normal workday is eight hours, which includes short rest periods that count toward the total hours worked. Employees are entitled to at least an hour-long break for meals.

Employees are also entitled to at least 24 consecutive hours of rest after six consecutive workdays. The employer can decide which day is the rest day, subject to collective bargaining agreements. Any employee who asks for a specific rest day based on their religion is entitled to it.

Employees can be required to work on their rest day in the following circumstances:

Actual or impending emergencies
Work urgently needed on equipment or machinery
Special periods of heavy workloads
Potential loss of perishable goods
Continual work operation is required

Employees who work on their rest day are entitled to 130% of their regular wages, or even more if the rest day falls on a holiday.

Compensation
As you consider the appropriate salary to offer new employees, keep in mind:

Minimum wage is set by each of the 17 administrative regions in the Philippines. There are two kinds of wages: the non-agricultural daily minimum wage, and the agricultural daily minimum wage.
Overtime equal to 125% of wages is required for any work over eight hours a day. Overtime on rest days and holidays is equal to 130% of rest day pay or holiday pay.
Employees doing night work (between 10 p.m. and 6 a.m.) are entitled to 110% of wages. Overtime for night work is calculated by first including the overtime premium and then calculating night shift pay.
Collective agreements may regulate the legal salary range.

As your employer of record in the Philippines, we can provide you with resources and insights about employee compensation, so you are better equipped to make a competitive employment offer.

Bonuses
Employers are required to pay a 13th-month bonus by December 24 to all employees who work at least one month of the year.

Probationary period
Employees can be hired for a trial period that lasts no longer than six months unless it is for an apprenticeship program, in which case it can be longer. When a new employee is brought on, the employer must explain the performance standards they must meet to be hired full-time. Employees can be dismissed only for failing to meet those standards, or for just cause.

Termination and severance
Termination requires just cause and due process.

The following circumstances are considered just cause:

Serious misconduct or willful disobedience
Gross and habitual neglect of work duties
Fraud or willful breach of trust
Commission of a crime or offense against the employer, a member of the employer’s immediate family or employer representatives
Behavior similar to the above
A disease or medical condition that makes their employment unlawful or harmful to their health or co-workers’ health

Employers must provide one month’s notice as well as an explanation to the employee before their termination date, and the employee must have the opportunity to defend themselves. Disputes over termination can be taken before the National Labor Relations Commission. If the employee wins, they must be returned to the same position with the same benefits, privileges and status as well as full back pay. If hostile working conditions make that impossible, the employee is entitled to compensation.

Employees are required to provide one month’s advance written notice if they are terminating employment without just cause. If they don’t provide notice, the employer can hold them liable for damages.

The following circumstances are considered just cause:

Serious insult by the employer or a representative to the employee or their honor
Inhumane and unbearable treatment
Commission of a crime or offense by the employer against the employee or their immediate family members

As your employer of record in the Philippines, we can work with you to quickly handle the unforeseen event of an employee termination, providing legal guidance and a personalized process that ensures you stay out of labor court.

Employee benefits and paid leave in the Philippines

When negotiating terms of an employment contract with a candidate in the Philippines, here are some of the statutory benefits and paid leave requirements to keep in mind, as well as how an employer of record can support your company’s benefits strategy.

Maternity leave
Pregnant employees are entitled to 105 days of paid maternity leave as well as 30 days of unpaid leave. In the case of a miscarriage or emergency termination, the employee is entitled to 60 days of paid leave (or 78 days of paid leave for Cesarean delivery). Single mothers are entitled to an additional 15 days of paid maternity leave. Employees who have four children cannot qualify for any future maternity leave.

Maternity pay is equal to 100% of an employee’s average daily salary. Employees who have made at least three monthly contributions to the social security system in the 12-month period prior to childbirth will receive some or all of their maternity pay from social security. Employers must pay the difference between what the employee receives from social security and their salary.

Employees may allocate up to seven days of their leave to the child’s father.

Vacation
Employees of businesses with 10 or more employees who have worked for their employer for at least a year are entitled to five days of paid leave per year. Vacation pay is equal to their regular salary. Unused leave may be cashed in at the end of every year.

Holidays
Employees in the Philippines are entitled to eight paid holidays:

New Year’s Day
Maundy Thursday
Good Friday
Bravery Day
Labor Day
Independence Day
Christmas Day
Rizal Day

Every year the government announces several special holidays, which are unpaid days off and may change from year to year. These might include any of the following:

Chinese New Year
End of Ramadan
Festival of Sacrifice
Ninoy Aquino Day
National Heroes Day
All Saints Day
Bonifacio Day
Christmas Eve
Last Day of the Year

The Philippines recognizes holidays that are categorized either as regular holidays or special (non-working) days. Employees covered under the Holiday Pay Rule are entitled to regular holidays off with their usual wages or 200% of regular wages if they work. If employees work on a holiday that also falls on a rest day, they are entitled to 230% of their regular pay. If employees work on a special day, they are entitled to 30% extra pay if the day is a weekday or 50% extra if it falls on a rest day.

Holidays that fall on a weekend are moved to the next regular workday.

The following holiday pay requirements apply to all private sector employers except retail and service establishments that regularly employ fewer than 10 workers:

For work on a regular national holiday: 200% of regular wages if the holiday falls on a regular workday or 260% if it falls on a rest day. Overtime requires an additional 30% premium.
For work on a special holiday: 130% of regular wages if the holiday falls on a regular workday or 150% if it falls on a rest day. As with regular holidays, overtime work earns an additional 30% premium.

Sick leave
Offering paid sick leave is not a legal requirement, but employers usually provide this through collective bargaining agreements. Workers who don’t have sick leave or have used it up are eligible for social security benefits as long as they have made at least three months of contributions in the prior 12 months, and their injury or illness leaves them unable to work for at least four days. The sickness benefit pays roughly 90% of one’s average salary for up to 120 days per year.

Health coverage
All Filipino citizens are covered by the Philippines’ universal health coverage called PhilHealth (the Philippine Health Insurance Corporation). It is run by the government and funded by a combination of government monies and employer/employee contributions. Premiums vary based on age and income. PhilHealth does not cover all medical services, however, resulting in out-of-pocket payments for certain things.

Private health insurance is also available, and most employers provide it to their employees.

As your employer of record in the Philippines, we may be able to provide optional supplementary medical insurance coverage for professionals and their dependents at a more cost-effective rate.

Pension
Retirement is required at age 65. The minimum retirement pay employers must provide is a half month’s salary for each year of service.

Employees who are 60 or older and have contributed to social security for at least 120 months can retire with social security benefits. If they have made at least 120 monthly contributions, they are entitled to a monthly pension. The amount depends on the total number of contributions, how many years they’ve been in the system and how many dependent children they have.

Retirees who have not made 120 contributions receive a lump sum equivalent to the amount they and their employer contributed together, plus interest.

Workers’ compensation
The State Insurance Fund is responsible for paying workers’ compensation benefits. Participation is required for all employers and employees 60 years old or younger. An employee who is over 60 years old and making contributions to qualify for retirement or life insurance benefits is also subject to compulsory coverage. Sick or injured employees receive medical care, equipment and supplies.

Temporary total disability: An employee who sustains a work-related injury or illness resulting in temporary total disability qualifies for 90% of their average daily salary for up to 120 days. This may be extended to 240 days if the condition requires more treatment. Beyond 240 days, it becomes a permanent total disability.

Permanent total disability: An employee who is permanently and totally disabled qualifies for a monthly benefit equal to the pension benefit. The amount depends on the total number of contributions the employee had made into the social security system and how many years they did so. The monthly benefit is suspended if the employee becomes employed, recovers or fails to have a medical exam every year.

Permanent partial disability: Employees who suffer a permanent partial disability qualify for the same benefits as those with a permanent total disability, but with time limits that vary depending on the type of disability. If the time limit for a worker’s injuries is under a year, the worker receives a lump-sum payment.

Employer social costs will cover a large portion of employee benefits in the Philippines, but we can consult with you about supplemental coverage options, such as additional pension contributions or life insurance, if needed.

Employee onboarding with an employer of record in the Philippines

We write and validate all local employment contracts, streamlining the onboarding process for you and your Philippines employees—all you have to do is provide relevant information and review and approve the employment agreement.

As your employer of record in the Philippines, we will:

Schedule a welcome call to discuss HR and employment information for the Philippines, as well as answer any questions
Prepare a customized employment contract in English and in Tagalog (or other local language)
Share the employment contract and benefits information with the new employee for signature and review
Gather tax and banking information from the employee to set up payroll
Provide a local point of contact to the employee to answer any questions regarding their employment, local HR or payroll

The entire onboarding process for the employee is often completed in as little as two weeks.

Partner with Safeguard Global as your Philippines employer of record and PEO

With over a decade of service, we are the longest-serving employer of record and PEO provider in the international market. Organizations around the world rely on Global Employment Outsourcing (GEO) to expand and hire in over 179 countries around the world, quickly and compliantly.

We’ve seen just about every global employment circumstance imaginable—and with our extensive knowledge of local law and culture, we know what it takes to get employment right in the Philippines. We provide written contracts in the local language, salaries in the local currency and HR support in your employees’ time zone.

Additionally, as a global payroll provider we support payroll administration—including payments, filings and other calculations—in more than 150 countries and can accommodate the payroll outsourcing needs of any size organization.

Whether you’re looking to hire as part of a strategic expansion or to meet specific talent needs, our global solutions advisors can walk you through your international hiring options so you can make the right choice for your organization. Contact us today.

The information provided on or through this website is for informational purposes only and does not constitute legal advice. Safeguard Global expressly disclaims any liability with respect to warranty or representation concerning the information contained herein, including the lost essence, interpretation, accuracy and/or completeness of the information in transit and language translation.

Learn more about Global Employment Outsourcing

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