How to hire contractors in the Philippines

When deciding where to hire independent contractors for your team, the Philippines should be a top contender. This Southeast Asian country boasts an ever-growing talent pool of cost-effective yet skilled workers in industries like IT, customer service, design, and digital marketing. Hiring Philippines contractors enables businesses of all sizes to generate high-quality work for excellent value.

While there are countless benefits to working with contractors in the Philippines, it’s critical to ensure that you’re doing it efficiently and remaining compliant with the local laws and tax processes. 

This guide will take you through how to hire and pay contractors in the Philippines, touching on Filipino labor laws and tax processes, and how Payoneer Workforce Management (WFM) can help you with the process. 

How to hire contractors in the Philippines

Before you hire contractors in the Philippines, you’ll need to understand more about worker classification, Filipino labor laws, and where to find the right talent for your business. 

1. Understand contractor vs. employee classification

An employee has different legal rights from a contractor in the Philippines, and you’ll need to classify them correctly to avoid penalties. 

The key differences between contractors and employees in the Philippines are:

• Ways of working: While companies have control over how and when Filipino employees complete work tasks, independent contractors in the region have more autonomy over their working schedules. 

• Benefits: Employees are entitled to several statutory benefits that contractors are not, including a national minimum wage and overtime pay.

• Taxes: Employers in the Philippines are required to withhold employees’ income taxes, while contractors are responsible for calculating and paying their own taxes. 

• Termination and severance: Employees are entitled to a specified notice period for termination and severance pay based on their time spent working for the company. In the Philippines, contractors aren’t entitled to either of these.

These are just a few factors that make hiring a contractor in the Philippines more cost-effective than hiring an employee. 

However, misclassifying employees as contractors can lead to legal consequences, including heavy fines and penalties. This can include paying employees for the benefits they didn’t receive and reimbursing taxes to the government.

To ensure that you classify your employees correctly, you’ll need to consult detailed labor laws and carefully review your working relationship with the hired individual. Alternatively, you can speak with a global workforce specialist for help and advice. 

2. Understand local labor laws

While the information below won’t apply to independent contractors in the Philippines, it’s still useful to familiarize yourself with the country’s employment landscape. 

• Minimum wage: As of 2025, the national minimum wage in the Philippines is PHP 645 per day. Employees are entitled to at least 25% extra wages for overtime.

• Working hours: Filipino law dictates that the standard workweek is 40 hours. 

• Public holidays and annual leave: After one year of service, employees in the Philippines are entitled to a minimum of five days of annual leave. The Philippines also has 18 public holidays.

• Rights and legal protection: Employees in the Philippines have the right to organize and engage in collective bargaining to protect their workers’ rights. Plus, employees are protected from wrongful dismissal because employers must have a valid and legal reason for terminating an employment contract as outlined in the Labor Code of the Philippines.

• Termination: If the employer has just cause for dismissal, they must provide the employee with written evidence and five days’ notice. If the employee challenges the dismissal, the employer must conduct a hearing, followed by a second and final notice of termination. Without just cause, the employer must provide 30 days’ notice with their reason for dismissal. A copy of this notice should be filed with the employee’s regional office of the Department of Labor and Employment (DOLE). Employees terminated for just cause are entitled to severance pay of half a month’s salary for each year of service.

3: Find and hire contractors in the Philippines

To find the right independent contractors in the Philippines, you’ll need to know where to look. LinkedIn is a popular platform for sourcing talent in the Philippines, as well as online job boards such as Indeed. Jobstreet and Kalibrr are also useful directories for independent Filipino contractors. 

Once you have a shortlist of potential candidates, be sure to request and review a portfolio, along with references to back it up. It’s also worth holding remote phone and video interviews to check they’re the right fit for your company. 

Once you pick the right candidate, you’ll need to draw up a contract that agrees on tight definitions for the scope of work, timeline for project completion, intellectual property, warranties, and so on. The agreement should also include payment terms for your working relationship. 

How to pay contractors in the Philippines

To pay Filipino contractors, companies need to choose the right payment method, the correct tax documentation, and any potential hidden costs. 

1. Determine how to pay  

You can pay contractors in the Philippines through:

• Bank transfers: A tried and true method, but international transfers can be slow and come with expensive currency conversion fees.
• Checks or money orders: Paying Filipino contractors by check can be costly and come with significant delays.
• Online platforms: Digital payment platforms offer more flexible international payments, but can come with high fees.

Paying contractors across borders can involve a lot of paperwork and red tape. Partnering with a global workforce management solution like Payoneer WFM takes care of this hassle and ensures swift and compliant payments. 

2. Ensure your Filipino contractors have the right tax information

In the Philippines, contractors must register with the Bureau of Internal Revenue and obtain a Tax Identification Number (TIN). If they exceed the threshold of PHP 3 million, they’ll also need to register for VAT. 

If your company is based in the US, you’ll also need to ensure that you’re filing the correct tax forms for your contractors. This includes:

• Form W-8BEN: Helps the IRS determine the foreign status of non-residents employed by US companies.
• 1099 form: A tax form used to report payments made to non-employee individuals.
• 1042-S form: Reports how much a US company has paid to international contractors.

3. Pay your Philippines contractor 

To make payments to Philippines-based contractors compliant and straightforward, it’s best to use a workforce management platform like Payoneer WFM. They can handle the transfers in local currencies with minimal delay. 

Don’t forget to consider hidden costs in your contractor budgets, like currency conversion costs and transfer fees. 

Why Payoneer WFM is the easiest way to hire and pay contractors in the Philippines

With Payoneer Workforce Management, companies can source and hire talent, both contractors and employees, from the Philippines and more than 160 countries, without needing to set up local entities. 

Payoneer WFM lets you:

• Onboard new international hires efficiently 
• Manage payroll in multiple currencies in one click
• Comply with evolving local labor laws
• Automate payments
• Handle taxes, benefits, timesheets, background checks, and more.

Philippines contractors FAQs

Can you hire an independent contractor in the Philippines?

US companies can hire contractors in the Philippines, as long as they comply with the local laws.

The easiest way to hire and pay contractors in the Philippines, and around the world, is to use a platform like Payoneer WFM.

What are some benefits of hiring a contractor in the Philippines?

Working with independent contractors in the Philippines means:

• Reduced labor costs for your company
• Increased flexibility
• Access to an international skilled workforce

And with Payoneer WFM, you won’t need to register as a local entity to enjoy these benefits.

Can you manually pay contractors in the Philippines?

Yes, but it’s not ideal. Manually paying Filipino contractors can come with risks, like compliance errors, security concerns, and bad experiences for contractors. Paying contractors based in the Philippines the easy way with Payoneer WFM.