Employment laws in the Philippines

Global businesses, like U.S. companies, are bound by local labor and employment laws in the Philippines. These laws outline what goes in an employment contract, the country’s minimum wage and maximum working hours, plus the benefits an employer must provide to remain compliant. 

Read on to learn more about the main employment laws in the Philippines and how Payoneer Workforce Management can help you navigate them. 

Key labor laws in the Philippines

Employers can find many of their responsibilities outlined in the Labor Code of the Philippines. 

Broken down into key “books”, the code covers aspects such as pre-employment, probation, notice periods, working hours, leave entitlements, wages, and work permits, including the employer’s role in securing work permits in the Philippines for all “alien” (international) workers. 

It’s also where you’ll typically find definitions around legal (and illegal) recruitment practices and penalties for non-compliance.

Essential contract elements

In the Philippines, an employment contract can be either written or verbal, except when hiring a contractor, when a written contract is essential. We recommend written contracts for all hires in the Philippines. It’s easier to work with one rule for all new hires, plus a written contract can help clear up misunderstandings and prove your compliance further down the line.

An employment contract in the Philippines should commonly include:

• Job description and top-line duties 
• Hours and location of work
• If the term is fixed or open
• Compensation and benefits
• Probationary period
• Termination standards

Working hours in the Philippines

The Philippines has a strong working ethic: employees typically work 8 hours a day, excluding a 1-hour lunch break. The workweek is typically 40 to 48 hours, and employees can be expected to work Monday through Friday. 

According to the Labor Code, employees can be asked to work beyond the standard 8-hour working day, but they must be paid overtime in return. Overtime is compensated at 125% their normal salary. 

The Philippines observes 19 public holidays a year. These must be provided as paid time off to all employees in addition to other paid time off covered by Service Incentive Leave (SIL). 

Learn more about SIL and leave policy in the Philippines.

Minimum wage in the Philippines

The legal minimum wage in the Philippines varies by region.

• Non-agricultural workers: Daily minimum wage ranges from PHP 316 (lowest) to PHP 695 (highest), depending on the region.
• Retail and service establishments (with fewer than 10 employees): Daily minimum wage ranges from PHP 410 to PHP 515.

Learn more about paying employees in the Philippines.

Mandatory benefits

Statutory, or mandatory, benefits are written in local labor law. Please note that many of these laws are legal minimums, meaning employers can (and often do) choose to offer beyond the statutory requirement to attract and retain top talent.

• Paid time off: After 1 year of continuous service, employees are entitled to 5 days of paid time off. This is known as Service Incentive Leave (SIL).
• Social Security System (SSS): Both employers and employees make contributions towards the Social Security System of the Philippines. Contributions should total 14% of the employee’s salary (9.5% funded by the employer, 4.5% by the employee). SSS pays out to cover periods of unemployment, illness, or other disruptions to earnings as covered below.
• Health insurance (PhilHealth): Employers and employees must make contributions to PhilHealth, the health insurance system in the Philippines. 4% of the value of the employee’s salary (income ceiling set at PHP 80,000) must go towards the fund (typically split evenly between employer and employee). 
• 13-month bonus: Employees receive 13-month pay on or before 24 December each year. This is usually a month’s worth of salary paid in addition to base pay as an annual bonus.
• Home Development Mutual Fund (HDMF): HDMF, also known as Pag-IBIG, helps fund affordable housing for Filipino workers.
  • Employers contribute 2%, while employees contribute 1%, when the salary is PHP 1,500 or less.
  • Employees and employers contribute PHP 100 each when the salary is over PHP 1,500.

Benefits that the Social Security System (SSS) helps fund

• Maternity benefit: Female employees who’ve made 3 months’ worth of SSS contributions in the last year are entitled to maternity pay. They can take up to 105 days for each pregnancy. If an employee sadly miscarries or loses their baby, they can take up to 60 fully-paid days off.

Termination

The Labor Code of the Philippines lays out rules for terminations. Employees are “protected against dismissal except for a just and authorized cause” and have the right to challenge their dismissal if they believe they’ve been wrongly terminated. 

Just and authorized causes for termination include:

• Serious misconduct
• Gross or habitual neglect of duties
• Criminal offences against the employer, their immediate family, or authorized representatives
• Redundancy
• Company closure

In the event of redundancy, employment law in the Philippines mandates a payment of 1 month’s salary, or 1 month for every year of their tenure, whichever is higher. 

In the event of company closure, the statutory severance pay is 2 weeks’ pay for each year of their tenure.

Navigate employment laws in the Philippines with trusted support

Following these labor and employment laws in the Philippines is essential to staying compliant. However, this may consume a lot of time and exhaust the hiring budget.

Working with a trusted solution, like Payoneer Workforce Management, helps you onboard, pay, and manage local talent in the Philippines, without setting up a local entity.

Book a demo today!

FAQs

1)  How often are Filipinos employees paid?

In the Philippines, payroll must run at least twice a month, typically on the 15th and the last working day. Employers cannot pay less frequently than semi-monthly.

2) What are the basic rights of workers in the Philippines?

According to employment laws in the Philippines, employees have the legal right to:

• Leave entitlements (maternity, paternity, solo parent, special leaves)
• Notice periods
• Termination protections
• Working hours
• Minimum wage
• Holiday entitlements
• Severance rules

3) Is paid sick leave mandatory in the Philippines?

No, sick pay is not mandated by law in the Philippines, but it is common practice.