Looking for an Employer of Record in the Philippines? Here’s What You Need to Know

The Philippines has a strong and resilient labor market, and its reasonable cost of hiring makes it a popular choice for companies looking to expand their global workforce. 

Typically, companies outside of the Philippines may look for Employer of Record solutions to engage talent in the country; however, it may not be permitted. They may use a workforce management platform instead to engage talent in the Philippines compliantly. 

A workforce management platform assists international companies in onboarding and paying employees residing in the country. 

Growing a team abroad requires a business to stay compliant with ever-changing local labor laws. But with workforce management by your side, you can delegate key HR tasks to them, freeing you up to focus on running your core operations.

Speak to the Payoneer Workforce Management team to learn about how we can help, or keep reading to learn more about onboarding and paying employees in the Philippines.

How to hire employees in the Philippines

U.S. companies and other international organizations have three options when it comes to engaging talent in the Philippines:

1) Setting up a local legal entity

Cost and time-wise, this is the most demanding route to take. Requirements include registering your business with the Securities and Exchange Commission (SEC) in the Philippines, getting a business permit from the local government unit (LGU), and registering with other relevant agencies (more on this later). 

This process can be time-consuming and challenging due to regulatory complexity and language barriers.

2) Hiring independent contractors

It’s possible to side-step local incorporation by hiring contractors. Contractors have a different working relationship with your business and can be more flexible and cost-effective as a talent pool. However, misclassifying full-time employees as contractors can come with significant penalties.

3) Workforce management platform 

While companies may search for a Philippines Employer of Record, it may not be allowed; they can use a workforce management platform, a third-party organization that onboards and pays full-time workers and contractors on a company’s behalf. 

You can access the local talent without setting up a local entity, while the workforce management platform helps manage Filipino talent. 

A workforce management platform may offer support for your business to stay compliant while navigating the local labor laws. 

Partnering with a workforce management platform in the Philippines

A workforce management platform in the Philippines can help with:

• Compliant employment practices and contracts: Although labor laws are available in English, contracts may be localized to align with local practices and language preferences. A workforce management platform can help localize contracts and may provide compliance support with employment laws, contract practices, and worker classification.
• Payroll: Hand your global payroll management over to a workforce management platform to save time and stay compliant with payroll laws.
• Employee benefits: Mandatory employee benefits in the Philippines include 13th-month pay, social security contributions (SSS), PhilHealth, and Pag-IBIG. Workforce management platforms can offer support with appropriately administering these benefits.
• Taxes and other contributions: If you don’t know your SSS, a workforce management platform can help you understand and manage payroll contributions such as SSS, PhilHealth, and Pag-IBIG in accordance with local laws.

In the Philippines, workforce management platforms can help you engage talent without setting up a local entity. 

How to onboard employees in the Philippines

Here’s your onboarding checklist for the Philippines:

• Work authorization: Foreign nationals need both a work permit and a visa to work in the Philippines. The type of permit and visa will depend on the role, and it’s the employer’s responsibility to manage the application process. 
• Payroll enrollment: You’ll need the employee’s legal address and bank details to enroll them in your payroll management platform. All workers employed in the Philippines must be paid in Philippine pesos (PHP).
• Set up tax filings and other contributions: Employers must register a new employee with the Social Security System (SSS). For this, you’ll need their Tax Identification Number (TIN), Social Security System number, PhilHealth number, and Pag-IBIG membership ID.
• Benefits enrollment: Some benefits come via the SSS, but others must be set up and managed by the employer, including paid time off (known as Service Incentive Leave, or SIL, in the Philippines).

Philippines payroll

Partnering with a workforce management platform is one of the simplest ways to pay employees in the Philippines. But it’s still good to understand your responsibilities as an employer. Here are the basics of payroll in the Philippines.

Payroll cycle

• The fiscal year runs from January 1st to December 31st.
• Payroll is typically run every 2 weeks, as outlined in the Labor Code of the Philippines.
• The minimum wage varies by region.
• All non-managerial employees are entitled to a 13-month bonus. This equals 1 month’s regular salary and must be paid before December 25th each year.

Tax and other contributions

• Income tax: Set on a sliding scale, ranging from 0% to 35%.
• International worker tax: Non-resident aliens (international workers) are taxed at a flat rate of 25% on all earnings within the Philippines.
• SSS contributions: Contributions to the SSS total 14%, with 9.5% funded by the employer and 4.5% by the employee.
• Health insurance: PhilHealth contributions are split between the employer and employee and must total 4%.
• Pag-IBIG: The Philippines has a specific fund for affordable housing (The Home Development Mutual Fund). Employers contribute 2% while employees contribute 1% on salaries below PHP 1,500 ($27) per month and PHP 100 on salaries over PHP 1,500.

Employment laws in the Philippines

The Labor Code of the Philippines is the primary legislation for employers to follow. 

The Labor Code dictates that:

• Standard working hours range from 40 to 48 hours per week, typically spread across 5 days. Employees working more than 8 hours a day are entitled to overtime pay.
• Employees are entitled to 1 rest day of 24 consecutive hours for every 6 days worked.
• A probationary period cannot exceed 6 months.

All employers must follow employment laws, such as the Anti-Age Discrimination in Employment Act and the Magna Carta for Women, which outline anti-discrimination legislation and fair employment practices.

Minimum wage in the Philippines

The legal minimum wage in the Philippines varies by location and industry. It is determined based on the location of the employer, not the employee. 

• 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.

These rates are subject to change based on wage orders issued by the Department of Labor and Employment (DOLE). Employers should refer to the latest DOLE circulars for region-specific updates.

This is informed by where the employer is located rather than where your employee(s) live.

Employment contracts in the Philippines

Employment contracts are not a legal requirement in the Philippines. However, creating written employment contracts can mitigate misunderstandings and reduce risk within working relationships.

A comprehensive employment contract should include:

• The contract type (fixed- or open-term)
• Start date
• The employee’s typical compensation, benefits, and eligibility for bonuses
• Work hours and location, and allocated paid time off
• Length of probation
• Termination requirements (e.g., notice period and severance pay)

Leave policy in the Philippines

Here are the key details of employee leave in the Philippines:

• There are 19 paid public holidays in the Philippines.
• The government sets additional “special non-working days” each year. Company policy dictates whether these are paid or not, but most employers adopt a “no work, no pay” rule.
• Service Incentive Leave (SIL) is the paid time off quota in the Philippines. Employees with 1 year of service are entitled to 5 days of SIL. Any SIL days not taken by the end of the year are exchangeable for cash; encashment is calculated as monthly salary ÷ 21.75 × number of unused SIL days..
• If an employee is sick, they should take a day of SIL (there is no mandatory sick pay). 
• New parents can take advantage of parental leave under certain conditions. Maternity leave provides up to 105 days at full pay (and an extra 30 days unpaid). Paternity leave is available for up to 7 days, but only married partners are eligible.
• Solo parent leaves are 7 working days, applicable after 6 months with the same employer
• Bereavement Leaves are not statutory; most employers offer 3 days
• Special leave for women is for 2 months for gynecological surgery; 10 days for victims of violence

Work permit in the Philippines

All foreign nationals require a work permit and a visa to work in the Philippines. 

Work permit requirements in the Philippines can differ based on the employee’s country and the type of role they will be performing.

Both employers and candidates should refer to official government sources to verify the specific rules, documentation, and procedures involved.

Background check in the Philippines

A background check is standard practice for employers engaging talent in the Philippines. It may not be a legal requirement, but it’s considered an essential part of due diligence. 

Employers generally must obtain the candidate’s consent and clearly outline what will be reviewed. It is best to consult local laws and guidelines before initiating any background checks in the Philippines.

Employment termination in the Philippines

Under the Labor Code of the Philippines, an employer can terminate an employee’s contract in the event of serious misconduct, habitual neglect of duties, and criminal offense(s). 

Redundancy and company closure are also authorized causes for termination. In these cases, employers should provide a severance package.

Severance pay should equal at least one month’s pay or one month’s pay per year of service, whichever is higher, in the event of redundancy, and at least half a month’s pay per year of service if not due to serious financial losses; no severance if closure is due to serious losses. 

Notice periods vary depending on the reason for termination. For authorized causes, a 30-day written notice is required. For just causes, no notice is required if due process is followed.

Company registration in the Philippines

Registering a company in the Philippines can be complicated, but it may be the right choice if your company wants to establish a long-term presence there. 

Full details are available through the Philippines’ SEC and BIR websites. However, for many U.S.-based companies, using a workforce management platform in the Philippines is often a faster and simpler solution.

PEO in the Philippines

Typically, a PEO (Professional Employer Organization) and an EOR (Employer of Record) both support you with HR and payroll tasks when building an international team. However, there are some important differences to consider.

However, in the Philippines, while companies may search for Employer of Record (EOR) services, this model is not permitted. Workforce management platforms may assist with HR and payroll.

While PEOs are a helpful way to outsource HR functions, they don’t serve as the legal employer for your Filipino team. This means you still need to register as a legal entity in the Philippines if you want to engage employees there.

On the other hand, partnering with a workforce management platform in the Philippines offers a simple way to engage Filipino employees. 

The workforce management platform may offer a compliant way to engage with talent in the Philippines as per local employment laws.

Payoneer Workforce Management services in the Philippines

When it comes to onboarding and paying employees in the Philippines, companies may search for Employer of Record (EOR) services in the Philippines, but this model is not permitted. Workforce management platforms may assist with HR and payroll coordination.

With a workforce management platform, organizations can grow their international teams while worrying less about complex local labor laws and complicated global payroll. 

Book a demo today to see how we can help.

FAQs 

1) What is an EOR in the Philippines?

Generally, an Employer of Record (EOR) is a third-party company that supports an organization’s global talent engagement needs. However, while companies may search for Employer of Record (EOR) services in the Philippines, this model is not permitted. Workforce management platforms may assist with HR and payroll coordination through their local entity.

2) How much does an employer of record in the Philippines cost?

As mentioned above, an EOR model is not allowed in the Philippines, and companies can use a workforce management platform instead; its cost varies based on the provider. For instance, Payoneer Workforce Management’s services in the Philippines start at $199 a month. Overall, the cost of working with a workforce management platform is lower than the cost of setting up a local legal entity and/or managing recruitment.