Using an employer of record in the Philippines

The Philippines has a strong and resilient labor market, and its low cost of living makes it a popular choice for expats. 

An Employer of Record (EOR) in the Philippines assists international companies in hiring 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 an EOR 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 WFM team to learn about our Employer of Record services in the Philippines, or keep reading to learn more about hiring, 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 hiring employees 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 if you don’t speak Filipino.

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) Hiring employees with an employer of record 

A Philippines Employer of Record is a third-party organization that hires, onboards, and pays full-time workers and contractors on a company’s behalf. 

You still own the relationship with your team(s) and get to make all the calls on who you hire and why. However, as the legal employer, an EOR eliminates the need to incorporate in every country where you want to hire. 

An EOR helps your business stay compliant with local labor laws. 

Partnering with an employer of record in the Philippines

An EOR in the Philippines can help with:

• Compliant employment practices and contracts: Although copies of the Philippines’ labor laws are available in English, contracts should be written in Filipino. An EOR can help localize contracts and keep your business compliant with employment laws, contract practices, and worker classification.
• Payroll: Hand your global payroll management over to an EOR to save time and stay compliant with payroll laws.
• Employee benefits: COLA (Cost of Living Allowance) is one example of a mandatory employee benefit in the Philippines. Your EOR can help you offer the appropriate employee benefits to your team.
• Taxes and other contributions: If you don’t know your SSS from your COLA, an EOR can help make all the correct payroll contributions in line with local laws.

Payoneer WFM provides employer of record services in the Philippines and over 160 other countries, helping you hire globally.

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).

Your EOR in Philippines can help with onboarding new employees.

Philippines payroll

Partnering with an EOR is one of the easiest way 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 (see more below).
• All non-managerial employees are entitled to a 13-month bonus. This equals 1 month’s regular salary and must be paid by December 24th each year.

Tax and other contributions

• Income tax: Set on a sliding scale, ranging from 15% 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 15%, 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 5%.
• 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 2% 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:

• Working hours should not exceed 8 hours per day (unless overtime pay is offered).
• 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. This is informed by where the employer is located rather than where your employee(s) live.

Region	Daily minimum wage	Equivalent in USD (rounded)
National Capital Region	PHP 608 to PHP 645	$11 to $12
Cordillera Administrative Region	PHP 470	$8.35
Region I (Ilocos Region)	PHP 435 to PHP 468	$8
Region II (Cagayan Valley Region	PHP 460 to PHP 480	$8
Region III (Central Luzon)	PHP 435 to PHP 550	$8 to $10
Region IV-A (Calabarzon)	PHP 425 to PHP 560	$8 to $10
Region IV-B (Mimaropa)	PHP 404 to PHP 430	$7
Region V (Bicol Region)	PHP 395	$7
Region VI (Western Visayas)	PHP 480 to PHP 513	$8.50 to $9
Region VII (Central Visayas)	PHP 390 to PHP 420	$7 to $8
Region VIII (Eastern Visayas)	PHP 405-435	$7 to $8
Region IX (Zamboanga Peninsula)	PHP 401 to PHP 414	$7 to $8
Region X (Northern Mindanao)	PHP 434 to PHP 461	$7 to $8.50
Region XI (Davao Region)	PHP 476 to PHP 481	$8.50
Region XII (Soccsksargen)	PHP 410 to PHP 430	$7.50
Region XIII (Caraga Region)	PHP 435	$7.75
BARMM (Bangsamoro Autonomous Region in Muslim Mindanao	PHP 316 to PHP 361	$5.50 to $6.50

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 12 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, where 1 day of SIL equals PHP 500 ($9).
• 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.

Work permit in the Philippines

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

The most common work permit is the Alien Employment Permit (AEP), which costs around PHP 9,000 ($160) for one year, paid for by the employer. 

An AEP works in tandem with the 9(g) Pre-Arranged Employee Commercial Visa. All foreign nationals working in the Philippines need a permit and a visa to comply with local law.

Your Employer of Record in the Philippines can help you comply with work permit and visa requirements.

Background check in the Philippines

A background check is standard practice for employers hiring in the Philippines. It’s not a legal requirement (unless hiring in certain industries, like childcare), but it’s an essential part of due diligence. 

Here are the most common types of background checks performed in the Philippines.

Type of check	Description
Criminal record check	Run through the National Bureau of Investigation (NBI), criminal record checks usually take 2 weeks.
Employment history and reference check	Employment history and references checks confirm an employee’s prior work experience and performance.
Education verification	Education verifications confirm a candidate’s degree or other qualifications if relevant to the role.
License/certification verification	A license and certification check verifies whether the candidate holds the necessary licenses and certifications to perform their duties effectively.

Employers may also choose to run a background check on a candidate’s social media profile(s) and credit history. However, both of these checks involve sensitive, personal information, and you’ll need to process this data in line with the Data Privacy Act of 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 1 month’s salary in the event of redundancy and 2 weeks’ to 1 month’s salary if the company is ceasing operations.

In most circumstances, the notice period is 1 month.

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. 

To register a business in the Philippines, employers need to:

• Choose your company name and structure
• Register with the Securities and Exchange Commission (SEC)
• Obtain a business permit from the local government unit (LGU)
• Register with the Bureau of Internal Revenue (BIR) for tax purposes
• Apply for other licenses or permits specific to your business activities

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

PEO in the Philippines

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.

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 hire employees there.

On the other hand, partnering with an EOR in the Philippines offers a simple way to hire Filipino employees without establishing a local entity. 

The EOR acts as the legal employer for your workers in the Philippines and helps you stay compliant with local employment laws.

Payoneer WFM: Leading employer of record services in the Philippines

When it comes to hiring, onboarding, and paying employees in the Philippines, an employer of record, as offered by Payoneer WFM, makes an employer’s life easier.

With an EOR, organizations can grow their international teams without worrying about complex local labor laws and complicated global payroll. 

Payoneer WFM helps you hire compliantly in 160+ countries. Speak to one of our experts about your hiring needs in the Philippines.

FAQs about the Philippines employer of record 

1) What is an EOR in the Philippines?

An Employer of Record (EOR) is a third-party company that supports an organization’s global hiring needs. As the legal employer of your Filipino workers, an EOR can hire, onboard, and pay employees on your behalf and save your company the time and cost of setting up a local legal entity.

2) Does an EOR help with tax filings in the Philippines?

Yes. An EOR can calculate and file taxes on your organization’s behalf in the Philippines.

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

The cost of EOR varies based on the provider. For instance, Payoneer WFM’s Employer of Record services in the Philippines start at $199 a month. Overall, the cost of working with an EOR is far lower than the cost of setting up a local legal entity.