Given its vibrant culture and highly skilled labor force, many businesses set their sights abroad and are hiring in the Philippines. If the region is on your radar, there are new labor laws and requirements to learn.
As mentioned, talent is vast in the region. Thus, one of the many benefits of hiring in the Philippines is sourcing cost-effective labor. When you take the time to understand how to navigate the rules and regulations in your new market, you can help your company avoid compliance issues down the road.
To help you get started, we put together a guide that will help you start understanding the landscape of labor laws in the Philippines.
Similar to all our law-related articles, this information is a guide and outline of suggestions. You should always consult with a local expert or international attorney before making any final decisions.
Basic Labor Laws for Hiring in the Philippines
When you have a basic understanding of the nuances of the labor laws in your target country, you can prepare an effective strategy. Here are important regulations for hiring in the Philippines.
Rules for Withholdings
Withholding requirements in the Philippines are drastically different from the U.S. The Philippines Bureau of Internal Revenue (BIR) is the governing body for tax withholdings. Upon setting up your business with a solution like Foreign Subsidiary as a Service (FSaaS), you will need to comply with the rules outlined by this body. Failure to do so could result in financial penalties or criminal prosecution.
Obtaining Work Permits
Work permits take time. The application and approval processes vary when hiring in the Philippines. There are two government agencies that handle visas including The Department of Labor and Employment and the Bureau of Immigration.
Foreign nationals and expats need to apply for an Alien Employment Permit (AEP), issued by the Department of Labor and Employment, and a 9(g), issued by the Bureau of Immigration. The 9(g) grants foreign nationals permission to live and work in the Philippines.
Being prepared and knowing about these permits is essential for a smooth transition to hiring in the Philippines. Consider using a partner to help with hiring in the Philippines. An International PEO is an employer of record service that helps companies hire legally in other markets. It can also help you obtain work permit for your foreign team members.
Intellectual Property (IP)
At the office of the Intellectual Property in the Philippines, all businesses must submit their intangible assets for approval. Unlike the US, certain IP assets are not automatically protected. You must be very careful when hiring employees, especially contractors, in the Philippines and any foreign market. Learn more about IP protection in this post.
The Philippines takes termination seriously. As a result, it’s an arduous process. Termination may only occur for just or authorized causes, but the employer bears the burden of proving the lawfulness of the employee’s dismissal. As with employers, employees must provide a 30-day resignation notice outlining whether or not it’s with just cause. Basically, there’s no such thing as hire and fire “at will.”