Employer of Record in the Philippines

Navigating the complexities of international business expansion presents a variety of challenges. Partnering with Velocity Global while expanding your company abroad gives you the support and expert guidance necessary to confidently hire employees in the Philippines.

When you choose our Employer of Record, you access a team of experts who ensure each supported employee meets all compliance requirements. We make it simple for you to expand into the Philippines by managing your supported employees’ onboarding, payroll, taxes, immigration, and benefits.

Benefits of hiring in the Philippines

• The Philippines is located in the world’s fastest growing region, Asia. The country is a pivotal entry point to more than 500 million in the ASEAN (Association of Southeast Asian Nations) market. The Philippines is a major intersection of eastern and western business and operates as a gateway for international shipping.
• The Philippines’ population is the twelfth-largest in the world with over 100 million people, where half of the population is under the age of 25, professionally qualified, and fluent in English. The Filipino workforce is highly attractive for international business.
• The Philippine government permits 100% foreign ownership in almost all sectors. The government has deregulated many of the country’s top sectors to remove monopoly structures, allowing foreign companies to have unlimited business opportunities.
• The Philippines has a developed communication, transportation, and economic infrastructure which connects the country’s three major islands. Accessible by water, air, and cyberspace, inter-island transport has high efficiency for traffic and goods.

Challenges of hiring in the Philippines

• Philippine bureaucracy can be dense when doing business. There are 16 different procedures in starting a business, which takes about 36 days and property registration takes an additional 39 days. The Philippines is known for often burdensome business processes.
• The Philippines ranks poorly by the World Bank on all indices for investor protection and ease of getting credit.
• Paying taxes in the Philippines is a laborious endeavor, as businesses are required to make 47 tax payments each year which average to almost 200 business hours.
• Levels of corruption are high in the Philippine government and it restricts business efficiency. Bribery and unclear, complicated laws make foreign businesses unprotected from extortion and manipulative influence by public officials. Favoritism is widespread in the legal system which can create an uncertain business environment.

Cultural nuances and must-knows of doing business in the Philippines

• Filipino business culture is relationship-oriented. Having a third-party introduction is beneficial since Filipinos prefer to engage with colleagues they know and trust. Networking is purposefully done because personal contacts are pivotal to success.
• Decision-making is done by colleagues in highly ranked positions. The colleague of highest rank approves all decisions but group agreement is still gathered and received. Expect slow negotiations as Filipinos respect checking in with all colleagues on decision-making matters.
• Punctuality is heavily respected. Business-related endeavors are always on time.

Minimum wage

• There is not a uniform minimum wage in the Philippines. The minimum wage varies by industry and region. The Philippines’ Department of Labor and Employment has 51 different daily minimum wage rates.

Probation periods

• According to Article 281 of the Philippine Labor Code, the maximum length of a probation period is six months.

Bonuses

• Discretionary bonuses are at the directive of the employer and they are not mandatory by law. However, the Philippine government mandates a 13th month bonus by law for employees to receive one twelfth of their total salary earned in a year. Employers are permitted to divvy its distribution throughout the year or allocate it as a lump sum around Christmas.

Onboarding

• In the Philippines, there is no statutory requirement to have a written employment contract. Likewise, there is no law which lists in detail the required terms in an employment contract.

Termination and notice periods

• In the Philippines, the law distinguishes an important difference between an authorized cause dismissal or just cause dismissal. Authorized cause is based on economic or health reasons. Just cause is based on blameworthy actions such as misconduct, disobedience, neglect, fraud, or crime.
• There is no notice period required by an employer for a just cause dismissal.
• Employers are legally required to give employees a 30 day notice for an authorized cause dismissal.
• Employees can terminate the employment contract with a 30 day notice.
• If an employer terminates the employment relationship for a just cause, no severance pay is legally required. If an employer dismisses an employee for an authorized cause, the employee is entitled to severance pay of at least a half month’s wages for every year of service.

Annual leave

• The Philippine Labor Law states that employees are entitled to 13 days of annual paid leave, with an additional day for every year of service starting after the third year. The maximum annual leave accrual is 18 days.

Parental leave

• Maternity leave is 105 days with full pay and an additional 15 days of leave if the employee is a single parent. Mothers receive a cash allowance from the Philippine Social Security System’s (SSS) as a maternity benefit. For eligibility, employees need to pay at least three months of contributions within the 12-month period before childbirth.
• Under the Philippine Republic Act 8187, employees are entitled to seven days of paternity leave with full pay.

Sick

• Employees are entitled to 12 days of sick leave for the first two years of service and an additional day for every year of service starting after the third year. The maximum annual sick leave accrual is 15 days.

National and regional holidays

• The Philippines has 18 public holidays in a calendar year, which are excluded in the minimum paid leave entitlement and are taken in addition to annual leave. The following are national holidays recognized by the Philippines:
  • New Year’s Day (January 1)
  • Chinese New Year (January or February, the specific day fluctuates each year)
  • EDSA (Epifanio Delos Santos Avenue) Revolution Anniversary (February 25)
  • Day of Valor (April 9)
  • Maundy Thursday (March or April, the specific day fluctuates each year)
  • Good Friday (March or April, the specific day fluctuates each year)
  • Black Saturday (March or April, the specific day fluctuates each year)
  • Labor Day (May 1)
  • Eidul Fitr (March, April, or May, the specific day fluctuates each year)
  • Independence Day (June 12)
  • Eidul Adha (May, June, or July, the specific day fluctuates each year)
  • Ninoy Aquino Day (August 21)
  • National Heroes Day (August, the specific day fluctuates each year)
  • All Saints’ Day (November 1)
  • Bonifacio Day (November 30)
  • Immaculate Conception (December 8)
  • Christmas Day (December 25)
  • Rizal Day (December 30)

• Philippine government agencies administer the country’s benefits programs.
• The Department of Labor and Employment provides overall general supervision and administration of employment programs and cash benefits to Filipino residents.
• The Philippine Social Security System (SSS) provides financial assistance to employees due to disability, sickness, maternity, old age, death, and other events resulting in income loss or financial hardship.
• The Department of Health ensures access to general public health benefits and medical services for Filipino residents. Public healthcare is administered by the Philippine Health Insurance Corporation (PhilHealth), a government-owned corporation.

• Individuals are considered Filipino tax-residents when they stay in the Philippines for more than 180 days in a calendar year.
• Non-tax residents are legally required to pay income tax only on their Philipine-source income.
• Filipino tax-residents are legally required to pay income tax on their global income.

Thresholds

• As of January 1, 2023, the the Philippine income tax brackets are:
  • Up to PHP 250,000: 0%
  • From PHP 250,000 to PHP 400,000: 15%
  • From PHP 400,000 to PHP 800,000: 20%
  • From PHP 800,000 to PHP 2,000,000: 25%
  • From PHP 2,000,000 to PHP 8,00,000: 30%
  • Above PHP 8,000,000: 35%

Health

• The Philippine healthcare system, PhilHealth, provides universal healthcare services to residents of the Philippines. The insurance scheme is government-controlled and funded by both Philippine government subsidies and employer and employee contributions. In general, the healthcare system in the Philippines is high quality, medical staff are highly qualified, and facilities are well-equipped by international standards. The primary barriers to healthcare in the country include a shortage of hospitals and surgical equipment in rural areas.

Pension

• Employees in the Philippines are subject to eligibility requirements for the state’s old-age retirement pension. Qualifying conditions for the state’s old-age pension include paying at least 120 monthly contributions into the Philippine Social Security System (SSS) and a range of ages, depending on the type of old-age pension plan. The pension has two payment options: a monthly lifetime cash benefit or a lump sum, one-time payment.

Tax dates

In the Philippines, the tax year is the calendar year. Tax returns need to be filed no later than April 15.

Cycle

The payroll cycle in the Philippines is generally bi-monthly, where payments are made once every two weeks.

Average hours

Employees in the Philippines usually work an eight-hour day. A work day can go beyond eight hours, but it cannot exceed 10 hours a day or 48 hours a week for a regular workweek.

Overtime

In the Philippines, overtime is considered time worked in excess of normal business hours. If overtime work is done on an ordinary day, employees receive an additional 25% of their regular wage. If work is done on a holiday or rest day, employees receive an additional 30% of their regular wage.

Learn more about payroll and taxes in the Philippines.