Guide to Hiring Employees in the Philippines

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The Philippines, a southeast Asian country, offers exciting opportunities for all the foreign companies that are willing to enter into new markets. Expanding your business and hiring employees in the Philippines can be fruitful as the country has a highly educated and skilled workforce in all the major fields such as IT and customer services, etc, coupled by a developing country’s economics. The Philippines is today, one of the top expansion choices for multinational companies.

Business expansion is not only limited to having a physical location for your company. Thanks to the technology that we can connect remotely, enabling us to hire employees in the Philippines without any entity setup. Employer Record (EoR) is one of the easiest and the most preferred options for companies that are looking to start business in the Philippines as it helps your business to start faster and also helps save a lot of money.

hiring employees in the Philippines

Why The Philippines?

Expanding your business and hiring employees in the Philippines can be a strategic move due to several compelling factors. The country offers exciting opportunities for foreign companies looking to enter new markets. With a highly educated and skilled workforce across various fields, such as IT and customer services, coupled with a developing economy, the Philippines has become one of the top expansion choices for multinational companies.

One of the key advantages of expanding to the Philippines is the availability of a highly educated and skilled workforce. The country produces a large number of graduates in fields such as IT, engineering, finance, and business administration. This means that businesses can easily find qualified professionals to fill their job positions and contribute to driving business growth.

Additionally, the Philippines provides a competitive labor market with cost-effective labor costs compared to many Western countries and other Asian economies. This makes it an attractive destination for businesses seeking to optimize their operational expenses. Companies can benefit from cost savings while still accessing a skilled workforce.

The Philippine government actively supports foreign investments and offers various incentives to attract businesses. These incentives include tax breaks, simplified business registration processes, and access to special economic zones. Such support and incentives significantly facilitate businesses in their expansion plans, making the Philippines an attractive destination for investment.

The strategic location of the Philippines in Southeast Asia is another advantage for businesses. It provides access to a large regional market and membership in ASEAN opens doors to neighboring markets such as Indonesia, Malaysia, Thailand, and Vietnam. Expanding to the Philippines enables companies to leverage regional trade agreements and tap into a broader customer reach.

The Philippines also offers a supportive business environment. The government has made efforts to improve ease of doing business, simplify regulatory processes, and enhance investor protection. Various business chambers, industry associations, and networking events are available to facilitate connections with local partners and stakeholders.

Expanding your business to the Philippines can take different forms, including a physical presence or remote operations facilitated by Employer of Record (EoR) services. EoR allows businesses to hire employees in the Philippines without the need to establish a legal entity, simplifying the setup process and saving costs associated with compliance and administration.

Option For Hiring Employees In The Philippines

  1. Setting up an entity: One of the very obvious options for companies to employ business expansion projects in the Philippines is to have their own local legal entity. This is major requirement for any company who wants to hire employees directly. However, this option not only requires a large sum of initial investment, there is also a lot of risk associated with the success of the business such as managing employee payroll, benefits, tax and compliance as per the law in the Philippines can get very complicated without an established local relationship.
  2. Using an Employer of Record: The other way to set up a business operation in the Philippines is to work with an Employment Solutions provider who will look after all of your employees and hiring needs in the Philippines. This service provider is known as an Employer of Record (EOR). An EOR is a third party company which on behalf of another company acts as the employer of record for the client’s employees in a specific country and manages all the employment related roles & responsibilities. Thereby, sharing all risks and liabilities associated with the hiring without the need for the client company to set up a separate entity locally.

If you are planning to expand your business in the Philippines and looking to reduce labour cost then the Employer of Record (EOR) solution in the Philippines is the best outsourcing model to be considered. This will make your business expansion a lot easier and in full compliance with the labor laws in the Philippines. An EOR can assist you in your market entry plans and will help reduce all the government compliance and regulation complexities.

An Employer of Record (EOR) is responsible for managing and submitting all the necessary documents to the government in the Philippines. This will take off all the tax compliance issues and regulation related to the labor laws from the shoulders of the clients willing to expand in the Philippines. EOR usually comprises specialists and consultants who are expert and have full knowledge of all the labor laws and regulations followed in Philippines and use the best practise in development of an organization and implementing the policies for HR. 

EoRs Can Be Used By The Companies Who

  • Are looking to cut the costs related to labor by outsourcing back-office functions related to the back office.
  • Require assistance associated with employment, legal, payroll & tax compliance in the Philippines.
  • Want to expand operations into the Philippines market by testing and exploring the market first in a cost effective way.
  • Are willing to hire employees remotely from the Philippines without the requirement of setting up an entity.

Labor Laws In Philippines

Working Hours In The Philippines

The typical work week in the Philippines is 40 hours over five working days with an average of eight hours per day. An employee working more than eight hours per day is entitled to overtime of 125% of the basic wage, 130% on a Sunday or paid holiday, and 200% on public holidays.

Minimum Wages

The average minimum wage per day in the Philippines ranges from PHP 290 to PHP 537 and depends upon the nature of the job and location of the employee

 Probation Period

 In the Philippines, a probation period of 6 months is necessary for each new employee. The duration can be extended by the employer as per the situation. An employee is absorbed as a regular employee after the completion of a successful probationary period.

Termination Regulations

An employment relation can be terminated by an employee by serving one months’ notice period in advance. The termination can also be initiated by the employee without giving any notice on the following grounds:

·         Serious insult by the employer or his representative

·         Inhuman and unbearable treatment

·         Commission of a crime or offense by the employer

 Grounds For Employee Termination By Employer

Employers in Philippines can terminate employees only on the basis of the following conditions:

·         Wilful disobedience

·         Gross negligence towards duty

·         Serious misconduct

·         Breach of trust and fraud

·        Commission of any crime against the employer or his representative

There is no severance payment required to be paid for the above conditions.

An employer can also legally terminate an employee with authorised causes as follows where severance payment is required

·         Replacement of labor-saving devices

·         Redundant placement

·         Closure of business

·         Disease or illness

·         Retrenchment to prevent losses

Severance pay is based on the reason for termination and is generally one month’s wages per year of service.

philippines PEO

Vacation Leave

Each Employee in the Philippines is entitled to five days of paid leave every year after completion of one year of service. Some employers also offer 15 days of paid leave each year. However, many employers offer up to 15 day’s paid vacation per year. Employment contracts can establish rules for carrying over any unused portion of leave.

Sick Leave

In General, the Philippines’ government does not require employers to provide employees with sick leave. However, at times of illness or accident, employees may be entitled to 90% of their average daily wages subject to fulfilling the following criteria:

·         All sick leave provided by the employer has been exhausted by the employee

·         Before the illness, the employee must have paid at least three of the previous 12 monthly social security contributions.

·         The employee’s hospitalization of more than three days which is approved by the social security system

If any of the above conditions is met, then employers are entitled to full reimbursement from the social security system. 

Maternity And Paternity Leave

In the Philippines, two months of paid maternity leave is available for a woman’s first four pregnancies. Fathers are eligible for 7 day’s paid paternity leave for their first four children. Paternity leave should be used within 60 days of the child’s birth.

Holidays

The following public holidays are considered as paid holidays for employees in Philippines:

·         New Year’s Day (1 January)

·         Lunar New Year (1 February)

·         Day of Valor (9 April)

·         Maundy Thursday (14 April)

·         Good Friday (15 April)

·         Black Saturday (16 April)

·         Labour Day (1 May

·         Eid ul-Fitr (3 May)

·         Independence Day (12 June)

·         Eid ul-Adha (9 July)

·         Ninoy Aquino Day (21 August)

·         National Heroes Day (29 August)

·         All Saint’s Day (1 November)

·         Bonifacio Day (30 November)

·         Feast of the Immaculate Conception (8 December)

·         Christmas Day (25 December)

·         Rizal Day (30 December)

Compliance with Labor Laws and Regulations

In the Philippines, labor laws and regulations are subject to amendments and updates. It is crucial for employers to stay informed about any changes to ensure compliance with the law. This involves keeping track of new labor codes, regulations, and policies issued by government agencies such as the Department of Labor and Employment (DOLE) and the National Labor Relations Commission (NLRC). Regularly reviewing and understanding these updates will help employers adapt their practices and policies accordingly.

To ensure compliance with labor laws and regulations, it is essential for employers to establish comprehensive internal policies and procedures. These policies should cover various aspects such as recruitment, employment contracts, working hours, leave entitlements, disciplinary procedures, and termination processes. By clearly defining these policies, employers can ensure consistency in their practices, promote fairness, and mitigate the risk of legal disputes.

Internal policies and procedures should align with the relevant labor laws and regulations in the Philippines. It is important to consult legal experts or HR professionals familiar with Philippine labor laws to draft these policies accurately. Regularly reviewing and updating these policies in line with any changes in labor legislation will help maintain compliance.

Given the complexity of labor laws and regulations, employers in the Philippines should consider engaging legal counsel and HR professionals with expertise in local employment practices. These professionals can provide valuable guidance on interpreting labor laws, ensuring compliance, and minimizing legal risks.

Legal counsel can assist in reviewing and drafting employment contracts, advising on termination procedures, and representing the company in labor-related disputes or negotiations. They can also help with staying updated on changes in labor legislation and providing recommendations on necessary adjustments to internal policies and procedures.

HR professionals with knowledge of Philippine labor laws can help ensure that recruitment, onboarding, compensation, and benefits practices are in line with legal requirements. They can also provide training to managers and employees on their rights and responsibilities, promote a culture of compliance, and handle any employee grievances or complaints in accordance with labor laws.

By engaging legal counsel and HR professionals, employers can enhance their understanding of labor laws, mitigate legal risks, and maintain a healthy employer-employee relationship based on compliance and fairness.

It’s important to note that while this information provides a general overview, consulting with legal counsel or HR professionals who specialize in Philippine labor laws is essential for accurate and up-to-date advice tailored to your specific circumstances.

Philippines PEO employer of record in the Philippines

Hiring Through An Employer Of Record In The Philippines

Hiring a talented team for the success of your business is very important as the team members help in achieving the desired objectives through their skills and knowledge. The Philippines Employer of Record solution makes it smooth for the expansion process of any business as it is in full compliance with the government and all the labor laws in the Philippines. Choosing EOR can come with many advantages such as saving the cost, full government compliance, reducing employee’s liability, saving the time and effort towards business generating activities and other employment related tasks.

Conclusion

To expand and set up your business in compliance with the policies in the Philippines one needs to have full fledged knowledge of all the local laws, rules and regulations to be followed. One of the easiest and the most cost efficient ways to meet the growing needs of a business is to have an effective and efficient EOR solution to help streamline and expedite your expansion process without any need to establish a company. Therefore, NNRoad is a one-stop shop to handle all the hiring needs in the Philippines on behalf of your company in accordance with the local laws.

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