Guide to Hiring Employees in the Philippines 2022

Philippines PEO

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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.

Philippines PEO

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.
  1. 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 labour 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 labour 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 labour laws and regulations followed in Philippines and use the best practise in development of an organisation 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.

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)

hiring employees 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 labour 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 Philippines on behalf of your company in accordance with the local laws.

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