Employer of Record Philippines

The decision to expand your business in the Philippines can be fruitful. The island nation boasts a highly educated and skilled workforce in fields like information technology, customer-related services, and more. 

This has resulted in an especially high demand for workers from the Philippines from companies seeking to grow their brands internationally. The following page discusses the different aspects of hiring, paying, and managing employees as an employer of record in the Philippines.

The Philippines at a Glance

• Population size: 119.1 million
• Currency: Philippine Peso
• Capital city: Manila
• Languages spoken: Tagalog & English
• GDP: USD 7.6 billion

How To Hire Employees In The Philippines

There are two main ways you can hire an employee in the Philippines.

1. Hiring directly by setting up a subsidiary.
2. Working through an “employer of record” (EOR) in the Philippines.

Direct Hiring: Setting Up A Subsidiary

For a Filipino subsidiary establishment, you need to file with the Securities and Exchange Commission and obtain the necessary licenses along with the following documents:

• Articles of Association
• Memorandum of Association
• Declaration from the Treasurer’s Office
• Company name verification and approval paper
• Registration datasheet
• A Tax Identification Number (TIN)
• Registration with the Social Security system

Incorporating a subsidiary in the Philippines takes around 30 days, after which you can easily do your business directly. Before hiring, you must evaluate the skills and qualifications of candidates during the interview process according to the job description. For example, potential government employees must complete civil services exams that take anywhere from two to six months. 

Upon selection, candidates must enter into a written employment contract with the company in accordance with compliance. If you are working without an EOR provider like Skuad, you will need to work through your legal team to ensure compliance.

Hiring with an Employer of Record in the Philippines

Skuad’s global HR platform will help to simplify the management of your business by removing complexities. The unified and automated platform is designed to handle monthly payroll, onboarding employees, drafting employment contracts, managing compliances, and all day-to-day HR functions for your employees in the Philippines. 

General Employer Of Record Service Terms

For more information on how hiring would work for your particular company, speak to a Skuad expert now.

Onboarding And Agreements

The first step in a successful onboarding process is to draft a proper employment agreement as per the onboarding policy in the Philippines. It should highlight all the essential elements of the working relationship, such as working hours, compensation package, method of payment, leave entitlements, and termination conditions, among others. 

Under employment law in the Philippines, a labor contract can be categorized into the following types:

• Fixed-term contracts: Agreements in which the employee renders services for a definite period of time, and the employment relationship ceases to exist after such period expires.
• Seasonal contracts: Agreements wherein an individual performs work only for a certain period of time or season of the year. This contract type is commonly used in the food and beverage, hospitality, and retail industries.‍
• Casual contracts: These agreements are usually used for employees who perform work that is not primarily related to the employer’s business or trade. The duration of this kind of employment relationship must be made known to the worker at the time they start rendering services.

Taxes

The table below contains a detailed overview of payroll taxes in the Philippines.

Employer Tax in the Philippines

Employee Tax in the Philippines

Compliance

Employment laws in the Philippines are governed by the Labor Code 1974, which defines the rules and standards regarding employment policies, wage rates, working hours, employee benefits, etc.

Provincial Rate / Minimum Wages Philippines

The provincial rate of daily minimum wages for Calabarzon (Region IV-A), the Philippines, has seen an increase, according to Wage Order No. IVA-19, published on June 14, 2022. 

The increase, cutting across different private sector industries, is mandated in two tranches:

• 1st Tranche, where workers in the private sector will receive PHP 3 (USD 0.051)-PHP 49 (USD 0.83) per day, in addition to the current minimum wage rates.
• 2nd Tranche (applicable six months after 1st Tranche), where workers in the private sector will receive up to PHP 48 (USD 0.81) per day, in addition to 1st Tranche.

The minimum wage increase applies to a typical working day of working hours not exceeding eight hours per day and to all private sector workers regardless of position, status, designation, or method of wage payment. The minimum wage increase applies to five provinces in Calabarzon, including:

• Cavite
• Laguna
• Rizal
• Batangas
• Quezon

The minimum wage increase is indicated as per Wage Order No. IVA-19, in Non-Agriculture and Agriculture sectors in each province, as follows:

Check Wage Order No. IVA-19 for a full record of wage increases across provinces, metropolitan areas, and municipalities (First-Sixth Class). The Wage Order No. IVA-19 exempts certain organizations from compliance, including:

• Retail or service industries employing ten workers or less.
• Organizations affected by COVID-19 or natural or human-caused disasters.

Failing to comply with Wage Order No. IVA-19 will result in legal consequences as indicated in Section 12 of RA No. 6727, as amended by RA No. 8188.

Independent Contractor vs. Full-Time Employee

There are two primary employee categories in the Philippines that are protected through employment contracts in the Labor Code – full-time employees and contractor employees.

Regardless of which you intend on hiring, working with an EOR platform like Skuad allows you to easily hire and manage employees to seamlessly grow your operations. Without the tools provided through a quality EOR, misclassifying them can lead to tricky situations, as described below.

Fines/Penalties for Worker Misclassification

If found guilty of not maintaining the proper distinction between an employee and an independent contractor in the Philippines, you will be charged with worker misclassification and will be subject to the following fines and penalties:

• 25% surcharge.
• 12% interest per annum.
• Compromise penalty up to a maximum of PHP 50,000.
• Social security fines range from PHP 5000 to PHP 20,000, imprisonment up to six years, one day to 12 years, or both.
• The Philippines Health Insurance Corporation fine is PHP 50,000 for every violation per affected employee, or jail time is six months to one year, or both.

IP Protection 

Acting as an employer of record in the Philippines also means taking steps to ensure that your intellectual property is protected. The Republic Act 8293, also known as the Intellectual Property Code, is the primary law governing all matters relating to intellectual property rights in the Philippines. 

Some of the many provisions of this law include:

• Patent: The term of patent protection is 20 years, which begins from the date of filing.
• Utility Model: A utility model is provided with seven years of protection, starting from the date of filing. It does not contain any possibility of renewal.
• Trademark: The period of protection for trademarks is ten years starting from the date of registration.It can be renewed for ten years at a time.‍
• Copyright: Copyright protection for literary and artistic works typically lasts the author's lifetime plus an additional 50 years.

Types Of Visas In The Philippines

The three categories of Visas in the Philippines are Immigrant, Non-Immigrant, and Special Visa, which are further classified into different types of visas as listed in the table below:

Immigrant Visas

Non-Immigrant Visa

Special Visa

Work Permits

For a work permit in the Philippines, you are required to apply for Employee Visa 9G at the Bureau of Immigration Philippines. The documents required are as follows:

• Copy of passport
• Employment Contract
• Alien Employment permit issued by the Department of Labor and Employment in the Philippines
• Application Form
• Additional information on the applicant’s children (if needed)
• Notarized certification of the number of foreign and Filipino Employees

Skuad's local partners in the Philippines can help you with managing work permits for your organization. As an EOR in the Philippines, Skuad manages all employment requirements and responsibilities in a simplified, compliant manner.

Read more

Learn how we can grow your business across borders.

Consult with us

Payroll

To manage payroll and taxation in the Philippines, you will most likely need a talented accounting team and a diligent HR representative to track changing employment laws and tax considerations if you are hiring directly on your own. If you partner with an EOR service in the Philippines like Skuad, you’ll get access to numerous capabilities such as:

Having these tools at your disposal allows you to manage the complexities of global payroll more efficiently and effectively, freeing up your time to do mission-critical work.

Benefits and Compensation

The Social Security System was established to help employees and their families cope with disability, illness, and death. Contributing to the Social Security fund is mandatory for employees under the age of 60 who earn P1000 per month.

Under this system, employees in the Philippines are entitled to the following benefits:

• Sickness benefit: It comprises a daily cash allowance paid for the number of days a member has been unable to perform work due to sickness or injury.
• Maternity benefit: Any female employee who is unable to perform work due to childbirth, miscarriage, or emergency termination of pregnancy receives a daily cash allowance.
• Disability benefit: Disability benefit is disbursed either as a monthly pension or as a lump sum amount to a member who becomes permanently disabled, either partially or wholly.
• Retirement benefit: Similar to disability benefits, retirement benefits comprise a monthly pension or a lump sum amount provided to individuals who are unable to work due to old age.
• Death benefit: Beneficiaries of a deceased member are eligible for death benefit in the form of a monthly pension or a lump sum amount.
• Funeral benefit: A cash benefit is provided to the individual who paid for the burial expenses of the deceased member.‍
• Unemployment benefit: All covered employees are eligible for a cash benefit.

Worker Rights

The employment law in the Philippines lays down a few obligations and terms of employment that both employees and employers must follow. These include:

If you are hiring directly, it will be critical to keep your legal team in close contact to ensure full compliance with local labor laws. If you are working with an EOR platform like Skuad, on the other hand, we automate this process for you.

Remote & Hybrid Work

When hiring employees in the Philippines, it is necessary to determine your organization’s readiness for remote work. Two main factors will help you determine how well your organization can maintain productivity outside a traditional office environment.

• Firstly, make sure that you are investing in proper technology and infrastructure that will amplify remote work readiness, if not more. This means a reliable internet connection, robust communication and collaboration tools/software, and suitable hardware, such as mobile devices and laptops.
• Second, formulate flexible work policies that will help you uphold clarity, relevance, and effectiveness. 

Make sure your policies target some of the key areas of remote and hybrid work, including performance evaluation, time management, and communication expectations.

Salary

The salary of employees in the Philippines usually differs based on numerous factors, such as:

• ‍The candidate’s experience level: A professional with many years of experience and expertise in a particular field will demand a higher salary than a fresher.

• The industry: Employees in the Philippines are compensated differently based on the type of industry they work in. The average salary of an individual in the finance domain is PHP 30,000 per month. Meanwhile, a healthcare professional earns an average salary of PHP 21,300 per month.
• The nature of work: Compensation packages can also differ depending on the nature of work. Individuals in highly specialized roles usually earn much more than those handling general or administrative tasks.

With Skuad’s salary benchmarking tool, you can unlock the key to the latest salary trends and tap into robust compensation data.

Leave Policy

Here, we have highlighted some of the major leave entitlements for all employees in the Philippines.

All employees are entitled to five days of paid leave after one year of service, called ‘service incentive leave,’ which can be used for vacation or illness, depending on the number of working days.

Background Checks

When hiring employees in the Philippines, it is always advisable to run a thorough background check pre-onboarding to safeguard your company’s assets and employees from unnecessary threats. 

We list some of the most common types of verification checks performed in this country in the table below.

Criminal Record Check

When running a criminal record check in the Philippines, you must obtain the NBI Clearance, which is the police clearance issued by the National Bureau of Investigation.

It will help you uncover all key details related to the past criminal convictions (if any) of job applicants so that you can make better-informed hiring decisions.

Credit History Check

A credit history check involves scrutinizing an individual's credit report to understand how responsibly they manage their finances, indicative of their trustworthiness and reliability.

In the Philippines, the primary body dealing with matters related to credit reports is the Credit Information Centre.

Under the policies of this institution, a credit report can only be accessed with explicit authorization by the employees themselves.

Education Verification

An education verification is performed to understand the accuracy of an individual's academic claims. These include degrees or diplomas, certificates, and any other academic achievements.

The employer may contact the educational institution directly to gather all the necessary information and verify whether the candidate has the required qualifications to handle a job role.

Termination And Offboarding

For an employer of record, the Philippines has a few critical rules to be aware of when letting an employee go:

Cultural Considerations

For an employer of record, the Philippines can provide a few distinct challenges when taking on a new hire. The following points outline a few core cultural differences that an employer should be aware of when taking on a new hire:

• Family, respect, and teamwork are some of the key elements of cultural values in the Philippines. As a result, new employees from the Philippines may have higher expectations of their co-workers’ etiquette and commitment than other places.
• Building strong relationships is crucial to the culture of the Philippines. This can sometimes lead to differences in how much of their personal lives new hires may want to share with co-workers. 
• Filipino cultural values are also characterized by a strong hierarchical system and respect for authority. Senior professionals are often regarded with high respect and deference. Additionally, informing and consulting high-ranking individuals before making significant decisions or changes is generally considered polite.

EOR platforms typically feature their payroll and onboarding features as the primary offering, but they also provide valuable HR tools that make managing employees a more simple task. Read more here.

Professional Employer Organization (PEO)

A Professional Employment Organization (PEO) is an outsourced HR department where organizations merge with small and medium-sized businesses to handle your company compliances, payroll management, tax filing, recruitment, and other services.

So when you engage the services of a PEO, that organization handles your business operation smoothly without setting up a separate business entity. A PEO offers customized services according to the client requirements (e.g. employee benefits, payroll processing, administration of workers compensation, business compliances, recruitment).

With the Philippines’ EOR solution, you don’t need to associate with any small or medium-sized organization because you can become a legal employer directly. Skuad’s EOR solution allows you to easily handle: 

• Employee benefits and compensation
• Tax filing
• Payroll
• Compliance
• Attendance management

Depending on the nature, size, and operations of your business, you may still want to hire directly by becoming a legal employer or partner with a Professional Employment Organization (PEO). Both options are available.

Book a demo with Skuad to help you decide..

Conclusion

As this page suggesst, hiring directly can be overwhelming as an employer of record. The Philippines, like most other countries, has a wealth of applicable laws and regulations, which will require constant monitoring and input from your legal and accounting teams. 

That’s why EOR platforms like Skuad offer the most attractive option for business owners seeking to source talent from the Philippines. Contact us to see how we can simplify your operations and help you grow your business to the next level.

FAQs

What is an employer of record in the Philippines?

An Employer of Record (EOR), like Skuad in the Philippines, is a service provider that legally employs individuals on behalf of another company. The EOR solutions in the Philippines handle all HR responsibilities, including payroll, taxes, benefits administration, and compliance with local labor laws like labor code break time Philippines. This allows the client company to focus on core business activities without establishing a local entity.

Is employer of record legal in the Philippines?

Using an Employer of Record is legal in the Philippines. This service allows companies, especially foreign ones, to legally hire local employees without the need to establish a physical presence in the country, which is particularly useful for businesses looking to expand into the market.

How long do employers keep employee records after termination in the Philippines?

In the Philippines, employers are required to keep employee records for at least three years after termination. This period is mandated to ensure compliance with the Philippines labor laws and for audit purposes. Records include personal information, employment details, payroll, and contributions to government institutions.

What is the difference between employer of record and payroll?

An Employer of Record payroll Philippines provides comprehensive employment services, including hiring, payroll, compliance, and HR management. In contrast, payroll services only calculate, distribute, and report employee salaries. While an EOR acts as the legal employer, a payroll service does not take on employer responsibilities.

How to set up an EOR in the Philippines?

Setting up an EOR in the Philippines typically involves selecting a reputable service provider, like Skuad, who understands local employment laws and can efficiently manage HR tasks. The process includes negotiating terms, defining service scope, and ensuring the EOR’s capabilities align with your business needs. Companies should ensure the chosen EOR can handle the specific requirements of employing staff in the Philippines, including legal compliance and payroll processing.

What is the difference between EOR and PEO?

One of the main differences between EOR services in the Philippines and PEOs is that when you partner up with a PEO, you are essentially entering into a co-employment relationship. This means that you will still be legally responsible for your employees, and the PEO is simply there to support your HR functions, such as managing payroll and employee benefits. On the other hand, an EOR in the Philippines becomes the legal employer on your behalf, handling everything from drafting contracts to ensuring compliance with local labor laws.

What are the benefits of EOR?

Some of the many benefits of using an employer of record in the Philippines include reduced costs, simplified payroll, improved compliance, and access to expertise. For example, an EOR is how an American company hires employees in the Philippines without setting up a local entity.