Professional Employer Organization (PEO) in the Philippines

What is a PEO?

PEO is an acronym for Professional Employer Organization but that term does not necessarily tell us what these companies are or what they do.

Simply put, a PEO is an outsourcing firm that offers services to small and medium-sized companies, allowing them to manage their employees more effectively. PEOs become the employees’ recorded employer for tax management and cost purposes but otherwise have no control over how these employees operate.

In the Philippines, a PEO will help to manage payroll, freeing up the client company’s time. They can also take care of onboarding so new employees get used to the way the company works as per the client’s instruction.

Perhaps more importantly, PEOs take precautions and advise their clients around employment and tax laws. This is of great benefit when operating in multiple or multiple countries where labor laws differ.

What are the benefits of using a PEO provider in the Philippines?

Managing payroll across different countries can be difficult. Company registration is a legal requirement in most countries; you must register an entity, such as a branch office, to begin any business activities in that country. This alone has major startup costs as this method requires you to rent and maintain separate office space.

There is also difficulty surrounding how you should go about setting up a foreign office without initiating business transactions. As a result, you might find yourself held back — waiting a significant amount of time to obtain the relevant legal documents to begin!

So why not delegate all that additional work to a PEO in the Philippines instead? Businesses that do can expect…

Dramatically less time and effort to hire in the Philippines

By shifting the responsibility of managing aspects such as payroll, onboarding, and meeting a country’s legal requirements to a third party, you free up time and resources. PEOs allow you to undergo business operations in another country without establishing an entity.

The Philippines is one of the largest English-speaking regions in the world. Why wait to start building your team there?

Contact Skuad to find out how we can help you hire in the Philippines and beyond.

Controlled costs

Furthermore, working with an experienced PEO team offers benefits, such as a better employee experience, simplified payroll, and tax organization, and lower HR overheads. These factors allow you to more easily grow on an international scale and employ the best people for the job regardless of their geographical location.

Trusted compliance partners

When managing payroll in the Philippines, you will need to understand the basics of payroll compliance as it differs from the country your company is based in. This is yet another example where an established PEO can help make your job much easier and tackle the challenges of doing business in the Philippines. 

And that’s a benefit that really can’t be undervalued.

Doing business in the Philippines: hiring laws and employee expectations

Currency

The national currency of the Philippines is the Philippine Peso, equal to 0.02￠U.S., and is shown as ₱ or PHP. When it comes to working with Philippine currency, hiring a payroll company is advised as they will provide optimal exchange rates.

Tax

Tax deductions and certain exemptions are some of the many reasons why more and more companies have been drawn towards expanding their employee base within the Philippines. There are some facts about tax you should know.

• Income Tax: Personal income tax in the Philippines ranges between 0 and 35% based on tax brackets. Once an income reaches ₱400, 000, the employee pays an additional lump sum.
• Non-residents: Employees who are not residents of the Philippines pay a flat-tax rate of 25% regardless of income, though there are some exceptions.
• Allowances: Certain allowances an employee receives as part of their compensation, such as meal and uniform allowances, may not need to be taxed.

Leave

When doing business in the Philippines, keep in mind that the rules and regulations surrounding leave are generally more favorable to the employee than in other countries. What you’ll need to know is:

• Paid Leave: Assuming an employee has paid contributions to Social Security for at least 3 months, they are entitled to 120 days of paid leave earning 90% of their usual pay.
• Maternity Leave: Female employees are entitled to 105 days of relevant maternity leave with full pay which can be extended for another 30 days without pay.
• Paternity Leave: Men legally married to the mother of their child are eligible for 7 days of paid leave to be taken within 60 days of a birth or miscarriage.
• Deductible Pay: An employee who arrives late to work or who leaves early can have their salary legally deducted by their employer equal to the time they missed.

With Skuad as a PEO provider, you no longer need multiple payroll partners across different countries. It gives payment and withdrawal flexibility to companies and takes care of remote workers. Skuad provides optimal exchange rates, stays up to date with regulations and provides you with a single dashboard where you can view and analyze global payroll data.

Minimum wage

The Philippines has a country-wide government-mandated minimum wage which is implemented per day rather than hourly, weekly, monthly, or yearly.

The minimum wage in the Philippines has been ₱537 per day since 2019. It is scheduled to increase to ₱547 per day in 2023.

Social security

The Philippines implements a Social Security System for any employees unable to work, temporarily or permanently. There is also a nationwide health insurance program called PhilHealth and a housing fund that provides home loans known as the Home Development Mutual Fund.

• Employers and employees are both required to contribute to the Social Security fund. The amount is capped at ₱19,750 and determined by the employee’s salary.
• 3% of an employee’s monthly salary is automatically collected and used to fund PhilHealth health insurance.
• ₱100 is taken from every employee’s salary each month to contribute to the Home Development Mutual Fund.

Unsocial hours

When work is conducted in the Philippines during unsocial hours — between 10 p.m. and 6 a.m. — the employee must be paid at least 10% more than their regular hourly rate.

Withholding Tax

Legislation in the Philippines dictates that employers must withhold tax from their employees’ salaries and pay it back to the authorities by the 10th of the following month with the exception of December’s task which must be paid by the 15th.

13th Month of Pay

In the Philippines, workers receive a ‘13th month of pay.’ Employees who have worked at a company for at least a month by 24th December are entitled to 1/12th of their regular yearly salary.

This payment works like a bonus, though amounts under ₱90, 000 are not liable to be taxed.

A PEO can not only inform you on how best to tackle these payroll parameters but will actively help you get started and keep you up to date on any relevant legislation changes. 

Book a demo with Skuad to see how we can help your business grow, providing company and business incorporation support in the Philippines.

How much does it cost to build a team in the Philippines?

Cost of company incorporation in the Philippines

Make no mistake: entity registration and hiring in the Philippines can be a laborious process. And even if the cost of starting a business (~$150) is lower than in other countries, there’s still an opportunity cost associated with all the time you’ll have to wait as your paperwork is processed. Plus there’s also those easy-to-overlook costs such as the cost of banking, having to rent or buy an office space for your local entity to be based in, and more.

So how does the cost of PEO services in the Philippines measure up?

Cost of PEO in the Philippines

Given how much a PEO can help a business to grow rapidly without the headache or price tag of registering a foreign office, most people may assume that it is costly. But be ready to be surprised! Because with Skuad as your PEO provider, you can start employing people in the Philippines for the super competitive offer of $19 per contractor per month and $199 per employee.

Depending on your chosen package, you can get localized employment agreements from legal and HR experts, secure IP and invention rights, and access to a dashboard. From there, you can manage international payroll statistics for workers in multiple countries in one easy-to-navigate place.

How to get started with a PEO service in the Philippines

Getting started with Skuad is easy. Instead of the long, drawn-out process, Skuad will get you set up and start hiring and paying employees in the Philippines today.

See how Skuad simplifies remote hiring by booking a demo now. International business expansion has never been so easy. The team is available 24/7 and provides PEO services for low costs in more than 160 countries. We’ll speak to you soon!