Philippines

Overview

The Philippines is the 3rd largest economy in the Association of South East Asian Nations (ASEAN) and the 13th largest in Asia. Emerging as a newly industrialized country, the country’s economy is moving from agriculture-based to services and manufacturing, at a brisk pace. Exports include transport equipment, electronic products, garments, copper goods, coconut oil, and fruits. Healthy macroeconomic environment aided by low debt to GDP ratio, low inflation, and a spike in exports has helped the economy expand. The government is actively pursuing several legislative reforms to improve the business environment and generate more jobs.

Currency: Philippine Peso

Principal language: Filipino

Government: Under a presidential representative and democratic and a constitutional republic

Capital City: Manila

Major Cities: Quezon, Caloocan, Davao, Cebu

Employment Contracts

No specific requirements for employment contracts are mentioned in the Labor Code. Workers can be hired for a trial period which cannot be more than 6 months unless they are a part of an apprenticeship program and a longer trial is required. Employers are required to inform workers of the minimum performance standards required for regular employment at the time of hiring. Workers can only be terminated if they fail to meet these standards.

Work/Time Regulations

The regular work schedule comprises 8 hours. Night shifts or any work between 10 p.m. and 6 a.m. is compensated by a minimum 10 percent of regular wages. Employers must give at least a day off in a week. Working more than 8 hours a day is considered overtime. Overtime pay is 25 percent of regular wages. Remuneration is 30 percent for working overtime on holiday.

Leave

Maternity Leave
Women employees are entitled to a minimum of 2 weeks’ of maternity leave before the expected date of delivery and 4 weeks after delivery or abortion provided the employees have worked for at least 6 months in last 12 months.

If an employee is rendered unfit for work due to illness caused by delivery, pregnancy, or miscarriage, and has no unused leave credits from which an extended leave can be given, the maternity leave is extended without pay.

Paternity Leave
Employers must provide 7 days of paid paternity leave to married male employees after the child’s birth or wife’s miscarriage regardless of their employment status. The leave is limited to the birth of an employee’s first 4 children.

Sick Leave
Though labor code has no provisions for sick leave, employers generally provide sick leave through collective bargaining agreements. Employees who do not have any sick leave, qualify for social security sickness benefit if they have contributed for at least 3 months in the last 1 year and have suffered an injury or illness that renders them unfit for work for at least 4 days. The sickness benefit is paid at the rate of 90 percent of regular wages for a maximum of 120 days in a year.

Parental Leave for Single Parents
Employees can take up to 7 days’ of parental leave in a year with full pay. They qualify for this leave if they:

  • complete at least 1 year of service
  • notify the employer about using this leave within an adequate period
  • present a Solo Parent Identification Card obtained from Department of Social Welfare and Development office

Leave for Victims of Violence against Women and Their Children
Employees who are victims as specified in the Republic Act No. 9262 are entitled to a leave of up to 10 days with full pay. The leave can be extended if the need arises as mentioned in the protection order issued by the court or barangay. The leave benefit also covers the days an employee has to attend medical and legal matters.

Special Leave Benefits for Women under the Republic Act No. 9710
Female employees are entitled to a special leave of 2 days with full pay based on total monthly wages, regardless of civil status or age, due to surgery as a result of gynecological disorders if they have completed a minimum of 6 months of continuous employment in the last 12 months. If an extended leave is required, employees can use their earned leave credits. This leave is non-cumulative and non-convertible to cash.

Benefits

The compulsory retirement age is 65. Employees aged 60 or more who have contributed for at least 120 months can retire with benefits. The minimum retirement pay is one half of month’s salary for each year of service.

Employees who have made 120 monthly contributions receive a monthly pension based on the number of contributions made, coverage period, and the number of dependent children. Those who have not made 120 monthly contributions get a lump sum based on the number of contributions made by themselves and their employer including interest.

Workers' Compensation
All employers and employees below the age of 60 are required to register with the State Insurance Fund (SIF) for insurance coverage. Employees who are over 60 and contribute toward life insurance benefits provided under the Social Security System are also required to register with the SIF compulsorily.

Temporary Total Disability
Employees who sustain a work-related illness or injury that results in temporary total disability, qualify for 90 percent of their average daily wages for a maximum of 120 days. The period can be extended to 240 days if the condition requires more care or treatment. In case the condition remains same beyond 240 days, it is considered a permanent total disability.

Permanent Total Disability
Permanently disabled employees are entitled to a monthly benefit equal to the old age pension benefit that is determined using the number of contributions made to the Social Security System and the years of membership. A supplemental allowance of 575 pesos each month and an extra 10 percent is granted for every dependent child up to 5.

Permanent Partial Disability
Employees who suffer a permanent partial disability due to work-related injury or illness receive the same benefits as those who suffer a permanent total disability, but with certain time limits. In case the time limit is less than a year for an employee’s injuries, the employee is given a lump-sum amount.

Death
In case a work-related injury or illness results in an employee’s death, the deceased’s primary beneficiaries qualify for the amount equivalent to monthly pension and an extra 10 percent for every dependent child until they become 5 years old. The person who pays for the funeral is paid a funeral benefit of 10,000 pesos.

Mandatory Employee Benefits
The Social Security System in the Philippines consists of:

  • Social Security System (SSS)
    The SSS protects against old age, sickness, disability, and death to private employees and their families. The Government Service Insurance System or GSIS is a similar system for government employees.
  • Home Development Mutual Fund (HDMF)
    The HDMF, a provident saving system, provides housing loans to Philippine government employees, self-employed individuals, and private employees who join the Fund.
  • Philippine Health Insurance Corporation (PhilHealth)
    PhilHealth, managed by the Philippine National Health Corporation, provides practical means to employees to pay for adequate medical care.

Coverage in the Philippines
Employees aged less than 60 who earn more than 1,000 pesos per month must contribute to the SSS. Government employees must contribute to the GSIS. Employees are required to make contributions to PhilHealth and the HDMF. Membership is optional only for self-employed individuals. Even foreign workers are required to contribute. Though opting out is allowed under limited circumstances, but in practice, the costs and efforts required to justify the exemption far overwhelm the savings in question.

How GPS can Help

With our Global PEO/Employer of Record services, companies can expand into Philippines and hire their employees without having to establish a branch office or subsidiary in Philippines.

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Spin Off/M&A Support

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24/7 Support in 100+ Countries

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Easy Visibility into Your Employee Time & Attendance and Benefits Data
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Ready for Growth When You Are
When ready, we can seamlessly transition you from the PEO/EOR model to your own legal entity and provide ongoing international HR, finance, legal, compliance and staffing support. Lean more about our end-to-end international expansion services.