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How to Hire in the Philippines

how to hire in the philippines Considering hiring in the Philippines? You’re not alone. The country ranks in the top 15 countries for its labor force of 40.5 million people, which is almost 40% of the total population. With a government focused on higher education, there are plenty of skilled, English-speaking workers ready to support your business needs.

The Philippines are most well known for their fast-growing economy, especially in sectors like manufacturing, agribusiness and services. This makes it a population location for companies looking to establish a presence in the Asian markets.

Employers considering how to hire in the Philippines from another country will need to understand the local labor laws. Companies have three main options for hiring workers abroad:

Hire directly through your own entity
Hire through a global PEO
Hire and pay independent contractors

Each method of hiring depends on the overall strategy and goals of your organization. We understand the complexity of international hiring process and will help you access the Filipino talent pool.

Hiring workers in the Philippines

Hiring foreign workers always starts with a business entity, which is why that option is the first on the list. But when hiring foreign workers, employers need to understand their overall business objectives and goals, timelines, and budget limitations. Having a better understanding of the Filipino market and their hiring requirements will establish a foundation for global expansion success.

1. Hire directly through your own entity

When establishing a legal entity, your business keeps full control over part- and full-time employees in the Philippines. The full registration process – including opening bank accounts, SEC registrations, and government applications – can take anywhere from 8 to 12 weeks. Depending on the type of structure and how many vendors you use to incorporate, this process can cost between $10,000-$25,000.

Although the cost and timelines deter many businesses from hiring in the Philippines, establishing a legal entity does provide greater stability and control for long-term success.

In addition to these operational challenges, hiring directly also means employers take responsibility for all compliance requirements. Employers hiring Filipino employees must be accountable to all local labor laws and private collective bargaining agreements (CBAs).

This is especially important in the Philippines because local labor laws favor employees over foreign businesses. That means you can’t simply dismiss underperforming employees at will, and severance and 13th-month pay are mandatory. These are just a few of the considerations when drafting employment contracts and preparing for the full scope of HR and payroll compliance. For those that don’t have the resources to support foreign employees, in-country partners can provide additional support.

Setting up your own legal entity is a more traditional option for hiring employees in the Philippines. If you have the time and resources to manage your own foreign subsidiary, it can offer a stable foundation for long-term growth.

2. Hire through a global PEO

A professional employer organization (PEO) is a simple way to hire foreign workers without managing all the compliance requirements yourself. Global PEOs, also called employer of record (EOR), manage all administrative tasks on behalf of their clients. They offer their existing network of subsidiaries to outside companies to hire employees without all the added complexity of local regulation.

Think of a global PEO as an extended branch of your HR team. They manage everything from hiring and onboarding to risk mitigation, benefit plans, streamlined payroll, and ongoing HR support. This allows companies to quickly hire and pay employees in the Philippines while still maintaining compliance with all labor laws. The speed and security offered by global PEOs have made them a popular alternative to incorporation.

Additionally, while the PEO handles the administrative side of HR, you still have complete control over the day-to-day responsibilities and goals of the employee. This allows businesses to test new markets with the flexibility to scale operations based on data-driven results.

Partnering with a global PEO to hire in the Philippines enables businesses to establish a remote workforce quickly. This is often a necessary first step before committing to a long-term expansion strategy like entity establishment.

3. Hire and pay independent contractors

For companies that need additional support on a project or just a temporary worker while searching for a full-time employee, hiring an independent contractor might be the right solution. Over 1.5 million Filipinos – about 2% of the workforce – work as freelancers, which is the highest per capita rate in the world. They also rank 6th in the Global Gig Economy Index and is one of the fastest growing markets for international contractors. Employers hire contractors for short-term or project-based jobs as a fast and flexible hiring solution.

Employers may enjoy the benefits of not paying taxes or benefits to these workers, but there is still risk of misclassification. Employers must have a firm grasp of the employment classifications in the Philippines before hiring a contractor. Failure to understand these requirements could result in mandatory benefits and tax back payments.

Hiring a contingent workforce in the Philippines is cost-effective as long as you avoid worker misclassification risks. Violating these employment laws will result in back pay, back taxes, civil lawsuits, and other legal penalties.

FAQs about how to hire in the Philippines

Hiring overseas can be a major challenge. If you’re planning to expand into France, here are some common questions to be aware of before you go. Understanding and complying with French employment law is necessary for success in the market.

What should be included in the employment contract?

As you consider hiring employees in the Philippines, it’s important to familiarize yourself with employment regulations to ensure compliant contracts. Here’s an overview of essential guidelines, along with how a professional employer organization (PEO) can support your HR needs.

Working Hours

Standard Workday: Eight hours, including short rest periods that count towards the total hours worked. Employees are entitled to at least a one-hour meal break.

Rest Days: Employees must have at least 24 consecutive hours of rest after six consecutive workdays. Employers can determine the rest day, but this is subject to collective bargaining agreements. Employees can request specific rest days for religious reasons.

Work on Rest Days: Employees may be required to work on their rest day during emergencies, urgent equipment repairs, heavy workload periods, potential loss of perishable goods, or when continuous operations are necessary.

Overtime: Work beyond eight hours a day is considered overtime.

Compensation

Minimum Wage: Set by each of the 17 administrative regions, with distinct rates for non-agricultural and agricultural work.

Overtime Pay: Regular wage plus 25% for overtime hours.

Night Shift Pay: Additional 10% of the regular wage for hours worked between 10 p.m. and 6 a.m. Overtime during night shifts includes the night shift premium.

Rest Day Work Pay: An extra 30% of the regular wage for working on a rest day, with higher rates if it falls on a holiday.

Holiday Pay: Employees covered under the Holiday Pay Rule receive their regular wages for holidays off, or 200% of regular wages if they work on a holiday. If the holiday falls on a rest day, they receive 230% of their regular pay. Special day work attracts 30% extra pay on weekdays and 50% extra on rest days.

Bonuses

13th-Month Bonus: Mandated by a 1976 presidential decree, this bonus must be paid by December 24 to all employees who have worked at least one month during the year.

Probationary Period

Trial Period: Can last up to six months, except for apprenticeships, which may be longer. Employers must clearly explain performance standards that must be met for full-time employment. Termination during this period can only occur for failure to meet standards or for just cause.

Termination and Severance

Just Cause and Due Process: Termination requires just cause, one month’s notice, and an explanation. Employees must have the opportunity to defend themselves. Disputes can be taken to the National Labor Relations Commission, which can order reinstatement with full back pay or compensation if hostile conditions prevent return.

Employee Resignation: Requires one month’s advance written notice. Failure to provide notice can result in liability for damages.

Severance Pay: Required for layoffs, business closures, or termination due to disease. Redundant employees receive one month’s pay per year of service. Employees terminated to prevent losses or due to business closure receive one month’s pay or half a month’s pay per year of service, whichever is higher. Employees terminated due to disease receive the same severance pay terms.

What are some benefit and leave requirements?

When negotiating employment terms with a candidate in the Philippines, it’s essential to consider statutory benefits and paid leave requirements. Here’s an overview of these benefits and how an employer of record (EOR) can support your company’s benefits strategy.

Maternity Leave

Paid Leave: Pregnant employees are entitled to 105 days of paid maternity leave and 30 days of unpaid leave. In the case of miscarriage or emergency termination, employees receive 60 days of paid leave (78 days for Cesarean delivery). Single mothers are granted an additional 15 days of paid maternity leave.

Maternity Pay: Equals 100% of the employee’s average daily salary. Employees who have made at least three monthly contributions to the Social Security system in the 12 months before childbirth will receive some or all of their maternity pay from Social Security. Employers must cover any difference between what Social Security provides and the employee’s salary.

Allocation of Leave: Up to seven days of leave can be allocated to the child’s father.

Limitations: Employees with four or more children are not eligible for additional maternity leave.

Vacation

Entitlement: Employees at businesses with 10 or more workers who have been employed for at least a year are entitled to five days of paid leave annually.

Vacation Pay: Equals the employee’s regular salary. Unused leave can be cashed in at the end of each year.

Holidays

Employees in the Philippines are entitled to the following paid holidays:

New Year’s Day
Maundy Thursday
Good Friday
Bravery Day
Labor Day
Independence Day
Christmas Day
Rizal Day

The government also announces several special holidays each year, which are unpaid and may include:

Chinese New Year
End of Ramadan
Festival of Sacrifice
Ninoy Aquino Day
National Heroes Day
All Saints Day
Bonifacio Day
Christmas Eve
Last Day of the Year

Holidays are categorized as regular holidays or special (non-working) days. If a holiday falls on a weekend, it is typically moved to the next regular workday.

Sick Leave

Legal Requirement: Paid sick leave is not mandatory but is commonly provided through collective bargaining agreements.

Social Security Benefits: Employees without sick leave or who have exhausted it are eligible for social security benefits if they have made at least three months of contributions in the prior 12 months and are unable to work for at least four days. The sickness benefit covers approximately 90% of the average salary for up to 120 days per year.

Health Coverage

Universal Health Coverage: All Filipino citizens are covered by PhilHealth (the Philippine Health Insurance Corporation), funded by government funds and employer/employee contributions. Premiums vary by age and income. PhilHealth does not cover all medical services, leading to some out-of-pocket expenses.

Private Health Insurance: Many employers provide additional private health insurance.

Additional Benefits

Pension: Funded by government tax revenues.

Workers’ Compensation: Covered through mandated employer insurance.

Employer social costs cover a significant portion of employee benefits in the Philippines. We can advise on supplemental coverage options, such as additional pension contributions or life insurance, to enhance your benefits package.

How to hire employees in the Philippines with Global PEO Services

The Filipino market is bursting with new talent and opportunities for growth. We have the experience and expertise to help you navigate complex international employment laws to expand your workforce. Global PEO Services, a Safeguard Global company, simplifies your expansion strategy and empowers you to focus on hitting your growth objectives.

We handle all the onboarding, payroll, HR, benefits administration, taxes and compliance. No matter what your hiring needs are, we can help you quickly and cost-effectively acquire the best workers in the Philippines. Speak with one of our global business advisors today to learn more.

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