How to Hire in Philippines
How to Hire Employees in Philippines: A Strategic Guide
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Table of Contents
Why Philippines Is a Strategic Market for Global Hiring
The Philippines ranks as one of Asia’s most attractive outsourcing destinations, offering English-proficient talent at competitive costs. With over 110 million people and a young workforce, the country provides strong capabilities in IT, customer service, finance, and creative industries. The government actively supports foreign investment through economic zones and incentives, while cultural affinity with Western business practices makes integration seamless for global companies.
Strength of the Local Talent Ecosystem in Philippines
The Philippines produces over 600,000 college graduates annually, with strong concentrations in technology, engineering, and business administration. The country is globally recognized for its Business Process Outsourcing (BPO) sector, ranking as the world’s leading voice services provider.
- High English proficiency: Third-largest English-speaking nation globally
- Technical skills: Growing pool of software developers, data analysts, and digital marketers
- Service orientation: Cultural emphasis on hospitality and customer service excellence
- Competitive compensation: Salaries typically 50-70% lower than Western markets
Business Environment and Regulatory Predictability
The Philippines maintains a stable democratic system with clear labor regulations governed by the Labor Code. The country offers various business-friendly initiatives including the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, which reduced corporate income tax rates.
- Legal framework: Civil law system with well-established employment regulations
- Foreign ownership: 100% foreign ownership permitted in most sectors
- Economic zones: Special Economic Zones offer tax holidays and incentives
- Ease of doing business: Streamlined processes through digitalization initiatives
What Should Employers Consider Before Hiring Employees in Philippines?
Understanding Philippine labor law is essential before hiring, as the country maintains strong employee protections. The Labor Code governs employment relationships, mandating specific benefits, working conditions, and termination procedures. Employers must distinguish between regular, probationary, project-based, and seasonal employees, each with different entitlements. Compliance with social security, health insurance, and housing fund contributions is mandatory, while failure to meet requirements can result in penalties and legal disputes.
Understanding Employment Classification and Worker Status in Philippines
Philippine law recognizes several employment classifications with distinct rights and obligations. Proper classification prevents misclassification penalties and ensures compliance with the Labor Code.
- Regular employees: Indefinite employment with full statutory benefits and security of tenure
- Probationary employees: Maximum 6-month trial period before regularization or termination
- Project employees: Engaged for specific projects with defined completion dates
- Seasonal employees: Hired for recurring work during specific seasons
- Casual employees: Work not related to usual business operations
- Independent contractors: Must demonstrate genuine independence to avoid reclassification
Working Hours, Leave Policies, and Statutory Benefits Requirements
The standard workweek in the Philippines is 48 hours (8 hours daily, 6 days weekly), with overtime paid at premium rates. Employees are entitled to comprehensive leave benefits and mandatory contributions to social protection programs.
| Benefit Type | Entitlement |
|---|---|
| Service Incentive Leave | 5 days paid leave annually after 1 year |
| Maternity Leave | 105 days paid (120 for solo parents) |
| Paternity Leave | 7 days paid for first 4 children |
| 13th Month Pay | Mandatory bonus equivalent to 1/12 annual salary |
| Overtime Pay | 125% of regular rate (130% on rest days/holidays) |
Termination Rules, Notice Periods, and Severance Obligations in Philippines
The Philippines provides strong employment protection, requiring just cause or authorized cause for termination. Regular employees enjoy security of tenure, making termination procedures complex and strictly regulated.
- Just causes: Serious misconduct, willful disobedience, gross neglect, fraud, or commission of crime
- Authorized causes: Redundancy, retrenchment, closure, disease (requires 30-day notice and separation pay)
- Notice period: 30 days written notice for authorized causes; immediate for just causes after due process
- Separation pay: One month salary per year of service for redundancy; half-month per year for retrenchment/closure
- Due process: Two-notice rule mandatory (notice to explain, notice of decision)
What Is the True Cost of Hiring an Employee in Philippines?
The total cost of employment in the Philippines extends beyond base salary to include mandatory contributions, benefits, and compliance expenses. Employers must budget for Social Security System (SSS), PhilHealth, and Pag-IBIG Fund contributions, plus the mandatory 13th-month pay. While salaries are competitive regionally, the comprehensive benefits package and strict compliance requirements add approximately 15-20% to gross compensation. Administrative costs for payroll processing, HR management, and legal compliance must also be factored into total hiring expenses.
Base Salary and Local Compensation Benchmarks
Philippine salaries vary significantly by region, industry, and role. Metro Manila commands the highest compensation, while regional centers offer 20-40% lower rates. Minimum wage differs across 17 regions, ranging from PHP 420-610 per day.
| Position Level | Monthly Salary Range (PHP) | Annual Range (USD) |
|---|---|---|
| Entry-level (BPO/Admin) | 18,000-25,000 | 3,900-5,400 |
| Mid-level Professional | 35,000-60,000 | 7,500-13,000 |
| Senior Specialist | 70,000-120,000 | 15,000-26,000 |
| Management Level | 100,000-250,000 | 21,500-54,000 |
Employer Payroll Taxes and Statutory Contributions in Philippines
Philippine employers must make mandatory contributions to three social security programs based on employee salaries. These contributions are shared between employer and employee, with specific percentage rates and salary caps.
| Contribution | Employer Rate | Employee Rate | Salary Cap |
|---|---|---|---|
| SSS (Social Security) | 8.5% | 4.5% | PHP 30,000/month |
| PhilHealth (Medical) | 2.5% | 2.5% | PHP 100,000/month |
| Pag-IBIG (Housing) | 2% | 2% | PHP 5,000/month |
| 13th Month Pay | 8.33% | 0% | No cap |
Compliance, Benefits, and Administrative Overheads
Beyond statutory contributions, employers face additional costs for compliance management, supplementary benefits, and operational overhead. Service Incentive Leave, overtime calculations, and night shift differentials add to compensation expenses.
- De minimis benefits: Transportation, rice subsidies, and other allowances (tax-exempt up to limits)
- Night shift differential: Additional 10% for work between 10 PM and 6 AM
- Holiday pay: Premium rates for 18 regular and special holidays
- Payroll processing: Software, accounting, and administrative personnel costs
- Compliance management: Legal consultation, audits, and documentation systems
- Employee benefits: HMO, life insurance, and other competitive benefits typically add 5-10%
What Compliance Steps Must Employers Follow to Hire in Philippines?
Hiring employees in the Philippines requires strict adherence to multiple registration and reporting requirements across various government agencies. Employers must register with the Department of Labor and Employment (DOLE), Securities and Exchange Commission (SEC), Bureau of Internal Revenue (BIR), and social security agencies. Written employment contracts, accurate payroll records, and timely contribution remittances are mandatory. Non-compliance can result in substantial penalties, back payments, and potential business closure. Understanding the specific requirements for each hiring model is essential for maintaining legal operations.
What Are the Requirements for Hiring Through a Local Entity?
Companies establishing a local presence must complete comprehensive registration procedures before hiring employees. This process involves multiple government agencies and can take 2-6 months depending on business structure and industry.
- Business registration: Register with SEC as corporation, branch, or representative office
- Tax registration: Obtain Tax Identification Number (TIN) from BIR and register books of accounts
- DOLE registration: Register establishment within 30 days of commencement
- SSS registration: Register as employer and obtain employer number
- PhilHealth registration: Enroll company and secure employer registration
- Pag-IBIG registration: Register as employer with Home Development Mutual Fund
- Barangay clearance: Obtain local government permits and business licenses
What Are the Requirements for Hiring Through an Employer of Record?
Using an Employer of Record (EOR) eliminates the need for entity establishment while ensuring full compliance. The EOR becomes the legal employer, handling all administrative and regulatory requirements on behalf of the client company.
- No entity required: Begin hiring within days without SEC registration or local incorporation
- Employment contracts: EOR issues compliant contracts under its legal entity
- Payroll processing: EOR manages salary calculations, deductions, and disbursements
- Statutory compliance: EOR handles all SSS, PhilHealth, and Pag-IBIG registrations and remittances
- Tax withholding: EOR files and remits income tax and maintains BIR compliance
- HR administration: Leave management, benefits administration, and employee documentation handled by EOR
How Do Different Hiring Models Compare in Philippines?
Companies can engage Philippine talent through three primary models: establishing a local entity, partnering with an Employer of Record, or engaging independent contractors. Each approach offers distinct advantages and limitations in terms of setup time, cost, control, and compliance risk. Local entities provide maximum control but require significant investment and ongoing administrative burden. EOR solutions offer rapid deployment with full compliance but with service fees. Contractor engagement provides flexibility but carries misclassification risks. The optimal choice depends on hiring volume, timeline, budget, and long-term market commitment.
Hiring Through a Local Subsidiary or Branch
Establishing a local entity provides complete operational control and is suitable for companies planning substantial, long-term investment in the Philippines. This model requires significant upfront investment and ongoing compliance management.
| Aspect | Details |
|---|---|
| Setup Time | 2-6 months for full registration and licensing |
| Initial Investment | $15,000-50,000 (registration, legal, office setup) |
| Ongoing Costs | Accounting, HR staff, legal compliance, office overhead |
| Control Level | Complete control over operations and employees |
| Best For | Large teams, permanent presence, strategic operations |
Engaging Contractors or Freelancers in Philippines
Independent contractors offer flexibility for project-based work, but Philippine law applies strict tests to distinguish genuine contractors from employees. Misclassification results in penalties, back payments, and regularization orders.
- True independence required: Contractor must control work methods, timing, and have multiple clients
- No employer-employee relationship: No fixed hours, supervision, or integration into regular operations
- Limited benefits: Not entitled to statutory benefits, leave, or 13th month pay
- Tax obligations: Contractors responsible for own income tax and social contributions
- Misclassification risk: DOLE can reclassify contractors as employees with retroactive obligations
- Best for: Specialized projects, consulting, temporary assignments with clear deliverables
Hiring Employees Through an Employer of Record (EOR)
An EOR enables compliant hiring without entity establishment, serving as the legal employer while the client manages day-to-day work. This model provides the fastest market entry with full compliance assurance.
| Aspect | Details |
|---|---|
| Setup Time | 3-7 days to onboard first employee |
| Initial Investment | No setup fees with most providers |
| Service Fee | Typically $200-600 per employee monthly |
| Compliance | EOR assumes all employment law obligations |
| Best For | Fast market entry, small teams, market testing |
A Step-by-Step Framework for Hiring Employees in Philippines
Successfully hiring in the Philippines requires systematic planning across four critical phases: selecting the appropriate hiring model, drafting compliant employment documentation, establishing payroll and tax systems, and implementing ongoing HR compliance processes. Each phase involves specific legal requirements and administrative tasks that must be executed properly to avoid penalties and operational disruptions. Companies should allocate 1-6 months for full setup when establishing a local entity, or 1-2 weeks when using an EOR. Following this framework ensures compliant, efficient onboarding while minimizing risks and administrative burden.
Choose the Right Hiring Model for Your Business
Evaluate your hiring objectives, timeline, and resources to determine the optimal approach. Consider team size, market commitment duration, budget constraints, and required control level before deciding between entity establishment, EOR partnership, or contractor engagement.
- Assess hiring volume: Single hires or small teams favor EOR; large operations may justify entity setup
- Evaluate timeline: Urgent hiring needs require EOR; entity establishment takes months
- Calculate total costs: Compare entity setup and maintenance versus EOR fees over 2-3 years
- Consider permanence: Market testing suits EOR; permanent operations warrant local entity
- Analyze control needs: Direct control requires entity; operational flexibility suits EOR
Draft Country-Compliant Employment Contracts
Philippine employment contracts must be in writing and include all mandatory provisions required by the Labor Code. Contracts should clearly specify employment type, probationary periods, compensation structure, benefits, and termination conditions.
- Employment classification: Clearly identify as regular, probationary, project, or seasonal
- Compensation details: Specify base salary, allowances, 13th month pay, and overtime calculation
- Working hours: Define schedule, rest days, and shift arrangements
- Benefits enumeration: List SSS, PhilHealth, Pag-IBIG, and company-provided benefits
- Leave entitlements: Detail Service Incentive Leave and other applicable leave policies
- Probationary terms: If applicable, specify 6-month period and regularization criteria
- Termination provisions: Outline grounds, notice requirements, and due process
Set Up Payroll and Tax Compliance Systems
Establishing accurate payroll systems is essential for statutory compliance and timely employee payments. Payroll must calculate correct withholding taxes, statutory contributions, and benefits while maintaining detailed records for labor inspections and audits.
- Register with tax authorities: Obtain BIR registration and authorization to withhold taxes
- Configure payroll software: Set up system to calculate SSS, PhilHealth, Pag-IBIG, and income tax
- Establish payment schedules: Determine pay frequency (typically bi-monthly) and disbursement methods
- Set up contribution remittance: Schedule monthly payments to SSS, PhilHealth, and Pag-IBIG
- Implement 13th month accrual: Set up system to accrue and pay by December 24
- Create recordkeeping system: Maintain payroll records, receipts, and compliance documentation
Manage Benefits, Leave, and Ongoing HR Compliance
Continuous compliance requires systematic benefits administration, leave tracking, and regulatory reporting. HR systems must accommodate changing regulations, handle employee requests, and maintain documentation for potential labor disputes or government inspections.
- Leave management: Track and approve Service Incentive Leave, sick leave, and special leaves
- Benefits administration: Coordinate with SSS, PhilHealth for claims; manage HMO and insurance
- Compliance calendar: Schedule contribution remittances, tax filings, and DOLE reportorial requirements
- Employee recordkeeping: Maintain 201 files, contracts, performance records, and disciplinary documentation
- Regular audits: Review payroll accuracy, contribution compliance, and contract renewals
- Policy updates: Monitor labor law changes and update policies accordingly
How Can an Employer of Record (EOR) Support Your Hiring in Philippines?
An Employer of Record provides comprehensive employment services, acting as the legal employer while enabling client companies to manage employee work assignments and performance. EOR providers handle all compliance burdens including registration, payroll processing, statutory contributions, tax filings, and benefits administration. This model allows rapid market entry without entity establishment, typically enabling hiring within one week. EORs maintain expertise in Philippine labor law, ensuring contracts, policies, and practices remain compliant as regulations evolve. For companies testing the Philippine market or hiring small distributed teams, EOR services eliminate administrative complexity while providing full legal protection.
Core Services Provided by EOR Providers in Philippines
Professional EOR providers deliver end-to-end employment administration, managing the complete employee lifecycle from onboarding through termination. These services ensure compliance while freeing client companies to focus on business operations and employee productivity.
- Legal employment: Serve as legal employer of record with full liability assumption
- Contract management: Draft, execute, and maintain Labor Code-compliant employment agreements
- Payroll processing: Calculate salaries, deductions, benefits, and ensure timely disbursement
- Statutory compliance: Register and remit SSS, PhilHealth, Pag-IBIG contributions and income tax
- Benefits administration: Manage 13th month pay, leave accruals, and statutory entitlements
- HR support: Advise on disciplinary actions, terminations, and employee relations matters
- Ongoing compliance: Monitor regulatory changes and adapt policies accordingly
Common Limitations of Generic EOR Platforms
While EOR services provide valuable benefits, generic platforms often lack the localization and support necessary for complex situations. Understanding these limitations helps companies select providers with appropriate capabilities for their needs.
- Limited local expertise: Generic platforms may lack deep Philippine labor law knowledge and practical experience
- Slow response times: Large global platforms often have centralized support unfamiliar with local nuances
- Template-based contracts: Standardized agreements may not address industry-specific or role-specific requirements
- Minimal HR consultation: Basic platforms provide administrative services without strategic HR guidance
- Hidden costs: Additional fees for benefits, amendments, or termination processing may inflate total costs
- Technology limitations: Poor integration with client systems creates duplicate data entry and reconciliation issues
Why Asanify Is the Best Employer of Record Partner in Philippines
Asanify ranks as the number one EOR provider globally on G2, delivering specialized expertise in Philippine employment law and operations. Unlike generic platforms, Asanify provides dedicated local HR specialists who understand regional nuances, industry practices, and cultural considerations. Our technology platform integrates seamlessly with client systems while offering transparent pricing with no hidden fees. Asanify’s Philippines team maintains direct relationships with SSS, PhilHealth, Pag-IBIG, and DOLE, ensuring rapid issue resolution and compliance certainty. With average onboarding completed in 3-5 days, Asanify enables faster market entry than any competitor. Our clients benefit from dedicated account management, 24/7 support, and strategic HR consultation that goes beyond basic administrative services, making Asanify the ideal partner for companies serious about Philippine market success.
Frequently Asked Questions About Hiring in Philippines
How can companies hire employees in Philippines without setting up a local entity?
Companies can hire employees in the Philippines through an Employer of Record (EOR) service without establishing a local entity. The EOR acts as the legal employer, handling all compliance requirements including registration with government agencies, payroll processing, statutory contributions, and tax filings, while the client company manages the employee’s daily work and responsibilities.
What is an Employer of Record in Philippines and how does it work?
An Employer of Record in the Philippines is a licensed entity that becomes the legal employer for your workers, assuming all employment law obligations and liabilities. The EOR issues employment contracts, processes payroll, remits statutory contributions, and maintains compliance with Philippine labor law, while you retain control over the employee’s work assignments, performance management, and day-to-day responsibilities.
Is using an EOR in Philippines legal and compliant?
Yes, using an EOR in the Philippines is completely legal and compliant when the EOR is properly registered with DOLE, SEC, BIR, and social security agencies. The EOR model is recognized under Philippine law as a legitimate employment arrangement provided the EOR maintains proper licensing, issues compliant contracts, and fulfills all employer obligations under the Labor Code.
What are the employer payroll taxes in Philippines?
Philippine employers contribute approximately 13% of gross salary for mandatory benefits: 8.5% for SSS (capped at PHP 30,000 monthly salary), 2.5% for PhilHealth (capped at PHP 100,000), and 2% for Pag-IBIG (capped at PHP 5,000). Employers must also pay the mandatory 13th month bonus equivalent to 8.33% of annual salary, bringing total statutory employer costs to approximately 21% of gross salary.
How much does it cost to hire an employee in Philippines?
The total cost to hire an employee in the Philippines includes base salary plus approximately 20-30% in additional expenses. This includes 13% statutory contributions (SSS, PhilHealth, Pag-IBIG), 8.33% for 13th month pay, plus additional costs for benefits like HMO, leave entitlements, and administrative overhead, making the total employment cost 120-130% of base salary.
What employee benefits are mandatory under labour laws in Philippines?
Mandatory benefits in the Philippines include SSS, PhilHealth, and Pag-IBIG contributions; 13th month pay; Service Incentive Leave (5 days annually); maternity leave (105-120 days paid); paternity leave (7 days); overtime pay at premium rates; holiday pay for regular and special holidays; and night shift differential (10% additional for work between 10 PM-6 AM).
Can startups use Employer of Record services in Philippines?
Yes, startups benefit significantly from EOR services in the Philippines, enabling them to hire talent quickly without the time and expense of entity establishment. EOR solutions are ideal for startups testing the Philippine market, hiring small teams, or needing rapid scaling without administrative burden, with onboarding typically completed within 3-7 days.
What are the risks of hiring contractors in Philippines?
The primary risk is misclassification, as Philippine law applies strict tests to distinguish contractors from employees. If DOLE determines an employment relationship exists, companies face regularization orders, back payment of benefits and contributions, penalties, and potential lawsuits for unpaid entitlements including 13th month pay, leave, and overtime compensation.
Hire Employees in Philippines the Smart and Compliant Way
Asanify enables you to hire, onboard, and manage employees in the Philippines without setting up a local entity—ensuring full compliance with Philippine labor and tax laws.