Introduction to Remote Hiring in the Philippines
The Philippines has emerged as a top global destination for remote hiring due to its English-speaking workforce, thriving BPO sector, and competitive labor costs. However, foreign companies often face challenges in navigating local labor laws and compliance requirements.
Two strategic options exist for businesses looking to hire remotely:
- Establishing a legal entity in the Philippines.
- Engaging with an Employer of Record (EOR) to streamline hiring and compliance.
This guide will help you understand the pros, cons, and use cases of both approaches.
EOR vs. Setting Up an Entity in the Philippines
Factors to Consider When Choosing EOR or Entity Establishment
- Speed: EOR offers faster employee onboarding.
- Cost: Entity setup involves significant upfront and ongoing costs.
- Compliance: Entities must handle labor law compliance independently.
- Flexibility: EOR is better suited for short-term or pilot projects.
Why Time to Market Matters for Global Companies
In fast-moving industries, speed is everything. Delays in hiring can cost opportunities. An EOR allows you to start operations in days, while entity setup may take months. For global companies looking to enter the Philippine market quickly, time to market can make a significant difference.
Cost Implications of Entity vs. EOR in the Philippines
Setup and Maintenance Costs
- Entity Setup: Includes incorporation fees, legal consulting, office lease, and bank deposit requirements.
- EOR Setup: Minimal to no upfront cost. Monthly service fees based on employee salary.
Compliance Costs
With a legal entity, companies must manage:
- SSS, PhilHealth, and Pag-IBIG filings
- DOLE labor reports
- Annual returns and audits
EORs handle all these, reducing internal workload and error risk.
Time Savings
Entity registration can take 2–3 months. In contrast, EORs can onboard employees in under 2 weeks, helping you kick off projects faster with zero local red tape.
Compliance and Legal Exposure: Entity vs. EOR
Labor compliance in the Philippines is governed by a range of laws and agencies including the Labor Code, DOLE, and local tax offices. Non-compliance may result in penalties or employment disputes.
An EOR serves as the legal employer, assuming responsibility for:
- Payroll and benefits
- Tax filings and reporting
- Employment contracts
This reduces legal exposure for foreign companies.
Foreign Compliance: Setting Up a Legal Entity vs. Using EOR in the Philippines
Setting Up a Legal Entity
To operate legally, a foreign business must:
- Register with the SEC
- Get a Mayor’s Permit and BIR registration
- Hire local directors (in some cases)
- Open a local bank account
This process is resource-intensive and slow.
Using an Employer of Record (EOR)
An EOR provides:
- Local employment contracts
- Statutory benefit management
- Payroll processing and tax reporting
You retain operational control while the EOR takes on employer obligations—perfect for market testing and early-stage hiring.
Switching from EOR to Entity Establishment in the Philippines
As your team grows or business operations scale, it might make sense to transition from EOR to a legal entity.
Key steps include:
- Planning timelines around contract migration
- Coordinating compliance handover
- Transferring payroll and benefit structures
EOR providers like Asanify support seamless transitions with minimal business disruption.
Choose Asanify for EOR in the Philippines
Asanify is a trusted EOR provider with deep local expertise and an AI-powered HR platform. Benefits of choosing Asanify include:
- Quick onboarding of local employees
- Compliance with DOLE, SSS, Pag-IBIG, and PhilHealth
- Transparent pricing and zero hidden fees
- Access to local payroll experts and legal advisors
- Seamless transition support if you decide to set up an entity later
FAQs
1. What is an Employer of Record (EOR) in the Philippines?
An EOR is a third-party company that legally hires employees on your behalf, managing all employment responsibilities.
2. How does an EOR help with labor law compliance in the Philippines?
The EOR ensures full adherence to DOLE regulations, social contributions, taxes, and local employment contracts.
3. What are the costs involved in using an EOR in the Philippines?
EORs charge a monthly service fee, typically 10–15% of the employee’s salary, covering payroll, benefits, and compliance.
4. What benefits do employees get under an EOR arrangement in the Philippines?
Employees receive mandatory benefits like SSS, PhilHealth, Pag-IBIG, paid leave, and additional perks like private insurance in some cases.
5. How does payroll management work with an EOR in the Philippines?
EORs process monthly payroll, remit taxes, and generate payslips—all in compliance with local regulations.
6. Can EOR handle independent contractors in the Philippines?
Yes, EORs often manage contractor invoicing, payments, and tax compliance for freelance workers.
7. What are the key differences between EOR and setting up an entity in the Philippines?
EOR is faster and simpler but less flexible for long-term growth. Entities provide more control but require more effort and capital.
8. Is it mandatory to have written employment contracts in the Philippines?
Yes, all employment must be documented with compliant contracts that outline compensation, working hours, and benefits.
9. What are the tax obligations for foreign companies hiring in the Philippines?
Tax obligations include withholding income tax, employer contributions to SSS, PhilHealth, and Pag-IBIG, which the EOR handles.
10. What are the maternity leave rules in the Philippines under EOR?
Maternity leave is 105 days with full pay, as mandated by the SSS. EOR ensures proper processing and compliance.
11. How does health insurance work under EOR in the Philippines?
PhilHealth covers basic healthcare. Some EORs also offer private health plans for enhanced coverage.
12. What is the Social Security System (SSS), and who is eligible?
SSS is mandatory for all employees in the Philippines. Contributions are shared by employer and employee.
13. What is the difference between employees and contractors in the Philippines?
Employees are entitled to full benefits and legal protections. Contractors are independent and don’t receive statutory benefits.
14. How does an EOR ensure timely salary payments in the Philippines?
EORs use automated payroll systems with built-in compliance checks and payment reminders to ensure timely disbursement.
15. What are the professional tax rules in different Philippine cities?
Professional tax rates vary by city and apply to licensed professionals. Local government units set and collect this tax.
16. Can EOR handle multi-city compliance in the Philippines?
Yes, EORs manage compliance across different cities and provinces, including variations in local taxes and employment permits.
17. Why is an independent contractor agreement important in the Philippines?
It defines clear terms of work, protects both parties legally, and ensures the contractor is not misclassified as an employee.
18. What is a Professional Employer Organization (PEO) in the Philippines?
A PEO co-employs workers and shares HR duties. It’s similar to an EOR but may differ in legal structure and risk exposure.
19. What are the key labor laws foreign employers need to know in the Philippines?
Key laws include the Labor Code of the Philippines, rules on minimum wage, leave, probation, and termination procedures.
20. How does an EOR simplify payroll and compliance for foreign companies?
EOR handles everything from employment contracts and payroll to tax remittance and compliance documentation, reducing the need for internal HR/legal capacity.
Not to be considered as tax, legal, financial or HR advice. Regulations change over time so please consult a lawyer, accountant or Labour Law expert for specific guidance.