If you are planning to branch out your business overseas, managing local regulations in countries like the Philippines where you wish to employ talent may be quite a daunting task. Familiarity with the tax environment and compliance standards in this Southeast Asian nation is critical for staying on the right side of the law. For stress-free global expansion and seamless workforce integration, outsourcing to a specialized third-party provider is a smart strategic move. Engaging with an Employer of Record (EOR) service provider can bring transformative value to your business. This approach helps streamline operations, ensure full compliance, and allocate your internal resources to core business functions. Continue reading this blog to discover everything about Employer of Record Services in the Philippines and how an EOR partner can help you save significantly on employment costs as you scale your global operations.
- Overview about Philippines
- What is an Employer of Record in Philippines
- Employer of Record vs Legal Entity
- What are the Use Cases for Availing of Services Under Employer of Record Philippines?
- Laws and Compliance Best Practices to Hire Employees in Philippines
- Best EOR Companies in Philippines
- What are EOR Services in Philippines
- How to Hire Employees Through an EOR Philippines Partner
- Taxes in Philippines
- Salary Cost Calculator for Hiring Employees in Philippines
- Key Considerations While Hiring Employees through EOR in Philippines
- Termination Policies
- Employee Benefits in Philippines
- Terminations in Philippines
- How to Choose the Right EOR Philippines Services?
- Benefits of Working With an Employer of Record Service Provider in Philippines
- Visa Types in Philippines
- Risks or Drawbacks of EOR Philippines
- How Does Employer of Record Philippines (EOR) Services Differ From Usual HR Software?
- How Much Does it Cost to Avail Services Under EOR Philippines?
- Conclusion: EOR Philippines
- FAQs
Overview about Philippines
The Philippines, with its strategic location in Southeast Asia and a highly proficient English-speaking workforce, has emerged as a preferred destination for global business expansion. The country is well-known for its thriving business process outsourcing (BPO) sector, strong service economy, and government incentives promoting foreign investment. However, the legal framework involving labor codes, mandatory contributions, and tax structures can be intricate. This makes Employer of Record (EOR) services an efficient and reliable choice for companies aiming to hire quickly and compliantly in the Philippines.
What is an Employer of Record in Philippines
An Employer of Record in Philippines is a third-party organization that serves as the official employer for a company’s workforce in the country. The EOR assumes responsibility for employment contracts, statutory benefits, payroll processing, tax reporting, and full legal compliance with local employment laws. This model allows international businesses to access top Filipino talent without the need to incorporate a local entity or navigate regulatory complexities directly.
Employer of Record vs Legal Entity
| Criteria | Legal Entity | Employer of Record (EOR) |
| Definition | A legal entity is a business or organization officially registered in the Philippines, authorized to operate and employ staff locally. | An Employer of Record (EOR) is a service provider that legally employs staff on behalf of another company. The EOR manages all HR, legal, and payroll responsibilities. |
| Ownership | Owned and governed by the parent company or its appointed representatives. | The EOR is the legal employer, while the client retains control over employee tasks and deliverables. |
| Employment Contracts | The local entity drafts and signs employment agreements directly with employees. | The EOR signs contracts in compliance with Philippine labor laws, offering localized protection and legal validity. |
| Compliance Responsibility | The legal entity bears full responsibility for adhering to labor codes, SSS, PhilHealth, PAG-IBIG, and other legal mandates. | The EOR ensures full compliance with local employment regulations, including tax and statutory contributions. |
| Payroll & Benefits Management | The entity handles salary disbursement, government contributions, and employee benefits internally. | The EOR processes payroll, manages deductions, and ensures timely payment of statutory contributions. |
| Tax Liabilities | The legal entity assumes all responsibilities for employee-related taxes and reporting to the Bureau of Internal Revenue (BIR). | The EOR takes on all employee-related tax obligations, filings, and compliance checks with BIR and other agencies. |
| Time to Set Up | Setting up a corporation or branch in the Philippines can take several weeks to months due to government approvals. | The EOR provides a fast-track setup, allowing hiring and operations to begin in just a few days. |
| Employee Onboarding | Managed internally through local HR and legal teams, often requiring manual setup and approvals. | The EOR handles onboarding end-to-end, including documentation, compliance verification, and system integration. |
| Employment Law Expertise | The entity must rely on in-house counsel or external legal firms to navigate labor laws and updates. | The EOR brings built-in legal expertise and local HR knowledge, minimizing compliance risk. |
| Risk & Liability | The company is directly exposed to labor disputes, compliance errors, and penalties. | The EOR absorbs the legal and financial risk of employee management, shielding the client company. |
| Control Over Workforce | Full operational and administrative control over employees and HR processes. | The client retains functional control, while the EOR manages regulatory and employment formalities. |
| Flexibility | Expansion or downsizing may require complex regulatory filings and notice periods. | EORs offer agility, enabling quick scaling or adjustment of workforce size with minimal overhead. |
| Cost & Investment | High startup and administrative costs, including capital investment, legal services, and HR setup. | Lower operational costs, no need for local incorporation, and no HR infrastructure expenses. |
| Global Expansion | Requires a separate legal setup in each target country, which can be resource-intensive. | The EOR facilitates global hiring by managing local compliance without establishing entities. |
Suggested Read: EOR- A Detailed Guide on Employer of Record 2024
Choose Between an EOR Philippines Partner and a Legal Entity
Legal Entity in the Philippines
Establishing a legal entity in the Philippines requires registering with the Securities and Exchange Commission (SEC), obtaining business permits from local government units (LGUs), and enrolling with government agencies like SSS, PhilHealth, PAG-IBIG, and the BIR. Although this approach gives businesses direct control over operations and workforce management, it also demands considerable investment in local infrastructure, HR systems, and in-depth knowledge of Philippine labor regulations.
Conversely, engaging with an EOR Philippines provider offers a faster, low-risk route to enter the Filipino market. Companies can rely on EOR services in the Philippines to simplify employee onboarding, manage payroll and government contributions, and ensure full compliance with local employment laws—without the burden of setting up a local entity.
What are the Use Cases for Availing of Services Under Employer of Record Philippines?
1. Business Expansion Without a Legal Entity
For foreign businesses, entering the Philippine market presents regulatory and logistical challenges, including local registration, tax filings, and labor code compliance. An Employer of Record (EOR) enables companies to operate in the Philippines without establishing a legal entity. The EOR acts as the local employer, overseeing payroll, taxes, and statutory contributions, allowing businesses to focus on strategy and growth.
This is especially beneficial for:
- Startups testing Southeast Asian markets.
- Enterprises managing short-term projects in the Philippines.
- Companies looking for low-risk, cost-efficient entry into the country.
2. Offering Full-time Employment to Contractors or Freelancers
Businesses often begin working with Filipino professionals on a freelance or contractor basis. However, converting these relationships into full-time employment can be administratively taxing and legally sensitive. An EOR streamlines this process by offering compliant employment contracts, benefits under Philippine law, and regulatory alignment, ensuring smooth transitions for both employer and employee.
3. Recruiting Talent Globally
The Philippines is home to a highly educated, English-proficient workforce, especially in sectors like BPO, IT, finance, and design. For international companies, an EOR is an essential partner that enables remote hiring without the burden of setting up local operations. The EOR ensures compliance with local employment laws and facilitates seamless onboarding of top talent.
Laws and Compliance Best Practices to Hire Employees in Philippines
The Philippines enforces strict labor laws that safeguard employee rights and ensure fair labor practices. Failing to comply can result in fines, lawsuits, or reputational harm. Below are some critical regulations and best practices:
- Understanding Philippine Labor Code: Be familiar with the Labor Code of the Philippines, which outlines working hours, minimum wages, leave policies, and termination rules.
- Taxation in the Philippines: Employers must withhold income taxes and contribute to BIR (Bureau of Internal Revenue) as well as to SSS (Social Security System), PhilHealth, and PAG-IBIG Fund.
- Employee Benefits in the Philippines: Employees are entitled to mandatory benefits like 13th-month pay, healthcare, paid leaves, and government-mandated contributions.
- Contract Structuring: Employment contracts must adhere to local norms and be written in a clear, legally compliant format.
Best practices include keeping up with legislative updates, maintaining accurate records, and partnering with a local EOR provider who ensures 100% compliance.
Best EOR Companies in Philippines
Selecting the right EOR partner is essential for smooth business operations and legal peace of mind. The best EOR providers in the Philippines offer end-to-end services, from onboarding and payroll to tax compliance and employee relations. Discover the Top EOR Companies in the Philippines to find a trusted partner who aligns with your business needs and expansion goals.
What are EOR Services in Philippines
Payroll Management
Payroll management is a core offering of EOR services in the Philippines. Employers must adhere to local payroll regulations that involve handling salaries, 13th-month pay, night differential, holiday pay, and mandatory deductions. EOR providers manage accurate salary computations, deductions for SSS, PhilHealth, PAG-IBIG, and BIR withholding taxes, and ensure timely government remittances. This not only ensures compliance but also eliminates the risk of payroll-related penalties.
Employee Onboarding
Employee onboarding through a Philippine EOR includes issuing locally compliant contracts, collecting pre-employment documents, and registering employees with mandatory government agencies. The EOR ensures that all labor code requirements are met, providing a smooth and efficient onboarding experience for both employer and employee—especially important for foreign businesses unfamiliar with Philippine employment norms.
HR Administration
EOR providers in the Philippines offer comprehensive HR administration support, including timekeeping, leave tracking, and employee data management. They also handle day-to-day employee inquiries and documentation. Many EORs provide access to cloud-based HR platforms where employees can monitor their leave balances, view payslips, and update personal details, enhancing transparency and user engagement.
Equipment Procurement and Management
For companies hiring remote or hybrid Filipino talent, equipment procurement and management is a valuable EOR service. EOR providers can assist in sourcing laptops, phones, and other tools, ensuring timely delivery and tracking of assets. This enables employees to be productive from day one, no matter where they are located within the Philippines.
Compliance and Legal Support
Compliance and legal support is a vital function of EOR services, particularly in a country like the Philippines with a strict labor code. EORs help companies comply with requirements such as the Labor Code of the Philippines, DOLE regulations, and local ordinances. They manage mandatory reporting and labor standards, reducing legal risks for international businesses operating locally.
Taxation and Statutory Compliance
EORs play a key role in ensuring full compliance with taxation and government-mandated contributions. They calculate and remit income tax, and submit contributions to SSS, PhilHealth, and PAG-IBIG. EORs ensure all filings and deadlines with the Bureau of Internal Revenue (BIR) are met, removing the burden from employers and minimizing risks of penalties or audit issues.
Employee Insurance and Benefits Administration
Administering statutory and supplemental benefits is a major responsibility of EORs in the Philippines. They manage legally required benefits like SSS sickness and maternity claims, as well as non-mandatory perks such as group life insurance and private HMO plans. This enhances employee satisfaction and ensures competitive benefits packages that comply with local norms.
Risk Management and Insurance
Risk management services offered by EORs help businesses protect themselves from employment-related liabilities. This includes addressing wrongful dismissal, disciplinary procedures, occupational safety, and other compliance risks. EORs serve as the legal employer, absorbing risks and reducing exposure for the client company in disputes or audits.
Self-Serve Employee Portal
A self-serve employee portal is often included in the EOR service suite. It provides employees with access to their salary details, tax certificates, government contribution summaries, and leave balances. This promotes autonomy, reduces manual HR workload, and supports transparent employee communication, all within a secure digital environment.
Employee Tax Optimization
Tax optimization services help Filipino employees structure their compensation to legally reduce taxable income. EOR providers guide employees in availing allowable deductions and exemptions under Philippine tax laws, such as those for dependents, health insurance premiums, or government-mandated benefits—enhancing take-home pay and morale.
Employee Retirement
EORs in the Philippines manage retirement benefit compliance, including SSS pension schemes and employer obligations related to retirement pay under Philippine labor law. They ensure accurate tracking of service tenure, proper calculation of benefits, and timely reporting to government bodies, ensuring both employer and employee obligations are met.
Offboarding & Recovery
Offboarding and recovery services handled by EORs ensure legally compliant exits. This includes clearance processing, release of final pay including pro-rated 13th-month pay, tax clearance, and return of company assets. The EOR ensures smooth transitions while safeguarding company interests and maintaining labor code compliance during separation.
How to Hire Employees Through an EOR Philippines Partner
Hiring employees through an EOR Philippines Partner provides businesses with a simplified and legally compliant path to build a local workforce without establishing a corporation. By leveraging an EOR provider, companies avoid navigating the complexities of Philippine employment laws, tax requirements, and HR administration.
EOR Philippines Partner
An EOR Philippines Partner is a third-party provider that becomes the legal employer of your staff in the country. This partner manages all employment responsibilities, such as labor law compliance, payroll, tax remittance, government contributions, and benefits administration. With an EOR, your company can stay focused on core functions like talent acquisition and operations while ensuring that your Filipino employees are employed in accordance with national labor regulations. The EOR also helps mitigate risks related to legal disputes, employee claims, and regulatory non-compliance in the Philippines.
Select the Best EOR Service Provider in Philippines for Your Business
Choosing the right EOR service provider is critical for seamless operations in the Philippines. The best partners possess thorough knowledge of Philippine labor law, strong on-the-ground experience, and a history of delivering holistic HR services. When assessing EOR providers, consider their expertise in managing payroll, DOLE compliance, SSS/PhilHealth/PAG-IBIG contributions, and local hiring practices. A reliable EOR should also offer scalable and customized service packages to match your business objectives and operational budget.
Hire & Onboard Your New Employees
After selecting your EOR Philippines partner, you can begin the hiring process. Your EOR will assist in sourcing talent, conducting interviews, and preparing compliant job offers. The EOR manages all onboarding tasks, such as executing legal contracts, registering employees with government agencies, and ensuring each new hire understands their responsibilities and entitlements. This process ensures a smooth entry into the organization and maintains legal compliance throughout.
Remote EOR Employee Onboarding Checklist for Philippines
| Onboarding Step | Responsibility | Details |
| Before Offer Letter | ||
| Collect Employee Details | Company | Gather basic info like full name, address, tax ID (TIN), SSS/PAG-IBIG numbers, employment history, etc. |
| After Offer Letter | ||
| Draft Employment Contract | EOR | Create a localized employment agreement compliant with Philippine labor laws. |
| Background Verification | EOR | Conduct necessary background checks with employee consent. |
| Welcome Email | Company & EOR | Company welcomes employee; EOR manages formal onboarding documentation. |
| On Joining Day | ||
| Employment Documentation | EOR | Collect signed contracts, NDAs, TIN forms, and required personal identification. |
| Payroll Setup | EOR | Register the employee with BIR, SSS, PhilHealth, and PAG-IBIG. |
| Policy Briefing | Company | Introduce company culture, attendance rules, and HR policies. |
| Account Setup | EOR | Help set up a local bank account for payroll deposits. |
| Introduction to Systems | EOR | Guide employee through HR portals and payroll platforms. |
| IT Setup | Company/EOR | Issue devices and provide access to business communication tools. |
| Mentor Assignment | Company | Assign an onboarding buddy or mentor for smoother transition. |
| Post-Onboarding | ||
| Payroll Explanation (First Paycheck) | EOR | Break down pay components: basic pay, deductions, and benefits. |
| Ongoing Support | Company | Provide periodic feedback and conduct check-ins. |
| HR Operations | EOR | Handle salary processing, government reporting, and employee support. |
Processing Payroll
Processing payroll in the Philippines involves compliance with local employment and tax legislation. An EOR takes full ownership of payroll processing to ensure salaries are accurate, timely, and compliant.
Key components of payroll management in the Philippines include:
- Salary and Wages: Basic salary, cost-of-living allowance (COLA), overtime, and holiday premiums.
- Statutory Deductions: Contributions to SSS, PhilHealth, PAG-IBIG, and mandatory withholding tax.
- 13th-Month Pay: Required under Philippine law; computed based on total basic salary for the year.
- Other Benefits: Optional additions like health insurance or bonuses, depending on company policy.
The payroll process typically involves three stages:
- Payroll Calculation: EOR computes gross pay, applicable allowances, and deducts statutory contributions and taxes.
- Tax Compliance: The EOR handles BIR filing for tax withholdings and ensures monthly/quarterly remittances to government agencies.
- Salary Disbursement: After all calculations and filings, the final net salary is disbursed to employees via their registered bank accounts.
The EOR guarantees full compliance and transparency throughout the payroll cycle, helping businesses avoid legal complications while supporting employee satisfaction.
Suggested Read: Offer Letters for Remote EOR Employees in the Philippines
Taxes in Philippines
Taxes are a vital part of the Philippine financial system, and employees working in the country are subject to multiple tax obligations. The primary taxes applicable include income tax, withholding tax, and value-added tax (VAT) for some professionals. Familiarity with these tax types and their rates is essential for both employees and employers to remain compliant and avoid financial penalties.
New Income Tax Table (TRAIN Law)
| Income Slab | Tax Rate |
| Up to ₱250,000 | Exempt |
| ₱250,001 to ₱400,000 | 20% of the excess over ₱250,000 |
| ₱400,001 to ₱800,000 | ₱30,000 + 25% of the excess over ₱400,000 |
| ₱800,001 to ₱2,000,000 | ₱130,000 + 30% of the excess over ₱800,000 |
| ₱2,000,001 to ₱8,000,000 | ₱490,000 + 32% of the excess over ₱2,000,000 |
| Over ₱8,000,000 | ₱2,410,000 + 35% of the excess over ₱8,000,000 |
Tax Due Dates in Philippines
In the Philippines, compliance with tax deadlines is strictly enforced by the Bureau of Internal Revenue (BIR). Employees’ withholding taxes must be remitted monthly, usually by the 10th of the following month. Quarterly tax returns must also be filed, with the Annual Income Tax Return due on or before April 15 of the following year. Missing these deadlines may lead to surcharges, interest, and penalties.
Tax Thresholds in Philippines
The Philippines follows a progressive income tax system under the TRAIN Law, with tax-exempt income up to ₱250,000 annually. Tax rates increase incrementally based on income level, with the highest rate capped at 35% for annual income exceeding ₱8 million. Businesses must also consider corporate income tax rates, which range from 20% to 25% depending on gross revenue. Understanding these thresholds is crucial for accurate tax planning and budgeting.
Withholding Tax (WHT)
Withholding Tax in the Philippines is the equivalent of TDS and is deducted directly by the employer from an employee’s salary. It is remitted to the BIR on the employee’s behalf. Employers must calculate the appropriate withholding tax based on updated BIR tax tables and ensure correct submission of remittances and returns. Non-compliance may result in penalties and disallowance of expenses for the business.
Professional Tax Receipt (PTR)
The Professional Tax Receipt is a local tax imposed by city or municipal governments on professionals like doctors, lawyers, and engineers. While not mandatory for private-sector employees, it is required for licensed professionals practicing in their field. The annual PTR fee typically ranges from ₱300 to ₱500, depending on the local government unit (LGU). Employers should verify local rules for staff engaged in licensed professional services.
Deductions and Exemptions
Employees in the Philippines can enjoy several deductions and exemptions to reduce their taxable income:
- Personal Exemption: ₱50,000 per individual (no longer applicable under TRAIN but reflected in older filings).
- Mandatory Contributions: Contributions to SSS, PhilHealth, and PAG-IBIG are tax-exempt.
- De Minimis Benefits: Certain allowances and bonuses are non-taxable up to BIR limits.
- 13th-Month Pay and Bonuses: Exempt from tax up to ₱90,000 annually.
Employers can guide employees in declaring these deductions during annual tax filing, helping them maximize their net income and reduce tax exposure.
Social Security System (SSS)
The SSS is a mandatory social security program for Filipino workers, offering retirement, sickness, maternity, and disability benefits. Employers contribute 8.5% of the employee’s monthly salary credit, while employees contribute 4.5%, for a total of 13%. Contributions must be remitted monthly and reported to SSS through their online portal or partner banks.
PhilHealth
PhilHealth is the national health insurance program providing medical coverage to employees and their dependents. Both employers and employees share equal contributions, which currently stand at 5% of the employee’s monthly salary, capped at a maximum monthly salary of ₱100,000. Contributions must be submitted monthly to maintain eligibility for healthcare benefits.
Home Development Mutual Fund (PAG-IBIG)
PAG-IBIG is a government savings and housing loan program. Employers contribute 2% of the employee’s monthly salary, matched by 2% from the employee. This fund helps employees access affordable home financing and savings options. Monthly remittances are mandatory and must be filed through the Virtual Pag-IBIG platform or approved channels.
Asanify’s Support For Employee Tax Optimization
Asanify, a top-tier global EOR platform, offers tax optimization services in the Philippines by assisting employers and employees in navigating complex tax rules. Asanify ensures accurate tax computations, timely withholding and remittance of contributions, and provides employees with guidance on allowable exemptions and benefits. By leveraging Asanify, businesses can enhance payroll accuracy, minimize compliance risks, and help employees maximize their take-home pay through smart tax planning.
Salary Cost Calculator for Hiring Employees in Philippines
When hiring employees in the Philippines, understanding the total employer cost is essential for accurate budgeting and compensation planning. This total cost includes the employee’s gross salary, mandatory government contributions, benefits, and other allowances. A Salary Cost Calculator helps businesses break down the full compensation package—highlighting both what the employee receives and what the employer pays. It simplifies visibility into deductions such as withholding tax, SSS, PhilHealth, and PAG-IBIG contributions. By using a Salary Cost Calculator, employers can ensure compliance and transparency, while employees gain clarity on their net take-home pay. For more insights on salary structures and how to calculate total compensation, check out our blog!
Key Considerations While Hiring Employees through EOR in Philippines
Employee Agreements in Philippines
Employee agreements are a foundational part of hiring in the Philippines. An EOR partner ensures that employment contracts align with the Labor Code of the Philippines and include essential elements such as job title, compensation, working hours, confidentiality clauses, termination terms, and non-compete provisions. These contracts legally protect both parties and outline the mutual rights and responsibilities. Contracts should always be written in English or Filipino and registered with the appropriate government bodies where necessary to avoid future legal issues.
Work Hours and Probation
The standard workweek in the Philippines is 40 to 48 hours, typically 8 hours per day over 5 or 6 days. Overtime must be compensated according to labor laws. EORs ensure that employment contracts clearly define probationary periods, which usually last up to 6 months. During this period, either party may end the employment with minimal notice, provided due process is observed. This period allows employers to evaluate performance and employees to assess fit within the organization.
Leave Policies
Philippine labor law mandates various types of leaves that employers must provide. EORs help ensure these are integrated into employment contracts and comply with legal requirements. Some leave types, while not legally mandated, are widely adopted to support employee well-being and enhance retention.
Standard Leave Policy in Philippines
| Leave Type | Description | Duration |
| Service Incentive Leave | Paid leave after 1 year of service | 5 days annually |
| Sick Leave | Leave for illness (not mandatory but commonly offered) | 5–15 days, company policy dependent |
| Vacation Leave | For rest and personal time (not mandated but standard) | 10–15 days per year, based on policy |
| Maternity Leave | For childbirth and recovery (RA 11210) | 105 days (paid), 120 for solo parents |
| Paternity Leave | For male employees (RA 8187) | 7 days (paid), within first 4 deliveries |
| Bereavement Leave | For death of immediate family (not mandated but offered) | 3–5 days, per company policy |
Employers often offer additional leave entitlements beyond the legal minimum to remain competitive in attracting talent.
Types of Leaves in Philippine Employment
- Service Incentive Leave (SIL): Mandated by law for employees with at least 1 year of service. Often convertible to cash if unused.
- Sick and Vacation Leave: Not mandated, but commonly granted in company policies. Employees can use these at their discretion with proper notice or medical certificates.
- Maternity Leave: Female employees are entitled to 105 days of paid leave (extended for solo parents) under the Expanded Maternity Leave Law (RA 11210).
- Paternity Leave: Covered under RA 8187, 7 days of paid leave for the first four deliveries of the employee’s spouse.
- Bereavement and Marriage Leave: Though not required by law, many companies offer paid time off for these life events.
- Sabbatical Leave: Generally not common but may be offered by progressive companies in education, tech, or creative industries.
List of General Public Holidays in Philippines – 2025
| Date | Occasion | Category |
| 1 January | New Year’s Day | Regular Holiday |
| 28 March | Maundy Thursday | Regular Holiday |
| 29 March | Good Friday | Regular Holiday |
| 9 April | Araw ng Kagitingan | Regular Holiday |
| 1 May | Labor Day | Regular Holiday |
| 12 June | Independence Day | Regular Holiday |
| 21 August | Ninoy Aquino Day | Special Non-Working Day |
| 30 November | Bonifacio Day | Regular Holiday |
| 25 December | Christmas Day | Regular Holiday |
| 30 December | Rizal Day | Regular Holiday |
| TBD | Eid’l Fitr | Regular Holiday (Movable) |
| TBD | Eid’l Adha | Regular Holiday (Movable) |
Note: Final dates for Islamic holidays depend on moon sightings and are announced by the Office of the President.
Separation Pay and Final Pay
Under Philippine labor law, employees may be entitled to separation pay in cases such as redundancy, retrenchment, or health incapacity. It is calculated based on length of service and termination grounds. Final pay must be released within 30 days of termination and include unused leave credits, bonuses, and other due benefits. EORs manage these calculations and disbursements to ensure legal compliance and employee satisfaction.
Termination Policies
Termination in the Philippines must adhere to due process, which includes notice, explanation, and the opportunity for the employee to respond. Grounds for termination include just causes (e.g., misconduct) and authorized causes (e.g., redundancy). Notice periods typically range from 15 to 30 days. EOR partners ensure the entire process is compliant, well-documented, and conducted in line with the Labor Code of the Philippines to avoid legal disputes.
Bonus Payments in Philippines
The 13th-Month Pay is mandatory and must be given to employees earning below a certain threshold. It should be equivalent to 1/12 of the basic salary earned within the calendar year and must be paid by December 24th each year. Some companies also offer performance or Christmas bonuses as part of incentive schemes. EOR providers handle bonus calculation and timely disbursement.
Health Insurance in Philippines
While health insurance is not mandated beyond PhilHealth, many companies offer private HMO (Health Maintenance Organization) plans to attract and retain talent. EORs facilitate the administration of both PhilHealth contributions and private insurance enrollment. For companies with 10 or more employees, HMO benefits can significantly improve employee morale and loyalty.
Suggested Read: PEO vs EOR Differences- All That You Need to Know
Employee Benefits in Philippines
Employee benefits are an integral part of compensation in the Philippines. They serve not only to attract and retain top-tier talent but also to foster employee satisfaction and productivity. In the Philippines, benefits are categorized into statutory (government-mandated) and supplementary (discretionary) benefits.
Statutory Benefits in Philippines
Statutory benefits are legally required under Philippine labor laws and ensure workers receive adequate protection and welfare. Employers must comply with these standards to remain legally operational. Major statutory benefits include:
- Social Security System (SSS): Both employer and employee contribute to the SSS fund, which provides retirement, disability, sickness, and death benefits.
- PhilHealth: This is the national health insurance program covering hospital bills and medical services. Contributions are shared between employer and employee.
- PAG-IBIG Fund: Also known as the Home Development Mutual Fund, it supports housing and savings programs. Contributions are mandatory and shared by both parties.
- 13th-Month Pay: Employers must provide an annual bonus equal to one-twelfth of an employee’s basic salary by December 24.
Supplementary Benefits in Philippines
To stay competitive, many companies offer supplementary benefits in addition to statutory ones. These are not legally required but are widely practiced:
- Health Maintenance Organization (HMO) Coverage: Many employers provide HMO cards that cover doctor consultations, hospitalization, and lab tests.
- Performance Bonuses: Companies offer incentives such as quarterly bonuses or annual profit-sharing based on performance.
- Transportation and Meal Allowances: Tax-free up to specific BIR limits, these allowances support employees’ daily expenses.
- Flexible Work Arrangements: Work-from-home options, compressed workweeks, and flextime are becoming popular, especially in tech and BPO sectors.
Asanify’s Flexible Benefits Plan for EOR Employees
Asanify offers a custom-built Flexible Benefits Plan (FBP) tailored for Filipino employees under EOR arrangements. This plan allows employees to structure their compensation in a tax-optimized manner. Benefits include meal allowances, telecom reimbursements, fuel stipends, and non-taxable incentives, aligning with BIR rules and maximizing employee take-home pay. Employees can save thousands of pesos annually through this smart structuring.
For employers, Asanify’s FBP enhances employee satisfaction without increasing payroll expenses. With built-in compliance tools and a user-friendly dashboard, employers can ensure seamless management of personalized benefits.
Flexible Benefits Components in Philippines (Sample Reference)
| Flexible Benefit | Tax Code | Eligible for Tax-Free? | Annual Limit (₱) |
| Meal Allowance | BIR Memo | Yes (Up to ₱2,400/month) | 28,800 |
| Mobile Reimbursement | BIR Sec. 34 | Yes | 24,000 |
| Fuel Allowance | BIR Sec. 34 | Yes | 30,000 |
| Uniform Allowance | BIR Sec. 33 | Yes (Non-taxable) | 36,000 |
| Gift Checks | BIR Memo | Yes (Up to ₱5,000) | 5,000 |
| Book Allowance | BIR Memo | Yes (Educational support) | 36,000 |
| Total | ₱1,59,800 |
Terminations in Philippines
Termination procedures in the Philippines differ for regular employees and project-based or contractual staff. Philippine labor law ensures that due process is followed during any form of employment separation to safeguard employee rights.
Notice Periods in Philippines
The standard notice period is 30 days, applicable for both employer-initiated and employee-initiated termination. Under Article 298 and 299 of the Labor Code, terminations must follow due process, including written notice and an opportunity for the employee to respond.
Severance Pay in Philippines
Employees terminated under authorized causes—such as redundancy, retrenchment, or closure—are entitled to separation pay, typically calculated as either one month’s salary or half a month’s salary for every year of service, whichever is higher. This ensures a financial buffer for employees transitioning out of the company.
Key Points:
- Legal Compliance: All terminations must meet DOLE regulations and procedural requirements.
- Documentation: Employers must maintain clear records of notices, communications, and termination grounds.
- Employment Contracts: Clear documentation of terms helps define proper exit procedures.
- Employee Rights: Employees must receive their final pay, unused leave encashment, and statutory benefits promptly.
Types of Termination
- Termination for Cause
An employee may be terminated for just causes like serious misconduct, willful disobedience, or gross neglect. In such cases, employers are not required to provide separation pay but must follow procedural due process, including a notice to explain and a hearing. - Termination Without Cause (Authorized Causes)
These include redundancy, retrenchment, or business closure. Employers must provide written notice and corresponding separation pay. DOLE notification is required for mass terminations. - Collective Termination
Occurs during mass layoffs or plant closures. Employers must notify the Department of Labor and Employment (DOLE) and affected workers 30 days in advance. Separation pay must be disbursed according to statutory guidelines. - Voluntary Termination (Resignation)
Employees may resign by submitting a written notice 30 days before the intended separation date. Employers are expected to provide final pay, including 13th-month pay and unused leave conversions, upon clearance completion.
What are the Key Steps Involved in Terminating Employees in Philippines?
1. Serve Notice Period
The Labor Code of the Philippines mandates that employers provide a 30-day written notice to employees prior to termination, except in cases of just cause. Employees who voluntarily resign must also serve a 30-day notice, unless a shorter period is mutually agreed upon. Failure to comply may result in legal disputes or labor complaints. EOR partners ensure this notice period is properly documented and served in compliance with DOLE (Department of Labor and Employment) requirements.
2. Termination for Cause
Termination for cause applies when an employee is dismissed due to serious misconduct, willful disobedience, gross neglect of duties, or breach of trust. In such cases, employers are not obligated to provide advance notice but must follow due process. This includes issuing a notice to explain, allowing the employee to respond, and conducting a formal investigation. EORs ensure that disciplinary procedures follow legal standards and are well-documented to prevent wrongful dismissal claims.
3. Full and Final Settlement
Upon termination, the employer must process a full and final settlement within a reasonable period (typically 30 days). This includes:
- Unpaid salary up to the final working day
- Pro-rated 13th-month pay
- Unused leave encashment (if applicable)
- Separation or severance pay (if required)
- Final SSS, PhilHealth, and PAG-IBIG contributions
The EOR handles disbursement, records, and statutory remittances, ensuring compliance and transparency.
4. Documentation
Proper documentation is critical to ensure that the termination process aligns with Philippine labor standards. Essential documents include:
- A signed notice of termination and employee acknowledgment
- Exit interview notes (optional)
- Receipts for final pay and benefits
- Copies of disciplinary reports or investigation findings (if termination is for cause)
Well-maintained records help prevent disputes and support legal compliance. EORs manage and archive these documents securely for employer protection.
Recommended Read: How to Hire in India Easily- 10 Key Considerations
How to Choose the Right EOR Philippines Services?
Expertise and Local Knowledge
When selecting an EOR partner in the Philippines, it’s crucial to choose a provider with proven expertise in local labor laws, DOLE compliance, payroll taxes, and statutory contributions (SSS, PhilHealth, PAG-IBIG, BIR). A knowledgeable provider ensures your operations remain compliant and shielded from penalties or legal actions.
Comprehensive Service Offerings
An ideal EOR partner should provide end-to-end HR and compliance services. These include employee onboarding, payroll processing, tax remittance, benefits administration, and legal advisory support. This comprehensive support allows businesses to focus on growth while the EOR manages operational complexity.
Scalability and Flexibility
Your hiring needs may vary depending on market conditions or project scope. A capable EOR in the Philippines must support both small-scale hiring and larger teams, offering scalable and flexible solutions such as short-term contracts, remote hiring, or specialized talent sourcing. The EOR should adapt quickly to your evolving business goals.
Technology and Data Security
Data security is a top priority in managing sensitive employee information. Choose an EOR that leverages secure cloud-based HR systems for payroll and record management. The provider should follow strict data protection standards in line with the Data Privacy Act of 2012, ensuring confidentiality, availability, and integrity of employee data.
Compliance and Risk Management
A primary advantage of working with an EOR Philippines partner is minimizing the risk of non-compliance with the country’s labor laws. Choose an EOR with a solid track record in handling compliance, including DOLE regulations, BIR filings, and SSS/PhilHealth/PAG-IBIG contributions. The EOR ensures your business meets local employment requirements, helping avoid penalties, disputes, and legal liabilities.
Reputation and Client References
Evaluate the EOR’s reputation by reviewing client case studies, testimonials, and reviews. A reputable EOR in the Philippines will demonstrate a history of delivering reliable HR and payroll services to global clients. Positive references indicate trustworthiness, timely service delivery, and effective communication.
Expertise in Philippine Employment Regulations
A competent EOR provider should have deep knowledge of Philippine employment law, including labor codes, government-mandated benefits, income tax laws, and data privacy regulations. This expertise helps employers manage hiring, payroll, and termination in full compliance, reducing exposure to local labor disputes.
Service Offerings and Scalability
Ensure the EOR offers comprehensive services, such as payroll, onboarding, government remittances, and employee relations. The provider should also offer scalable solutions—whether you need to hire a single employee or expand a team across multiple regions in the Philippines. This scalability supports your long-term business plans.
Reputation and Client References
Gather insights from other businesses that have used the EOR, especially those in similar industries or operating models. Look for case studies or success stories that demonstrate the EOR’s ability to navigate compliance and HR complexities in the Philippine setting.
Data Security and Privacy Compliance
The EOR should adhere to the Philippine Data Privacy Act of 2012, ensuring all employee data is securely stored and processed. Look for EORs that use encrypted platforms for payroll and HR data management, minimizing the risk of data breaches or non-compliance with government mandates.
Transparent Pricing and Contractual Agreements
A good EOR partner provides clear, competitive pricing and well-documented contractual terms. Ensure that the scope of services, pricing structure, and exit clauses are explicitly outlined to avoid hidden fees and contractual confusion. Transparency builds long-term trust.
Local Network and Support
Select an EOR with a robust local presence and partnerships with legal and tax professionals in the Philippines. This network is critical for managing complex HR scenarios, government audits, labor inspections, or dispute resolution. Localized support ensures smooth day-to-day operations.
Benefits of Working With an Employer of Record Service Provider in Philippines
Compliance and Legal Expertise
EORs offer deep expertise in Philippine labor law, tax compliance, and government-mandated benefits. Navigating DOLE rules, BIR obligations, and social welfare contributions can be complex for foreign companies. An EOR ensures your business stays compliant with evolving regulations, reducing risk and enhancing operational confidence.
Time and Cost Efficiency
Hiring via an EOR saves significant time and administrative costs. The EOR handles payroll, tax filings, contributions to SSS, PhilHealth, and PAG-IBIG, as well as contract management. This eliminates the need for a local HR team or legal consultants, helping you scale faster with leaner operations.
Swift Market Entry
An EOR enables immediate hiring in the Philippines without registering a local entity. This is ideal for pilot projects, contract roles, or quick market testing, allowing companies to start operations within days. It bypasses the delays and costs of incorporation and licensing.
Local HR Support
Managing employees in the Philippines requires cultural fluency and understanding of local HR norms. EORs provide on-the-ground HR support, handling onboarding, timekeeping, leave management, and employee communication. This ensures a seamless experience for both employer and employee.
Flexibility and Scalability
EOR services are built to adapt to your evolving business needs. Whether you’re scaling up during growth or downsizing post-project, the EOR provides hiring and termination support, maintaining compliance through the full employee lifecycle—without disrupting your operations.
Risk Mitigation
The EOR assumes responsibility for labor compliance, payroll accuracy, and lawful termination, reducing your legal exposure. If disputes arise over wages, dismissal, or entitlements, the EOR ensures due process is followed under Philippine law, protecting your brand and operations.
Cost Efficiency
By outsourcing to an EOR, companies avoid the fixed costs of setting up a legal entity, hiring internal HR/legal teams, or managing ongoing compliance. The EOR streamlines operations and centralizes services, offering a cost-effective way to run a compliant workforce in the Philippines.
Mitigating Cultural and Language Barriers
EORs help bridge cultural and communication gaps by interpreting local expectations around work hours, feedback, communication styles, and benefits. They also ensure policies and onboarding are presented in a locally relevant manner, improving employee satisfaction and retention.
Focus on Core Business Activities
Outsourcing HR, payroll, and legal compliance to an EOR allows companies to focus on sales, product development, and customer success. The EOR manages back-end complexity, allowing your team to prioritize strategic growth and client engagement.
Visa Types in Philippines
Asanify simplifies the hiring of foreign employees in the Philippines by offering end-to-end assistance with work visa and Alien Employment Permit (AEP) applications. Our expert team navigates the complex immigration requirements, ensuring compliance with Philippine laws. We handle document preparation, verification, and coordination with DOLE and the Bureau of Immigration, so you can stay focused on growing your business.
If you prefer to manage the visa and work permit process on your own, here’s a step-by-step overview of how to do it legally and efficiently:
Visa Application Process:
Foreign nationals intending to work in the Philippines must first secure a job offer from a registered Philippine employer. With this offer in hand, the applicant can begin the 9(g) Pre-arranged Employment Visa process. This visa is issued by the Bureau of Immigration and requires prior endorsement by the Department of Labor and Employment (DOLE) through an Alien Employment Permit (AEP). The applicant must submit documents such as a valid passport, job contract, medical clearance, and other supporting documentation. Once the visa is approved, the foreign worker may enter the country and start working legally.
Work Permit (AEP and 9(g) Visa) Requirements:
To legally work in the Philippines for an extended period, foreign nationals must secure both an Alien Employment Permit (AEP) from DOLE and a 9(g) work visa from the Bureau of Immigration. The key requirements include:
- A passport valid for at least 6 months beyond the intended stay.
- A valid job offer from a company registered in the Philippines.
- A signed employment contract detailing the position, salary, and job scope.
- Evidence that the foreigner possesses specialized skills not readily available in the local labor market.
- Company documents including the SEC or DTI registration, and Mayor’s Permit.
The AEP is generally issued for 1–5 years, based on the employment contract. After obtaining the AEP, the foreign national can apply for the 9(g) work visa, which is renewable as long as the employment continues.
Alien Registration:
All foreign nationals working in the Philippines must also register with the Bureau of Immigration and obtain an Alien Certificate of Registration Identity Card (ACR I-Card). This smart ID serves as proof of legal residence and must be secured within 60 days of obtaining the work visa. Required documents include a valid visa, AEP, passport, and proof of address. Failure to comply may result in penalties, cancellation of visa, or even deportation. Asanify ensures full support through this process to help employers and employees remain compliant.
Risks or Drawbacks of EOR Philippines
1. Limited Control
One of the primary challenges of working with an EOR in the Philippines is the limited operational control. As the EOR is the legal employer, they manage payroll, compliance, and employee documentation. This can reduce the client company’s direct influence on daily HR processes, company culture integration, and team management, which may affect employee alignment with organizational goals.
2. Potential Cultural Differences
Cultural dynamics in the Philippines, such as respect for hierarchy, indirect communication styles, and collectivist work environments, may differ from the client company’s home country. Although EORs help navigate these nuances, unfamiliarity with local customs may still affect team cohesion, onboarding, or performance feedback loops, especially for remote or global teams.
3. Cost
While using an EOR saves businesses the cost of setting up a local entity, service fees can be significant depending on the level of support required. For smaller teams or short-term engagements, EOR pricing may exceed the costs of managing direct hires locally. Businesses must weigh these fees against potential compliance risks and administrative burdens.
4. Data Security and Confidentiality
An EOR handles sensitive employee and financial data, including tax IDs, salaries, and government contributions. While top-tier EORs follow Philippine Data Privacy Act of 2012 and global standards like GDPR, companies must ensure robust cybersecurity and confidentiality protocols are in place before entrusting data to third parties.
5. Scalability Challenges
EORs are generally well-equipped for scaling operations, but hypergrowth scenarios may expose gaps in their ability to handle complex onboarding, payroll accuracy, or timely regulatory submissions. This is especially true for multi-region hiring across Philippine provinces with varying local requirements.
6. Communication Challenges
Time zone differences, language subtleties, and platform-related miscommunication can lead to delays or misunderstandings. While Filipinos are fluent in English, nuances in communication or indirect responses may cause confusion if not managed proactively. Regular check-ins and clear service level agreements (SLAs) help avoid these issues.
How Does Employer of Record Philippines (EOR) Services Differ From Usual HR Software?
1. Employer of Record (EOR)
An Employer of Record (EOR) in the Philippines serves as the official employer for tax, legal, and HR purposes on behalf of foreign businesses. The EOR assumes all local responsibilities, including:
- Payroll processing and BIR compliance
- SSS, PhilHealth, and PAG-IBIG contributions
- Issuing employment contracts
- Managing terminations and severance
- Employee benefits administration
The EOR is ideal for companies that want to operate in the Philippines without setting up a legal entity, providing a fully compliant framework for hiring and managing workers.
2. HR Software
HR software is a digital tool for automating internal HR functions such as:
- Attendance and time tracking
- Employee records and self-service portals
- Leave management and performance reviews
- Recruitment tracking and training modules
However, HR software does not assume legal employer responsibilities, nor does it handle statutory compliance or tax submissions. It supports internal HR teams but cannot act as a legal hiring structure in the Philippines—making it insufficient for foreign companies needing full legal and payroll coverage.
How Much Does it Cost to Avail Services Under EOR Philippines?
Scope of Services
EOR pricing varies based on whether you need basic payroll and compliance or a full-service package including benefits, recruitment, and legal support. More complex services command higher fees due to documentation, labor advisory, and contract administration.
Employee Strength
EORs usually charge on a per-employee-per-month basis. For growing teams, volume discounts may apply. The more employees onboarded, the higher the total cost—but the per-unit cost may decrease with scale.
Complexity of Employment Regulations
Hiring in industries like BPO, healthcare, or fintech involves additional regulatory layers, including industry-specific benefits or mandatory training. Managing this complexity through an EOR increases the service workload and hence the cost.
Customization and Additional Services
Some EORs offer custom benefits plans, expatriate employee support, or advanced compensation structuring. These value-added services improve employee satisfaction but can increase your monthly per-employee cost substantially.
Technology Infrastructure
EORs that offer cloud-based portals, employee dashboards, and automated compliance tracking typically charge more for the added convenience and accuracy. These platforms help manage payroll securely and improve transparency.
Pricing Models and Contract Terms
EOR Philippines providers may use flat monthly rates, tiered plans, or bundled packages. Contracts range from short-term (3–6 months) to long-term (1–3 years). Longer commitments often unlock lower pricing. One-time setup fees or charges for custom onboarding may apply.
Conclusion: EOR Philippines
The Employer of Record (EOR) model in the Philippines offers a robust solution for companies seeking to hire local talent without the need to register a legal entity. By handling compliance, payroll, employee onboarding, and risk mitigation, an EOR enables businesses to focus on growth while reducing administrative burdens.
Partnering with a trusted EOR in the Philippines ensures that your operations are legally compliant, scalable, and cost-effective. Whether you’re testing the market or scaling an offshore team, an EOR provides the flexibility, local HR expertise, and regulatory coverage necessary for success in the dynamic Philippine business environment.
FAQs
How does an Employer of Record ensure compliance with local labor laws in the Philippines?
An Employer of Record (EOR) ensures compliance by managing payroll, mandatory government contributions (SSS, PhilHealth, PAG-IBIG), tax filings (BIR), and employment contracts, all in line with the Labor Code of the Philippines.
What are some key Philippine labor laws that an EOR helps navigate?
An EOR helps businesses navigate laws such as the Labor Code of the Philippines, DOLE regulations, Social Security Act, the Tax Code, and RA 11210 (Expanded Maternity Leave Act), among others.
How does an EOR act as the legal employer for a company’s workforce in the Philippines?
An EOR becomes the legal employer by taking full responsibility for hiring, payroll, benefits, taxes, and compliance, while the client company oversees day-to-day work activities and performance management.
What are the benefits of using an Employer of Record in the Philippines?
Using an EOR in the Philippines enables fast and compliant hiring, reduces the need to establish a local entity, ensures legal compliance, and simplifies HR and payroll administration for foreign companies.
How does an EOR help companies comply with Philippine employment laws when hiring international employees?
An EOR handles the process of obtaining Alien Employment Permits (AEP), 9(g) work visas, and ACR I-Cards, while also managing payroll and ensuring labor law compliance for expatriate hires.
Is EOR legal in the Philippines?
Yes, EOR services are legal in the Philippines and operate under the Philippine Labor Code and BIR regulations, offering a compliant structure for foreign businesses to employ local talent.
Can an EOR help manage employment contracts for a company’s remote workers in the Philippines?
Yes, an EOR can create and manage legally compliant contracts for remote and hybrid workers, including clauses on tax, benefits, and data privacy, aligned with local regulations.
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.