The Philippines is one of Southeast Asia’s fastest-growing economies and a strategic location for businesses looking to tap into a large pool of English-speaking, highly skilled professionals. But expanding into the country requires more than just talent sourcing—it demands a strong grasp of local labor regulations. Philippine lawmakers created labour laws that protect employees by ensuring job security, fair wages, safe working conditions, and clearly regulated termination procedures.
For international employers, understanding these labor laws is critical for building compliant and sustainable operations. Non-compliance can result in fines, reputational damage, or even business closure. Fortunately, businesses can partner with an Employer of Record Philippines to manage legal complexities, streamline onboarding, and ensure local employment compliance without the need to set up a local entity.
Table of Contents
- Overview of Labour Laws in the Philippines
- Employment Contracts in the Philippines
- Wages, Working Hours, and Leave
- Social Security, Benefits, and Termination
- Labor Disputes and Legal Risk
- Hiring Through an Employer of Record (EOR) in the Philippines
- Conclusion
- FAQs
Overview of Labour Laws in the Philippines
The Philippines maintains a pro-employee legal framework that protects workers from exploitation and ensures equitable treatment across all levels of employment. These laws balance labor rights with economic growth and apply uniformly across the public and private sectors.
The Labor Code of the Philippines serves as the primary legislation governing employment, alongside special laws addressing health, maternity, paternity, social welfare, and termination rights. The Department of Labor and Employment (DOLE) enforces labour laws by monitoring compliance through inspections, audits, and formal complaint investigations.
Businesses hiring employees in the Philippines must recognize that the law grants statutory protections—including minimum wage, social security benefits, and leave entitlements—even to probationary and part-time workers. Proper documentation, transparency, and adherence to DOLE rules form the foundation of Philippines HR compliance.
Employment Contracts in the Philippines
An employment contract in the Philippines is more than a simple agreement—it’s a legal document that defines the relationship between employer and employee and determines compliance with national labor regulations.
Types of Employment Contracts
The Philippine labor system recognizes several employment types, each with distinct rules and entitlements:
- Regular Employment: Granted after six months of satisfactory probation or immediately if the job is essential to business operations.
- Fixed-Term Employment: Time-bound roles based on a predetermined end date or project.
- Project-Based Employment: Related to a specific project, ending upon its completion.
- Probationary Employment: Trial employment lasting no more than six months.
Philippine labor contract law requires employers to clearly state the nature and term of employment in writing, especially for fixed or project-based roles, to prevent disputes over regularization.
Contract Requirements and Legal Protections
All employment contracts should include:
- Job title and responsibilities: The contract must clearly define the employee’s position and outline their specific duties and functions.
- Work location and schedule: Employers must state the primary work site and the expected working hours or shift schedule.
- Compensation, allowances, and benefits: The agreement should include salary details, fixed allowances, performance incentives, and additional benefits.
- Government-mandated contributions (SSS, PhilHealth, Pag-IBIG): Employers must indicate compliance with required contributions and how deductions will be handled.
- Leave entitlements and probation period (if applicable): The contract should mention available leaves (e.g., vacation, sick leave) and the duration of the probationary period.
- Termination conditions and notice period: Employers must outline valid grounds for termination, due process steps, and the required notice period or pay in lieu.
Failing to issue a contract or including illegal provisions can trigger labor disputes in the Philippines and result in penalties from DOLE.
Probationary Periods
Employers may place new hires under probation for a maximum of six months. Employers must evaluate employees during this period based on performance standards clearly outlined in writing. If the employer fails to document these standards or the evaluation process, the probationary employee may automatically become regularized.
Wages, Working Hours, and Leave
Labor laws in the Philippines mandate fair compensation and reasonable working conditions. Authorities strictly monitor wage compliance, and they impose both monetary and criminal penalties for violations.
Minimum Wage and Salary Rules
The Regional Tripartite Wages and Productivity Boards (RTWPBs) periodically adjust minimum wages, which vary by region across the Philippines. For example, Metro Manila has the highest minimum wage, while agricultural regions may have lower rates. Employers must pay salaries at least twice a month and provide payslips detailing gross pay, deductions, and net pay.
Employers are also responsible for remitting mandatory contributions to SSS, PhilHealth, and Pag-IBIG. Failure to remit or underreporting contributions is a criminal offense.
Work Hours and Overtime
The standard workweek in the Philippines is 8 hours per day or 40–48 hours per week, depending on industry norms. Employees working beyond 8 hours are entitled to:
- 125% of their hourly wage for overtime on weekdays
- 130%–200% for work on rest days, special holidays, or regular holidays
Employers must pay an additional 10% night differential for work performed between 10 p.m. and 6 a.m.
Work Hours and Leave in the Philippines
Employees are entitled to:
- Service Incentive Leave: 5 days of paid leave after one year of service
- Maternity Leave: 105 days (plus 15 days for solo mothers)
- Paternity Leave: 7 days
- Special Leave: For solo parents, domestic violence survivors, bereavement, and more
Employers must keep accurate attendance records and ensure leave requests are processed in line with Philippines HR compliance laws.
Suggested Read: Detailed Guide to Employer of Record (EOR) vs. Entity Establishment in the Philippines [2025]
Social Security, Benefits, and Termination
The Philippine government mandates social protection through compulsory benefits and outlines strict procedures for ending employment relationships.
Philippines Social Security System (SSS)
Employers must enroll employees in three government programs:
- Social Security System (SSS): Provides pension, maternity, disability, and death benefits
- PhilHealth: Offers basic health insurance coverage
- Pag-IBIG Fund: A government savings and housing loan program
Contribution rates are shared between employer and employee, and payments must be made monthly. Late or missed contributions may lead to fines, interest, and legal consequences.
Separation and Termination of Employment
Employee termination in the Philippines falls into two categories:
- Just Causes: Serious misconduct, fraud, gross negligence, breach of trust
- Authorized Causes: Redundancy, installation of labor-saving devices, closure, disease
In both cases, employers must follow due process, which includes:
- Serving written notice to the employee and DOLE 30 days in advance
- Conducting a hearing or explanation process (for just cause)
- Issuing a final notice of termination
Severance Pay in the Philippines
For authorized causes, employers must provide:
- ½ month salary per year of service (redundancy, retrenchment, health reasons)
- 1 month salary per year of service (business closure)
Severance pay must be settled within 30 days of termination. Non-payment is a common trigger for labor disputes in the Philippines.
Labor Disputes and Legal Risk
Understanding and preparing for potential labor disputes is crucial for companies operating in the Philippines. The country’s labor laws prioritize employee protection, and any failure to comply with the Labor Code or related regulations can expose employers to legal action, financial liability, and reputational damage. Even minor missteps—if unaddressed—can quickly escalate into costly and time-consuming legal battles.
Common Triggers
Employers may face disputes over a variety of issues that, while seemingly minor at first, can have serious implications if not handled properly:
- Unjust Dismissal
Terminating an employee without just or authorized cause, or without observing due process, is one of the most common and serious causes of labor complaints. Employers must follow legal procedures strictly or risk penalties and reinstatement orders. - Delayed Wages or Underpayment
Failing to pay wages on time, paying less than the agreed amount, or unauthorized withholding of salaries often leads to formal complaints. DOLE regularly inspects companies for wage compliance. - Misclassification of Employment Type
Treating regular employees as independent contractors or project-based workers to avoid providing benefits and security of tenure can lead to disputes and legal sanctions. - Non-remittance of Government Benefits
Employers are required to remit contributions to SSS, PhilHealth, and Pag-IBIG on time. Non-compliance may result in penalties, interest charges, and lawsuits filed by employees or the government. - Unauthorized Deductions or Denied Leave
Deducting wages for disciplinary reasons without legal justification or denying employees their entitled leave benefits can also give rise to grievances.
These issues not only violate labour laws in the Philippines, but also damage employee morale and workplace trust. Companies must take every complaint seriously and maintain proactive, compliant HR practices to prevent escalation.
Resolution and Enforcement
The Philippines has a structured and multi-stage process for resolving labor disputes. Employers should be familiar with these steps to ensure timely and fair resolution of conflicts:
- Conciliation-Mediation through DOLE’s Single Entry Approach (SEnA)
This initial step is designed to encourage parties to resolve disputes informally and amicably. DOLE mediators facilitate discussions without imposing a binding decision. - Arbitration at the National Labor Relations Commission (NLRC)
If conciliation fails, the case proceeds to the NLRC for formal adjudication. Labor arbiters review evidence, conduct hearings, and issue binding rulings on both monetary and non-monetary claims. - Judicial Review at the Court of Appeals or Supreme Court (if appealed)
If either party contests the NLRC ruling, they may appeal to the Court of Appeals and eventually to the Supreme Court for final judgment. However, legal proceedings can be lengthy and costly.
Employers must maintain complete and organized documentation, such as employment contracts, payslips, leave records, disciplinary memos, and government remittance proofs. This documentation becomes critical when defending against claims and ensuring favorable outcomes during arbitration or court hearings.
By adopting proactive HR practices and staying aligned with Philippines HR compliance standards, businesses can significantly reduce the likelihood of labor disputes and mitigate risks before they escalate. Partnering with an Employer of Record Philippines can further insulate foreign companies from these risks by ensuring that all employment practices meet local legal standards from day one.
Hiring Through an Employer of Record (EOR) in the Philippines
Setting up a subsidiary or branch office in the Philippines requires significant time, financial investment, and strict regulatory compliance. To avoid these hurdles, many global companies partner with an Employer of Record Philippines to legally hire, manage, and compensate Filipino employees without establishing a local entity.
An EOR typically:
- Acts as the legal employer on behalf of the foreign company
- Prepares DOLE-compliant employment contracts that align with local labor regulations
- Processes payroll and remits contributions to SSS, PhilHealth, and Pag-IBIG on time
- Manages onboarding and offboarding while ensuring documentation and compliance procedures are followed
- Guarantees full Philippines HR compliance, minimizing risk for global employers
This model enables international companies to hire employees in the Philippines quickly and compliantly, while focusing on core business growth instead of navigating complex employment laws and registration procedures.
Suggested Read: Employer of Record Philippines: A Comprehensive Guide on Employer of Record 2025
Conclusion
Understanding and complying with labour laws in the Philippines is vital for any company operating or expanding into this fast-growing market. From employment contracts and working hours to benefits, social security, and termination, Philippine labor regulations are comprehensive and employee-focused.
For global employers, managing these obligations internally can be complex and resource-intensive. Partnering with an Employer of Record Philippines offers a turnkey solution to ensure compliance, streamline operations, and focus on business growth. Whether you’re scaling up or hiring remotely, an EOR helps you build a reliable, legal, and productive workforce in the Philippines.
FAQs
Yes, employers must provide a written contract detailing job terms, salary, and benefits to ensure compliance with Philippine labor laws.
Employees typically work 8 hours per day, 5 to 6 days per week, depending on industry norms.
Overtime is paid at 125% of the hourly rate for weekdays and up to 200% for holidays or rest days.
Employers must contribute to SSS, PhilHealth, and Pag-IBIG on behalf of all eligible employees.
Severance pay ranges from ½ to 1 month’s salary per year of service, depending on the reason for termination.
The probationary period is capped at six months and must include performance criteria for regularization.
No, termination without just or authorized cause is considered illegal and may result in legal penalties.
Disputes often involve illegal dismissal, wage underpayment, and non-remittance of government contributions.
Yes, employees are entitled to premium pay for work done on regular and special holidays.
Yes, by partnering with an Employer of Record Philippines, they can legally hire and manage local talent.
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.
