An Employer of Record (EOR) in the Philippines acts as the legal employer for your company, handling all employment-related tasks without the need to establish a local subsidiary. This allows companies to hire Filipino employees quickly and compliantly.

By partnering with an EOR, businesses can access the Philippines’ extensive talent pool while navigating the complexities and risks associated with local compliance and employment laws.

The EOR assumes the role of the official employer, managing essential tasks such as payroll management, tax compliance, benefits administration, and HR obligations. They ensure adherence to local regulations, generate employment contracts, manage employee onboarding, and provide robust support for smooth operations.

Additionally, EORs in the Philippines offer expertise in understanding cultural nuances, managing payroll taxes, and delivering localized support to both companies and their workforce. This enables businesses to concentrate on their core operations and growth activities while leaving the administrative and legal responsibilities to the EOR.

Firstly, establishing an entity to hire talent in the Philippines is time-consuming and expensive. Employers have to deposit a paid up capital of PHP 5,000,000 to register their entity. The entire process - opening bank accounts, registering with tax authorities, obtaining clearance - can take up to 2 months. By engaging with an EOR, you can overcome these obstacles and start hiring talent in days.

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Next, The Philippines is  a pro-labor employment market. For employers looking to hire from the Philippines, this means that they have to carefully tread the island’s hiring grounds. For employers where laws exist at the national level, Philippines’ labor laws can be daunting. For example, minimum wages vary with each region.

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By employing talent via an Philippines EOR, employers can rest assured that their employees are compliant with these laws, ensuring that all contracts, and tax obligations are met, reducing the potential for legal complications.

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EORs typically charge a service fee covering payroll management, benefits administration, compliance, and other HR-related tasks.

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While costs may vary, engaging an EOR is generally a cost-effective solution compared to setting up your own legal entity in the Philippines. The expenses associated with entity formation, legal compliance, payroll management, and benefits administration can be substantial. By outsourcing these functions to an EOR, employers can reduce administrative overheads and focus on their core business operations.

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Key Metrics For Foreign Employers in Philippines

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In recent years, the Philippines has gained global recognition for its robust economic growth and increased GDP. The country's expertise in healthcare, technology, and services is expanding, and it ranks favorably in skilled labor and talent appeal.

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These factors, combined with improved business conditions and rising foreign investment, position the Philippines as an attractive destination for establishing a business presence.

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Benefit from a skilled workforce, competitive costs, and supportive policies in the Philippines. Gloroots' Recrew platform enables you to connect with exceptional talent and enhance your team effectively.

The phenomenon of "employee misclassification" pertains to the incorrect categorization of workers by employers. It transpires when an employer labels a worker as an independent contractor to exempt them from employment rights  and benefits endowed upon a permanent employee, despite the worker carrying out duties akin to that of a permanent employee.

Engaging a PEO/EOR in the Philippines can help you make these distinctions correctly and prepare employment agreements to correctly classify workers. These experts ensure compliance with labor laws, accurate classification of employees, precise payroll processing, and provision of comprehensive benefits. This allows businesses to concentrate on core operations while entrusting employment-related obligations to seasoned professionals.

The Philippines Labor Code governs all rules and regulations around employment contracts, work hours, leaves and employer contributions. 

Employment Contract

While not legally required, it's important to prepare an employment agreement for the candidate when hiring in the Philippines. The agreement should be in Filipino and should outline the employee's duties, pay, benefits, and termination process.

The contract should be in both English and Filipino and cover:

1. Identifying parties

2. Start date (temporary contract duration)

3. Work location

4. Job description, position, duties

5. Salary, benefits

6. Working hours

7. Holidays

8. Notice periods for termination

9. Probation, if applicable

10. Conduct rules, complaint procedures

11. Company policies

Unless specifically mentioned in the contract, employment is generally considered permanent in the Philippines.

This need not be overwhelming. Gloroots eliminate these barriers for you. With Gloroots' Employer of Record solution, hiring and managing employees in Philippines is a piece of cake.

Get an overview of what you need to know when hiring in the Philippines. Contact us.

Working Hour 

In regular situations, it is generally expected that workers should not exceed an eight-hour workday, and shouldn’t exceed a total of 40 hours per week. In some industries that operate on a six-day work week, the maximum limit may extend to 48 hours. 

Employers have a responsibility to provide their employees with a minimum of 60 minutes for a meal break. However, there is an option to shorten the daily breaks to 20 minutes by compensating employees with additional pay instead.

Overtime:

Public holidays:

The Philippines observes 18 national holidays each year.

Minimum Wage:

The minimum wage in the Philippines differs across regions, with rates ranging from PHP 282/day to 537/ day.

Maternity Leave and Paternity Leave

Female employees with at least one year of service are eligible for 105 calendar days of maternity leave. Single mothers receive 120 calendar days. 

If the worker has contributed to the Social Security System for three months in their year before childbirth, employers pay 100% of average daily salary as daily maternity leave pay, up to PHP 70,000. The employer is reimbursed by the Social Security System.

Mothers can also take 30 additional days of unpaid maternity leave. Gloroots can guide you through maternity leave benefits and processes in a straightforward manner.

Annual leave

After fulfilling a year of service with the employer, employees have the right to receive five days of paid vacation time.

Sick Leave

While there are no specific laws around paid sick leaves in the Philippines, many companies commonly have internal policies regarding sick leave. Depending on the industry, collective agreements may also include provisions for sick leave entitlements.

INCOME TAX

Other Taxes and Social Security contribution:

Termination Process:

Terminating employment in the Philippines can occur due to either 'justified' or 'authorized' causes, as outlined by labor laws. 'Justified' causes include serious misconduct, neglect of duties, breach of trust, and more, while 'authorized' causes encompass business reasons like redundancy or health issues. 

In cases of 'justified' causes, employees must receive written notices and a chance to be heard before termination. For 'authorized' causes, both the employee and the Department of Labor and Employment need to be notified 30 days in advance.

The BIR 2316 form, which reports withholding tax, is mandatory upon termination before final payment. Other documents like Quitclaim and resignation letters might also be required, based on specific company policies. It's essential to understand that termination during pregnancy or maternity leave is protected under the law. Trust Gloroots to guide you through these processes with expertise and clarity.

Notice Period:

Employees and employers are generally required to give a one-month notice.

Severance Pay:

Termination for just causes does not necessitate severance pay. However, for authorized causes, employees are entitled to receive severance pay equivalent to one month's pay or one half month's pay for every year of service, whichever is greater.

Probation Periods:

Employees serve a probationary period of up to six months.

Global hiring can be complicated due to various compliance requirements like employment laws, payroll, and data protection. Gloroots simplifies this by offering a centralized solution for hiring in the Philippines. Our experts help manage cross-border employment and payroll compliance. We handle contracts, payments, and benefits, letting you focus on finding the right talent. Our goal is to ensure a smooth global employment experience for you and your employees. Reach out to our experts today to start your global hiring in the Philippines.

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Contact our experts today to kickstart your global hiring campaign.

Growing a team means hiring employees at the right time and for the appropriate positions. Employers in the Philippines must have a local legal organization and use local resources to handle compliance, payroll, tax, and benefits management. The complexity of employment regulations in the Philippines makes compliance with employment laws demanding.

With Gloroots’s Global Employer of Record (EoR) service, you can let Gloroots do the heavy lifting of payroll, tax, benefits, and compliance and concentrate on what matters to you most: your employees and company growth.