Employer of Record in Philippines

Hiring employees in the Philippines requires navigating a specific set of local labor laws, tax regulations, and compliance requirements. For companies looking to expand their workforce into this dynamic market, understanding the various engagement models is crucial to ensure legal adherence and operational efficiency. The employment landscape in the Philippines is generally employee-friendly, with strict rules governing contracts, benefits, and termination.

Companies have several options when considering how to bring on talent in the Philippines:

• Establishing a local entity: This involves registering a branch office, subsidiary, or representative office, which can be a time-consuming and resource-intensive process due to administrative procedures and capital requirements.
• Hiring through an Employer of Record (EOR): Services like Rivermate allow companies to legally employ staff in the Philippines without needing to set up their own legal entity.
• Engaging independent contractors: While offering flexibility, this option carries risks if the working relationship is later deemed to constitute employment by local authorities, leading to potential penalties and back-pay obligations.

How an EOR Works in the Philippines

An Employer of Record takes on the legal responsibility for employment in the Philippines, acting as the legal employer for your workforce while you retain full control over their day-to-day tasks and management. This approach ensures complete compliance with all local laws and regulations.

An EOR typically handles:

• Payroll processing and tax remittance: Ensuring timely and accurate payment of salaries, withholding taxes, and contributions to social security (SSS), national health insurance (PhilHealth), and housing development (Pag-IBIG).
• Employment contracts: Drafting and managing compliant employment agreements that adhere to Philippine labor law.
• Statutory benefits administration: Managing mandatory benefits such as 13th-month pay, service incentive leave, holiday pay, and other leave entitlements.
• HR and labor law compliance: Navigating complex regulations, including those related to working hours, overtime, termination procedures, and employee grievance handling.
• Work permits and visas: Assisting with the necessary documentation for foreign nationals working in the Philippines, if applicable.

Benefits of Using an EOR in the Philippines

Leveraging an EOR service offers significant advantages for businesses aiming to expand into the Philippines without establishing a local entity.

• Rapid market entry: Hire employees quickly, often within days, bypassing the lengthy process of entity registration.
• Reduced legal and compliance risk: Mitigate the complexities and potential penalties associated with navigating unfamiliar Philippine labor laws and tax regulations.
• Cost efficiency: Avoid the substantial costs and administrative overheads of setting up, maintaining, and closing a local subsidiary.
• Focus on core business: Free up internal resources by offloading payroll, benefits, and HR administration to experts.
• Access to top talent: Recruit and onboard the best talent in the Philippines, regardless of your company's physical presence.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in Philippines includes comprehensive HR support, benefits administration, compliance management, and access to our proprietary dashboard for real-time workforce analytics. No hidden costs, no setup fees—just straightforward pricing that scales with your business needs while ensuring full legal compliance in Philippines.

Employers in the Philippines have key tax obligations, including contributions to social security (SSS), health insurance (PhilHealth), housing fund (Pag-IBIG), and employee compensation programs. Contribution rates for 2025 are generally shared between employer and employee, with examples such as SSS (around 8.42% employer, 4.18% employee), PhilHealth (1.5% each), and Pag-IBIG (2% each). Employers must also withhold income tax from employees' salaries based on progressive rates, ranging from 0% for income up to PHP 250,000 to 35% for income above PHP 8 million.

Tax compliance involves timely remittance of contributions and withholding taxes, with deadlines typically on the 10th of the following month for monthly contributions and the last day of the following month for quarterly withholding tax filings. For example, remittance of withholding tax (Form 1601C) is due on or before the 10th day of the next month. Foreign workers and companies face additional considerations, such as tax treaties, different tax rates for non-resident aliens, and potential incentives for RHQ/ROHQ entities.

The Philippines' salary landscape in 2025 is highly influenced by industry, role, experience, and region, with higher wages in IT, finance, and healthcare. For example, software engineers earn PHP 50,000–150,000 monthly, while marketing managers earn PHP 40,000–120,000. Minimum wages vary regionally, set by RTWPBs, requiring employers to stay updated with official guidelines to ensure compliance.

Compensation packages typically include mandatory 13th month pay (equivalent to one month's salary), optional 14th month pay, performance bonuses, and allowances such as transportation and communication. Employees are entitled to leave benefits and paid holidays. Payroll is usually processed bi-monthly or monthly via bank transfer, with tax and social security contributions deducted and remitted to authorities. As the economy grows, salary levels are expected to rise, especially in high-demand sectors, with companies increasingly offering comprehensive benefits to attract top talent.

Employees in the Philippines are entitled to various leaves under the labor code, with the most common being annual vacation leave, sick leave, and parental leave. The minimum annual vacation leave is 5 days of paid leave after one year of service, which can be converted to cash if unused. Public holidays are observed throughout the year, with specific dates in 2025 listed below:

Sick leave is typically paid but not mandated by law; many companies offer 5-15 days annually, often requiring medical certification for absences over two days. Parental leave includes 105 days of paid maternity leave for women, paid through SSS, with additional leave for solo parents; 7 days of paid paternity leave for married men; and adoption leave, with specifics varying by law. Employers may also provide additional leaves such as bereavement, study, or sabbatical, depending on company policy.

The Philippines mandates several core employee benefits to ensure social security, health, and welfare. Employers must contribute to the Social Security System (SSS), PhilHealth, and Pag-IBIG Fund, with contributions varying based on salary levels. Key mandatory benefits include 13th-month pay, service incentive leave, maternity and paternity leaves, parental leave for solo parents, and special leave for women. For example, female employees are entitled to 105 days of paid maternity leave, and married male employees to 7 days of paid paternity leave.

In addition to legal requirements, many employers offer optional benefits such as health maintenance organizations (HMOs), life and accident insurance, retirement plans, allowances (housing, transportation, meals), wellness programs, flexible work arrangements, and employee assistance programs. Larger companies tend to provide more comprehensive packages, including supplemental health coverage and stock options, while SMEs may focus on basic mandated benefits.

Health insurance costs vary, with HMOs typically ranging from PHP 5,000 to PHP 20,000 annually per employee. Employers are required to register employees with PhilHealth and remit contributions monthly, based on salary brackets. Retirement benefits are primarily provided through the SSS pension system, with additional private retirement plans offering tax advantages and enhanced security.

Employment agreements in the Philippines are essential for establishing clear, legally compliant working relationships, outlining rights, responsibilities, and benefits. They must adhere to the Philippine Labor Code and include mandatory clauses such as job description, compensation, working hours, benefits (SSS, PhilHealth, Pag-IBIG), and grounds for termination. Properly drafted contracts protect both parties and help prevent disputes.

Philippine law recognizes various contract types: regular employment (full benefits, security of tenure), probationary (up to 6 months, with standards for regularization), fixed-term (justified duration), project-based, and seasonal employment. Fixed-term contracts require legitimate reasons; indefinite contracts offer greater job security. Probationary periods must be clearly communicated, with standards for regularization, and cannot exceed six months unless justified.

Key contractual clauses include confidentiality and non-compete agreements, which are enforceable if reasonable in scope and duration. Contract modifications require mutual consent and written documentation. Termination can be for just or authorized causes, with strict procedural requirements such as written notices and due process. Employers should ensure compliance to avoid legal liabilities.

The Philippines is experiencing a surge in remote work and flexible arrangements, driven by technological progress and changing workplace expectations. While no single comprehensive law exists, key regulations such as the Labor Code, Telecommuting Act (RA 11165), Data Privacy Act, and CREATE MORE Act provide a legal framework. Employers must ensure compliance with labor standards, data protection, and provide necessary equipment, fostering safe and productive remote work environments. The upcoming flexible work bill expected in 2024 aims to further enhance employee flexibility.

Common flexible work options include Work from Home (WFH) and telecommuting, allowing employees to perform duties outside traditional office settings. The government encourages adoption to sustain employment gains, with the Marcos administration supporting alternative arrangements in 2025. Employers should establish clear policies, ensure legal compliance, and invest in technology infrastructure to maximize the benefits of remote work.

Terminating employees in the Philippines requires strict compliance with labor laws to avoid legal issues. Employers must distinguish between just cause and authorized cause terminations, each with specific procedural and notice requirements. For termination due to just cause, a written notice and hearing are necessary, while authorized cause dismissals require a 30-day notice to both the employee and the Department of Labor and Employment (DOLE), along with severance pay.

Severance pay is mandated only for authorized causes, calculated at one month's pay per year of service for redundancy, closure, or cessation of business, and half a month's pay for retrenchment. The minimum notice periods vary based on the reason and length of service, as summarized:

Key pitfalls include failure to follow due process, insufficient documentation, discriminatory or retaliatory dismissals, and misclassification of cause. Proper adherence to procedures and accurate computation of benefits are essential to mitigate legal risks and ensure fair treatment.

The rise of freelancing and independent contracting in the Philippines is driven by technological advancements, professionals' desire for flexibility, and businesses' need for specialized skills without traditional employment overheads. Companies must understand the legal distinctions between employees and contractors, primarily determined by the "Four-Fold Test," which assesses selection, payment, dismissal authority, and control over work methods. Proper classification and contractual agreements are vital for compliance and risk management.

Key elements of independent contractor agreements include scope of work, compensation, and termination conditions, ensuring the contractor's independent status. Intellectual property rights are crucial, with contractors typically retaining IP unless a contract specifies otherwise. Tax obligations for contractors include registering with the Bureau of Internal Revenue, issuing official receipts, and filing income tax returns. The progressive tax rates for 2025 are expected to remain consistent under the TRAIN Law.

Independent contractors are responsible for their own insurance and contributions to social services. Common industries utilizing contractors include IT, BPO, creative services, consulting, education, healthcare, and media, benefiting from the flexibility and access to global talent.

Foreign nationals seeking employment in the Philippines must obtain appropriate visas and work permits, with the most common being the 9(g) Working Visa, which requires sponsorship from a Philippine-registered company and typically lasts 1-3 years. Short-term projects (up to 6 months) are covered by the Special Work Permit (SWP), while the Provisional Work Permit (PWP) allows work initiation during the 9(g) visa processing period. Certain entities, like regional headquarters or international organizations, may qualify for the 47(a)(2) visa.

Employers must navigate a multi-agency process, ensuring compliance with immigration laws, which include application procedures, documentation, and adherence to employment regulations. Proper preparation facilitates legal employment and residence for foreign workers in the Philippines.