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Hiring in Philippines

Hiring employees compliantly in Philippines means doing it yourself or using an Employer of Record like Global Expansion. You should be careful using independent contractor agreements in Philippines so that you don’t run afoul of employment laws. To hire an employee compliantly and offer them mandatory benefits and compliant agreements, you can:

(a) Establish your own new legal entity, banking, accounting and payroll service in Philippines; or

(b) use an Employer of Record like Global Expansion who can handle all of the details for you.

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Labor Laws in Philippines

Employee Probation Period

  • Under Article 281 of the Labor Code of the Philippines, probationary employment shall not exceed six (6) months from the date the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period.

Annual Leave in Philippines

  • Philippine employees are legally entitled to 5 days of paid 'service incentive leave', which can be used for vacation or sick leave.
  • However, employers sometimes offer 15 days of paid vacation and 15 days of paid sick leave for most professional level positions in the Philippines.

Holidays in Philippines

New Year’s Day 1st January
Chinese New Year 25th January
Bataan Day 9th April
Maundy Thursday 9th April
Good Friday 10th April
Labor Day 1st May
Eid al-Fitr  
Philippines Independence Day 12th June
Eid al-Adha  
National Heroes' Day (in Philippines) 31st August
Bonifacio Day 30th November
Feast of the Immaculate Conception 8th December
Christmas Day 25th December
Rizal Day 30th December

 

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Maternity Leave Philippines

  • All working mothers — including those employed in the informal sector — can take up to 105 days of paid maternity leave (up from 60 days for normal childbirth or 78 days for a cesarean delivery) for each pregnancy, provided they’ve made at least three monthly contributions to the Social Security System (SSS) in the 12 months preceding the semester of the birth and have notified their employer.

Paternity Leave Philippines

  • Notwithstanding any law, rules and regulations to the contrary, every married male employee in the private and public sectors shall be entitled to a paternity leave of seven (7) days with full pay for the first four (4) deliveries of the legitimate spouse

Sick Leave in Philippines

  • Philippine employees are legally entitled to 5 days of paid 'service incentive leave', which can be used for vacation or sick leave.

Working Hours in Philippines

  • The normal hours work of an employee shall not exceed 8 hours a day.
  • However, Health Personnel shall have a maximum of 40 hours a week.

Overtime in Philippines

  • Overtime pay is an additional pay of 25% of a covered employee's hourly rate for work performed beyond eight (8) hours a day or for overtime work.
  • If health personnel are made to work in excess of 40 hours, they are entitled to 30% additional pay.

Termination of Employment in Philippines

  • Employers may dismiss workers for just cause, in which case there no mandatory severance. Management must conduct an investigation and have strong evidence to prove cause.
  • Termination causes that would be deemed just cause include:
    • serious misconduct
    • willful disobedience
    • gross and habitual neglect of duty
    • fraud or breach of trust
    • commission of a crime or offense against the employer, his family or representative
  • As per Philippine laws, particularly the Labor Code, employees resigning on their own volition need to give their companies a notice of 30 days.
  • In case of termination due to the installation of labor saving devices or redundancy, the employee affected is entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher.

Notice Period in Philippines

  • As per Philippine laws, particularly the Labor Code, employees resigning on their own volition need to give their companies a notice of 30 days.

Severance in Philippines

  • In case of termination due to the installation of labor saving devices or redundancy, the employee affected is entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher.

Philippines Salary and Wages

Estimate your costs when employing in Philippine in 2023. Includes base salary, dependents, benefits, taxes, social contributions, and payroll costs. Monthly or yearly calculation period.

This calculator provides an estimate only. The final calculations mai differ based on the specifics of any given situation and changes in conditions.

13th / 14th Month Salary in Philippines

  • Yes (Mandatory)
  • There is a statutory requirement to pay the 13th month salary, no later than the 24th of December.
  • A bill was put to require a 14th month salary, however there is no evidence that the bill passed.
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Income Tax in Philippines

  • Resident citizens are subject to tax on worldwide income.
  • Nonresident citizens, resident aliens and nonresident aliens are subject to tax on income from Philippine sources.
  • Bureau of Internal Revenue (BIR) Ruling 517-2011 declared that employees of a Philippine entity who are working abroad for most of the tax year but remain on the local payroll are not nonresident citizens.
  • Accordingly, payments to them are subject to withholding tax in the Philippines.
  • Employment income received for services provided in the Philippines is subject to tax in the Philippines regardless of where the compensation is paid.
  • Remuneration for services remains classified as compensation even if paid after the employer-employee relationship is ended
  • Gross income includes compensation, income from the conduct of a trade, business or profession, and other income, including gains from dealings in property, interest, rent, dividends, annuities, prizes, pensions and partners’ distributive shares.
  • Net taxable compensation and business income of resident and nonresident citizens, resident aliens, and nonresident aliens engaged in a trade or business are consolidated and taxed at the following graduated rates.

Net taxable income

Tax on Lower Amount (PHP)

Rate on Excess (%)

Exceeding (PHP)

Not Exceeding (PHP)

 

 
0 250,000 0 0
250,000 400,000 0 20
400,000 800,000 30,000 25
800,000 2,000,000 130,000 30
2,000,000 8,000,000 490,000 32
8,000,000 -  2,410,000  35

Effective from 1 January 2023, the following will be the graduated rates.

Net taxable income

Tax on Lower Amount (PHP)

Rate on Excess (%)

Exceeding (PHP)

Not Exceeding (PHP)

 

 
0 250,000 0 0
250,000 400,000 0 15
400,000 800,000 22,500 20
800,000 2,000,000 102,500 25
2,000,000 8,000,000 402,500 30
8,000,000 - 2,202,500  35
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Social Security in Philippines

  • All individuals working in the Philippines must pay social security contributions.
  • The employee’s contribution is approximately 4% of salary and is withheld by the employer.
  • The employer’s contribution is approximately 8% of employees’ salaries.
  • Coverage is mandatory for self-employed persons and Overseas Filipino Workers.
  • The minimum monthly salary subject to social security contributions is PHP1,000.
  • The maximum monthly contributions are PHP1,630 for employers and PHP800 for employees, which apply to employees receiving monthly compensation of PHP19,750 or more.

Contribution

Group 1083

Social Security Contribution

Employee Group 1083 4%
Employer Group 1083 8%

Immigration Philippines

Alien Employment Permit

  • Unless specifically exempted or excluded, all foreign nationals desiring to work in the Philippines must obtain an AEP from the DOLE.
  • AEPs are normally valid for one year, but may be extended annually to cover the foreign national’s length of employment, up to a maximum of five years.
  • Local employers who desire to employ a foreign national must apply for the AEP on the foreign national’s behalf with the regional office of the DOLE having jurisdiction over the employee’s place of work.
  • The petitioning company must prove that the foreign national possesses the required skills for the position.
  • Educational background, work experience and other relevant factors are considered in evaluating the application.
  • The petitioning company must prove that no Filipino is available who is competent, able and willing to do the specific job and that the employment of the foreign national is in the best interest of the public.
  • The AEP is not an exclusive authority for a foreign national to work in the Philippines.
  • It is just one of the requirements in the issuance of a work visa to legally engage in gainful employment in the country.
  • Companies that are listed in the “Tenth Regular Foreign Investment Negative List” must comply with the Understudy Training Program and Anti-Dummy conditions of the authorities, which require them to obtain an “Authority to Employ Alien” from the Department of Justice (DOJ) based on the DOJ Ministry Order No. 210, series of 1980.

Temporary work permit

  • The Subic Bay Metropolitan Authority (SBMA) may issue a temporary work permit (TWP) to foreign expatriates in order to immediately legalize a foreign national’s status as an investor or worker in the Subic Bay Freeport Zone.
  • The permit is issued while the foreign national’s investor or work visa application is still in process.
  • It is valid for three months and may be extended every three months, subject to a maximum total extension of one year.
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Type of Visa/Permit

Documentation

Validity

Eligibility

Alien Employment Permit
  • Duly notarized application form;
  • Letter of request sent to DOLE;
  • Secretary’s Certificate electing foreign national to position (for non-resident foreign nationals with elective positions);
  • Authenticated passport with current visa;
  • Photocopy of Mayor’s Permit; and
  • Photocopy of Business Permit.
1 year (may be extended up to a maximum of 5 years)
  • Unless specifically exempted or excluded, all foreign nationals desiring to work in the Philippines must obtain an AEP from the DOLE.
  • Educational background, work experience and other relevant factors are considered in evaluating the application. 
Temporary Work Permit
  • Completed application form
  • Valid Passport
  • Passport photos
3 months
  • The Subic Bay Metropolitan Authority (SBMA) may issue a temporary work permit (TWP) to foreign expatriates in order to immediately legalize a foreign national’s status as an investor or worker in the Subic Bay Freeport Zone. 
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Value Added Tax (VAT) in Philippines

  • VAT is due on the sale, exchange or lease of goods, property or services by a taxable person.
  • VAT in the Philippines is administered by the Bureau of Internal Revenue.
  • The standard VAT rate is 12%
  • Certain goods and services such as export sales and foreign currency denominated sales are subject to 0% VAT

VAT

Standard Rate

Group 1083

12%

Zero Rate Group 1083 0%

Mandatory Benefits in Philippines

  • These are mandatory benefits as postulated by law
  • These include probationary period, annual leave, public holidays, sick leave, maternity leave, paternity leave, overtime pay, notice period, severance pay and 13th month pay
  • Statutory benefits also include social security benefits
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Mandatory Benefits overview

  • Probationary period

  • Annual Leave

  • Public Holidays

  • Maternity Leave

  • Paternity Leave

  • Sick Leave

  • Overtime Pay

  • Notice period

  • Severance Pay

  • 13th month pay

  • Social Security Benefits

Payments And Invoicing

  • The tax year runs from 1 January to 31 December.
  • Unless impracticable, a husband and wife must file one consolidated income tax return, but the tax is computed separately. Income that cannot be definitely attributed or identified as exclusive income of either spouse is divided equally between them.
  • Generally, this results in lower combined tax liability than when the tax is jointly computed.
  • Substituted filing is available for qualified employees.
  • In such case, the Certificate of Compensation Payment/Tax Withheld (Bureau of Internal Revenue [BIR] Form 2316) filed by the employer and duly stamped 'received' by the BIR shall be tantamount to substituted filing of the Annual Income Tax Return of the employees.
  • Substituted filing shall apply only to employees who meet all of the following conditions:
    • the employee receives purely compensation income (regardless of amount) during the taxable year,
    • the employee receives the income only from one employer in the Philippines during the taxable year,
    • the amount of tax due from the employee at the end of the year equals the amount of tax withheld by the employer, and
    • the employee’s spouse also complies with all three mentioned conditions.
  • Substituted filing, however, will not apply to non-resident aliens engaged in trade or business in the Philippines.
  • All individual taxpayers who do not qualify for substituted filing are required to file their returns on a calendar-year basis. The return must be filed on or before 15 April of the succeeding year.

Payroll Accrual in Philippines

Country Accruals Additional Information

Social Security max, matched by employer 28,200.00
Maternity leave 60days
Christmas Bonus 8.33%
Vacations 4.66%
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Description

The maximum annual social tax payable by a foreign national employee is PHP 28,200 for tax year 2021. Social taxes consist of contributions to the Social Security System (SSS) and Philippine Health Insurance Corporation (Philhealth). Foreign nationals who are working in the Philippines are no longer required to contribute to the Home Development Mutual Fund (HDMF). Employers are required to match the employees' contributions. employee in a foreign bank if no individual pension fund abroad is available.

Payroll Accruals Additional Information

 

 

Employment Accruals

Service Incentive Leave Philippine employees are legally entitled to 5 days of paid 'service incentive leave', which can be used for vacation or sick leave. This equals 1.36% (5/365 days) of annual income
Maternity Leave All working mothers — including those employed in the informal sector — can take up to 105 days of paid maternity leave (up from 60 days for normal childbirth or 78 days for a cesarean delivery) for each pregnancy, provided they’ve made at least three monthly contributions to the Social Security System (SSS) in the 12 months preceding the semester of the birth and have notified their employer. This equals 28.7% (105/365 days) of annual income
Paternity Leave Notwithstanding any law, rules and regulations to the contrary, every married male employee in the private and public sectors shall be entitled to a paternity leave of seven (7) days with full pay for the first four (4) deliveries of the legitimate spouse This equals 1.9% (7/365 days) of annual income
Severance In case of termination due to the installation of labor saving devices or redundancy, the employee affected is entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. This equals 8.33% (1/12 months) of annual income
Overtime Overtime pay is an additional pay of 25% of a covered employee's hourly rate for work performed beyond eight (8) hours a day or for overtime work. Depends on the number of overtime hours worked
13th Month Pay Under Presidential Decree No. 851, employers from the private sector in the Philippines are required to pay their rank-and-file employees a Thirteenth 13th Month Pay not later than December 24 every year. This equals 8.33% (1/12 months) of annual income
Social Security The employer’s contribution is approximately 8% of employees’ salaries. This equals 8% of annual income

Accrued Benefits in Philippines

Christmas Bonus %

Based on one month bonus (paid by the 24th of December)

8.33%
Christmas Bonus Over Vacations % 0%
Severance per Year%

Employees are entitled to severance pay that equals one and a half months pay after one year of service (12.5% of annual salary)

12.5%
of annual salary
Vacations %

Employees are entitled to 5 days of annual leave (1.37% of annual salary)

1.37%
of annual salary
Notice %

Employees are entitled to a 1 month of notice period for one year of service or more

8.33%
Christmas Bonus Over Notifications % 0%
Vacations Plus % 0%

Total percentage of Salary (yearly)

The total employment accruals as a percentage of salary per anum are equal to 26.36%

26.36%

Why use Global Expansion to hire in Philippines

Establishing a branch office or subsidiary in Philippines can be time-consuming, expensive and complex. With such a robust labor market in place, one must pay great attention to detail when structuring employment because Philippines labor laws are complex.

The company also has a responsibility to comply with specific employment practices dictated by Philippines law to maintain its good standing as an equal opportunity employer.

Global Expansion makes it easy for you to expand into Philippines. We'll help you hire your candidate of choice, handle HR matters and payroll, and ensure that you comply with local laws without the burden of setting up a foreign branch office or subsidiary. In addition, you'll have complete control and direction over your employees.

We enable you to stay in control of everything. Our Philippines Global Professional Employer Organization (PEO) and Employer of Record (EOR) solution provides you with peace of mind to focus on running your company and the security to enter new markets.

 

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