How To Hire And Pay Employees In the Philippines

Hiring in the Philippines provides access to a strong and diverse workforce with 700,000 graduates entering the labour market from Filipino universities each year. Furthermore, the Philippines has a hardworking attitude firmly integrated into the country’s working culture. Expanding your business to the Philippines is supported by the government through the provision of several different incentives that encourage investment. For example, the government provides tax deductions for foreign investors and special economic zones throughout the country. However, the Philippines holds corporate income tax at a flat rate of 30%, which is amongst the highest in Southeast Asia. The Philippines also has strict labour regulations, which include a requirement for companies to pay employees an additional 13^th month pay at the end of the year.

Philippine employees are legally entitled to 5 days of paid 'service incentive leave', which can be used for vacation or sick leave. However, for most professional-level positions, it is customary for employers to offer 15 days of paid vacation and 15 days of paid sick leave.

There are 18 public holidays

January 1st: New Year's Day 

February 1st: Chinese New Year

February 25th: People Power Revolution

April 9th: The Day of Valor

April 14th: Maundy Thursday 

April 15th: Good Friday 

Probation periods should not exceed six (6) months from the date the employee started working, unless covered by an apprenticeship agreement stipulating a longer period.

Employees must give companies 30 days’ notice of resignation. In case of termination due to redundancy, employees are entitled to a separation pay equivalent to at least one month’s pay, or one month’s pay for each year of service, whichever is higher.

Employers are free to include clauses in the employment contract which prohibit employees, within a certain period from and after termination, from:

• Starting a similar business, profession or trade or
• Working in an entity that is engaged in a similar business that might compete with the employer

There must be a limitation as to time (typically no longer than two years), place, and trade. Courts have found a two-year prohibition reasonable. Employee and customer non-solicitation clauses are also permissible.

Written employment contracts are optional but advisable. Employers and employees are free to agree to terms which are not contrary to law, morals, good customs, public order or public policy.

All working mothers are entitled to up to 105 days of paid maternity leave for each pregnancy, provided that they have 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. All married male employees are entitled to a paternity leave of seven days with full pay for the first four deliveries of the legitimate spouse

Philippine employees are legally entitled to 5 days of paid 'service incentive leave', which can be used for vacation or sick leave. However, for most professional-level positions, it is customary for employers to offer 15 days of paid vacation and 15 days of paid sick leave.

The employer’s Social Security contribution is approximately 8% of employees’ salaries, up to a maximum monthly contribution of PhP 1,630 per employee.

Employers are not obligated to provide any specific insurance benefits, since PhilHealth (the national health insurance programme) offers inpatient benefits, outpatient benefits, Z benefits, and SDG benefits. Many global companies may opt out of offering private health insurance to Filipino employees as a result, but it’s still common for many employers to offer secondary health insurance to their employees to help them access more specialised care (and to reduce wait times for more common treatments).

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 Department of Labor and Employment. 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 Philippines' minimum wage ranges from PhP 466 per day for agricultural workers in the Mimaropa Region to PhP 491 per day for non-agricultural workers in the National Capital Region. Minimum wages in the Philippines are set by tripartite regional wage boards.

Payroll in the Philippines follows a monthly cycle, depending on the employer and the sector. Employers must pay salaries once every two weeks at intervals of not more than 16 days. There is a statutory requirement to pay a 13th month salary bonus, no later than 24th December each year.

Employers are required to pay 4% and employees 8% as social security contribution.