Employ Candidates Compliantly in the Philippines

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  1. Overview: Philippines
  2. Global HR Compliance
  3. Global PEO and payroll
  4. Work permit for hiring expats via PEO
  5. Expand without a company set up
  6. Contractor vs. employee: which is better?
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HR Compliance in the Philippines

HR, legal and tax compliance is crucial when you are hiring a Filipino workforce for your own company or your clients. Acumen International takes the guesswork out of global compliance with our innovative global employment solution. We help you navigate the complexities and nuances of the Philippines’ labor legislation. With us, you get a single global partner who can handle compliant employee on-boarding, payroll and compensation management, including mandatory and voluntary benefits on your behalf. We can reduce all this to a single monthly invoice while ensuring you stay fully compliant and avoid legal and financial risks.

The labor laws and regulations of your home country may not apply to Filipino employees. Lack of in-country expertise in managing HR compliance and employment requirements in the Philippines can be a major hurdle to your company’s hiring and payrolling your overseas staff. You will need to research the country to learn about their individual employment requirements for hiring, compensating and terminating your global talent.

Acumen’s global employment and compliance solution is designed especially for companies like yours, to help meet your global hiring needs and keep you compliant while you grow your business in the Philippines. This is where we take the hassle off your shoulders and handle it for you. Acumen’s Philippines employment, aka Employer of Record (EOR) solution makes it possible for you to quickly hire a local and expatriate workforce there without establishing a legal in-country business entity. This takes away the need to go through the most complex process of setting up your own subsidiary or branch office, which includes 16 procedures to undergo and can take up to 40 days in time for completion.

To circumvent the complexities of Philippines employment laws, some businesses turn to hiring contractors, consultants, and sales agents, rather than dealing with official employment regulations head-on. But while those tactics may save you time and money early on, they can put you at risk of misclassification charges and lead to hefty fines and penalties. You also need to be mindful of the various types of employment agreements and civil contracts required for employees vs contractors.

Our dedicated global expert team works around the clock to monitor changes in the in-country HR compliance requirements and our system is constantly updated to keep our international clients abreast of legislative changes that impact them. So we never miss a beat in keeping your Filipino talent fully compliant.

How to hire workers in the Philippines

Before hiring local workers in the country, you should familiarize yourself with major regulations governing employment, existing practices to help you stay compliant and standard benefits in the Philippines.

The employment relationships are generally regulated by the Filipino Labor Code. This law can also be applied to foreign citizens who work in the Philippines.

Laws governing discrimination
The Philippines government strictly prohibits employment discrimination based on ethnicity, race, religious beliefs, sex or gender, pregnancy, sexual orientation, civil status and HIV. In addition, there is legislation to protect employees from sexual harassment.

Talent Recruitment
The demand for professional personnel is high in the Philippines, and you should leverage all local media to advertise open positions, including print, airwaves and online resources. Nevertheless, there are no guarantees that candidates will choose your firm over your competitors.

Acumen International can help you find and select the best talent, and arrange for in-country employment for your chosen candidates. Our global employment solution lets you outsource the hiring, compensation and termination of your workforce in the Philippines to us, to administrate on your behalf, so you can focus on your business operations.

*Note: While talent recruitment is not a key service of Acumen International, we can provide on-demand sourcing and recruitment of job candidates as a special service upon your request, and employ your selected candidates on your behalf.

Running background checks

During the recruitment process, it is important to run a background check on prospective candidates prior to onboarding, to ensure they are legally allowed to work in the Philippines. Acumen can assist you in arranging screening for criminal background checks, address checks and other relevant information.

Employment agreements
Employment agreements in the Philippines can be oral or written, in English or Tagalog (Filipino). Like in most countries, a dual language contract will be concluded by Acumen International for Philippine nationals. The contract must detail the terms of the employee’s compensation, benefits, and termination. The offer of employment letter and employment agreement must express the salary and other compensation amounts in Philippine Pesos (PhP).

To legally hire an employee in the Philippines for a duration of longer than one month, you must provide a detailed employment agreement. In addition to fundamental details like the names of the business and the employee, the agreement should provide a starting date of employment, and termination date if the duration of employment is limited; job title and associated duties; salary and benefits; working hours and designated time off; confidentiality covenants to protect intellectual property and sensitive data and other details relevant to the terms of employment.

Failure on the employer’s part to live up to the terms of the employment agreement can result in harsh fines and penalties.

Backdated contracts
Backdating employment agreements is not recommended, as it may impact the candidate’s taxes and other government mandated contributions. To stay legally compliant, the employee must be onboarded on the date of hire, with up to a one-week window of leeway. Backdating may be viewed as fraud by Philippines tax authorities, which is a criminal offense. With our solution, you can have your employees legally onboarded for you within several business days, eliminating the need for backdating.

Documents required for on-boarding Filipino workers

  • Detailed employee information sheet
  • Employment agreement, dated and signed by both parties
  • Employee’s legal birth certificate
  • Form BIR 2316 from the employee’s previous employer

*Check out what mandatory documents are required to get a visa, work or residence permit for your expatriate personnel in the Philippines in our Work permit for hiring expats via PEO in the country block.

Terminating Employees and severance in the Philippines

Firing employees is never easy. To avoid conflict and complications, the conditions for employee termination should be clearly defined in the employment agreement. They should include such details as a list of employee behaviors and conduct that justify immediate termination, the duration of notice required for termination by either party, circumstances under which the employee will receive severance pay, and the amount of severance pay. As a legal employer for your workforce in the Philippines, Acumen team will handle this and other HR issues to ensure smooth employee termination.

Philippine labor law prohibits at-will dismissal of employees without due cause, even with notice or with payment of salary in lieu of notice.

Reasons considered valid for termination include:

  • Serious misconduct and/or neglect of duties
  • Fraud or breach of trust
  • Criminal behavior against the employer
  • Installation of labor-saving technology
  • Redundancy
  • Downsizing or closure of the business
  • Diseases that threaten other workers

Consequences for invalid or premature dismissal and failure to follow correct procedures for termination can be dire for employers. Improper termination can result in costly court proceedings and payment of court-mediated damages to the wrongfully terminated employee.

Acumen International can help you navigate the detailed procedures for terminating your Filipino employees, to avoid compliance violations and legal repercussions. When employee behavior or performance is the impetus for termination, complexities can arise with unpleasant consequences. In such cases, Acumen will guide through all legislative nuances, handle all documentation, and make all necessary payments to terminate your Philippines employees, sparing you from unnecessary complications and penalties.

Employee benefits and contributions in the Philippines

When negotiating the terms of a candidate’s employment agreement in the Philippines, there are multiple mandatory and optional benefits to consider. Acumen’s global employment solution can provide support for your company’s benefits strategy, to ensure you attract and retain the country’s top talent while remaining compliant with in-country laws and regulations. Trust Acumen International as an industry expert to handle the tailored best-matched benefits and compensation programs for your international employees in the Philippines.

Mandatory Employee Benefits and Contributions

Compensation and wages

  • Minimum wage
  • Overtime pay
  • Premium pay
  • Night shift differential
  • 13th month pay
  • Separation pay
  • Retirement pay

Paid leave benefits

  • Meal and break time
  • Paternity and maternity leave
  • Special leave for female employees
  • Up to 2 months with pay for gynecological-related surgery
  • Up to 10 days with pay for victims of domestic violence or sexual assault

Contributions (deducted from employee’s gross monthly salary)

  • Social Security System (SSS)
  • Home Development Mutual Fund (HDMF/Pag-IBIG)
  • Philippine Health Insurance Corporation (PhilHealth)

Optional employee benefits in the Philippines

In addition to mandatory benefits, employers may offer additional benefits and incentives, to be detailed in the employment agreement.

  • Performance bonuses
  • Employee share schemes (ESS)
  • Enhanced medical insurance or healthcare
  • Company car
  • Company phone/laptop/tablet
  • Travel allowance
  • Meal vouchers
  • Work from home or flexi-time plans
  • Professional development opportunities
  • Global mobility options
  • Access to fitness or leisure facilities
  • Children’s educational stipends

Acumen International: your Philippines HR compliance partner

Avoid possible non-compliance pitfalls in the Philippines by partnering with Acumen International, your global employment and HR compliance partner. Trust us to navigate for you the numerous in-country complexities that can arise surrounding your employee on-boarding, payroll and termination. Reduce compliance risks and streamline your HR processes in the Philippines.

Along with our core solution for hiring remote workforce, Acumen International’s team of English-speaking professionals can deliver a custom solution for you, with payroll and various perks for your offshore teams. Thus reducing your HR processes to a standard unified procedure, and saving you time, money and valuable resources.

To learn more, request your Free Express Quote for the Philippines, or ask us a question. Our team is always ready to assist you, no matter what time zone you’re in.

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