10 Notable Points When Hiring in The Philippines

Whether you are an employer looking to expand your team or a business considering venturing into the Philippines, this guide is here to equip you with essential knowledge for a successful hiring process. From navigating labour laws to understanding mandatory benefits, we have compiled ten key points to help you make informed decisions and ensure compliance with Philippine employment regulations. 

Here are the 10 key points that will help to ensure a successful hiring process in the Philippines:

1. Compliance with Employer Cost You Must Follow

Typically, the employer cost is estimated to be around 10.57% of the employee's salary.

However, Philippine Insurance Corporation (PhilHealth) contribution is capped at PHP 1,600/month. Also, the social security contributions are capped at PHP 2,880/month. 

2. Vital Inclusions for Contracts

Contracts in the Philippines should be written in English or can be bilingual, but they must be in written form and signed by both parties involved. Essential elements that must be included in a contract are:

• Name 
• Start Date
• Length of the Employment
• Job Description
• Termination Conditions

If you are hiring remote workers in the Philippines, you should also specify the duration and location of their work, the confidentiality and intellectual property clauses, and the termination conditions.

3. Essential Documents for Onboarding in the Philippines

• Passport/ID
• Latest BIR 2316
• NBI Clearance
• Social Security Services ID
• Tax Identification Number
• Philhealth ID
• Pag-ibg/HDMF ID

When hiring, the onboarding process typically lasts for three business days. Prior to the employee's start date, they will be registered with the Social Security System (SSS) and PhilHealth, which are both part of the social security and healthcare systems in the Philippines.

4. Mandatory Benefits for Employees in the Philippines

In the Philippines, both on-site and remote employees are entitled to receive mandatory benefits, which encompass:

• Social Security
• Pension Fund
• Public Health Insurance
• Private Health Insurance (optional)

5. Compulsory Paid Time Off & Public Holidays

Full-time employees in the Philippines have the right to avail five days of paid time off (PTO) per year. The PTO accrues on a monthly basis at a rate of 0.42 days per month once the employee completes 12 months of work. If any unused holidays remain at the end of the year, employees may receive a payment in lieu of taking those days off. On the other hand, part-time employees do not have entitlement to leave.

In the Philippines, when hiring both on-site and remote employees, it's important to consider the holidays that apply to their specific location. The country celebrates a total of 18 national holidays, and in addition to those, there are 3 regional holidays. Moreover, there are 8 special holidays designated as non-working days. These national public holidays include:

6. Minimum Wage Requirements

In the Philippines, the minimum wage varies by region as there is no national minimum wage. The applicable minimum wage is determined based on the region where the employer's company is incorporated.

7. Overtime Pay & Maximum Hours

In the Philippines, it is mandatory to provide overtime payment to employees, whether they work remotely or on-site, and it cannot be included in their regular salary. Overtime refers to the hours worked outside of the standard work hours. Employees are entitled to receive additional compensation for these extra hours worked. In the Philippines, the standard working hours are set at eight hours per day and 40 hours per week. The standard workweek typically runs from Monday to Friday.

• On working days - 125% of the hourly rate
• On holidays - 130% of the hourly rate

Bonus

In the Philippines, employees are required to provide an additional salary payment per year which is also known as the 13th month salary.

8. Individual Income Tax

Individual income tax in the Philippines follows a progressive rate structure ranging from 0% to 35%. The calculation of income tax considers various factors, including household status and the number of children, which can impact the overall tax rates applied.

• Up to PHP 250,000 - 0%
• Up to PHP 400,000 - 20%
• Up to PHP 800,000 - 25%
• Up to PHP 2,000,000 - 30%
• Up to PHP 8,000,000 - 30%
• Over PHP 8,000,000 - 35%

9. Leave Policies in the Philippines

Maternity Leave

In the Philippines, pregnant employees who have completed 90 consecutive days of work are entitled to 105 days of paid maternity leave. If the employee qualifies as a solo parent, an additional 15 days of paid leave will be granted. Out of the total leave period, 14 days are required to be taken before the child's birth, while the remaining days can be taken after the child is born. During this maternity leave period, the employee will receive 100% of their average salary, and the payment responsibility lies with the Social Security administration. Additionally, the employee has the option to extend the leave by an additional 30 days without pay.

Paternity Leave

In the Philippines, employees have the right to avail seven calendar days of paid paternity leave, which should be taken after the child's birth. During this leave, the employee will receive 100% of their average salary, and the employer is responsible for providing the payment. The employee also has the option to extend the leave period, but it will be unpaid.

Sick Leave

In the Philippines, employees do not have a separate entitlement to sick leave in addition to their vacation allowance (PTO). If an employee needs to take sick leave, they are required to submit the request through the Deel platform using the Time Off feature. If an employee has exhausted their vacation allowance and requires further time off due to illness, those additional days will be considered as unpaid leave. However, employees may be eligible for reimbursement through the Social Security System (SSS) in the form of a sickness benefit. Similar to the Maternity Benefit, the Sickness Benefit ensures that eligible employees receive a portion of their regular pay during their period of sickness.

10. Procedures for Terminating Employees

Under the Labor Code in the Philippines, an employee may be terminated for authorized causes. In such cases, the employer is required to provide written notice of the termination.

Notice Period

In the Philippines, the minimum notice period for termination is 30 days, and the employer has the option to extend it as deemed necessary.

Severance

The amount of Severance Pay in the Philippines is determined based on the cause of termination and varies between 0.5 months to one month's wages for each year of employment.

• Fair dismissal
  • 30 days of salary per year of service up to 12 months based compensation
• Reduction from the employer
  • 15 days of salary per year of service up to 12 months based compensation