How to Hire in the Philippines: Complete Employer Guide (2026)

The Philippines has a labor force of 49.1 million workers as of Q4 2025, with median monthly wages of PHP 18,423 in the National Capital Region. Employers hiring in the Philippines must comply with the Philippine Labor Code, register with the Bureau of Internal Revenue (BIR), and make mandatory contributions to three social agencies. This guide covers every step from choosing a hiring structure to managing termination.

What Are the Hiring Options for Foreign Companies in the Philippines?

Foreign companies can hire in the Philippines through four structures. Each structure has distinct cost, compliance, and timeline implications. The choice depends on headcount, budget, and long-term plans.

An EOR in the Philippines allows companies to hire without registering with the Securities and Exchange Commission (SEC). The EOR becomes the legal employer, handles payroll and statutory contributions, and ensures DOLE compliance. A PEO provider in the Philippines operates under a co-employment model where compliance responsibilities are shared.

What Employment Laws Govern Hiring in the Philippines?

The Philippine Labor Code (Presidential Decree 442) is the primary employment statute. Additional regulations come from DOLE Department Orders, the Social Security Act (RA 11199), the PhilHealth Act (RA 11223), and the Pag-IBIG Fund Law (RA 9679). Key provisions that affect hiring decisions include mandatory regularization after 6 months, strict rules on termination, and required employee benefits that exceed many Southeast Asian countries.

The Department of Labor and Employment (DOLE) enforces labor standards, mediates disputes through the National Labor Relations Commission (NLRC), and audits employer compliance. Foreign employers without a local entity cannot directly employ workers under Philippine law, making an employer of record in the Philippines the standard alternative.

What Types of Employment Contracts Are Used in the Philippines?

Philippine employment law recognizes three contract types. Regular (permanent) employment begins after a probationary period of up to 6 months. Project-based employment ends upon project completion. Seasonal employment covers work that is seasonal in nature. Fixed-term contracts are permitted only under specific conditions established by the Supreme Court in the Brent School ruling.

All employees regardless of contract type receive full statutory benefits from day one. There is no exemption period. Employers must issue a written contract specifying duties, salary, work hours, and place of work. Contracts must be in English or Filipino.

What Are the Mandatory Employer Costs in the Philippines?

Philippine employer costs include contributions to three mandatory social agencies plus 13th month pay. Total statutory burden ranges from 12.5% to 14% of monthly salary depending on brackets, plus the 13th month pay equivalent to one additional month of basic salary per year.

The Social Security System (SSS) contribution table uses 31 salary brackets. Employers must register within 30 days of hiring the first employee. PhilHealth contributions increased to 5% (shared equally) starting January 2025. Pag-IBIG Fund contributions are capped at PHP 200 total (employer PHP 100, employee PHP 100-200). For detailed breakdowns, see employment agencies in the Philippines.

How Does Payroll Work in the Philippines?

Philippine payroll runs semi-monthly (1st and 15th or 15th and 30th). Employers must pay wages within 16 days of the end of each pay period. Withholding tax follows a graduated scale from 0% (income up to PHP 250,000/year) to 35% (income above PHP 8,000,000/year). Employers must file monthly remittances to SSS, PhilHealth, Pag-IBIG, and BIR.

13th month pay is mandatory under Presidential Decree 851. It equals one-twelfth of total basic salary earned during the calendar year. The first PHP 90,000 of 13th month pay and other bonuses combined is tax-exempt. Most employers pay 50% in June and 50% in December.

What Work Permits Do Foreign Employees Need in the Philippines?

Foreign nationals working in the Philippines require both a work visa and a work permit. The two primary permits are the Alien Employment Permit (AEP) from DOLE and the Special Work Permit (SWP) for assignments under 6 months. Longer assignments require a 9(g) pre-arranged employment visa from the Bureau of Immigration.

The AEP application requires a Labor Market Test (LMT) proving no qualified Filipino is available. DOLE publishes a list of occupations open to foreign nationals. Companies operating in Philippine Economic Zone Authority (PEZA) zones have expedited visa processing.

What Are the Termination Rules in the Philippines?

Philippine labor law provides strong employee protection. Termination is only lawful through just cause (employee fault) or authorized cause (business necessity). Procedural requirements include written notices and a hearing for just cause, or 30 days written notice plus DOLE notification for authorized cause.

Illegal dismissal results in reinstatement plus full back wages from the date of termination to actual reinstatement. If reinstatement is not feasible, the NLRC awards separation pay in lieu of reinstatement. The burden of proof falls on the employer to demonstrate lawful termination.

What Are the Leave Entitlements in the Philippines?

The Philippines mandates Service Incentive Leave (SIL) of 5 days after 1 year of service. Most employers exceed this minimum. Additional statutory leave includes maternity, paternity, solo parent, VAWC, and special leave for women.

The expanded Maternity Leave Law (RA 11210) provides 105 calendar days of paid maternity leave for every instance of pregnancy, including miscarriage and emergency termination. An additional 30 unpaid days may be extended. For leave in the context of marriage, see marriage leave in the Philippines.

What Are the Salary Benchmarks in the Philippines?

The Philippines uses a regional minimum wage system. The National Capital Region (NCR) has the highest rate at PHP 645/day (effective July 2024). Outside NCR, rates range from PHP 341-573/day depending on the region. Professional salaries vary significantly by industry.

The BPO sector employs 1.7 million Filipinos and drives competitive salaries in IT, customer service, and back-office roles. Executive search in the Philippines typically targets C-level and director positions with salaries ranging from PHP 200,000-500,000/month.

What Is the Step-by-Step Process to Hire in the Philippines?

Step 1: Choose a hiring structure. Register an entity with the SEC (3-6 months), or engage an EOR (3-5 days). Step 2: Draft an employment contract specifying salary, role, work hours, and probation terms. Step 3: Register the employee with SSS, PhilHealth, Pag-IBIG, and BIR. Step 4: Set up semi-monthly payroll with correct withholding calculations. Step 5: Issue the company ID, enroll in benefits, and conduct onboarding per DOLE labor standards.

Companies testing the Philippine market often start with an EOR provider in the Philippines to validate the talent pool before committing to entity setup. This approach eliminates SEC registration, BIR filing, and direct social agency management.

Frequently Asked Questions

Can a foreign company directly hire employees in the Philippines?

No. A foreign company without a SEC-registered entity cannot directly employ Philippine workers. The legal alternatives are establishing a subsidiary, representative office, or branch office, or using an employer of record.

Is 13th month pay mandatory for all employees?

Yes. All rank-and-file employees who have worked for at least one month during a calendar year are entitled to 13th month pay. Managerial employees are exempt under PD 851, but many employers include them voluntarily.

How long is the probation period in the Philippines?

The maximum probation period is 6 months. The employer must inform the employee of the standards for regularization at the start. Failure to notify results in automatic regular employment status.

What is the cost difference between EOR and entity setup?

EOR costs $299-599 per employee per month with no setup fees. Entity setup costs $3,000-5,000 initially plus $1,500-3,000 monthly for accounting, compliance, and registered office. EOR becomes cost-effective for fewer than 10-15 employees.

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