Expand your business into the Philippines - without an entity
New Horizons provides global employment solutions for businesses wanting to hire employees and distribute payroll in the Philippines. Through our Philippines PEO and EOR, we manage your company’s payroll, benefits, and expenses in the Philippines. Additionally, we oversee HR duties, as well as employment and tax compliance.
New Horizons will act as your employees’ Employer of Record, which means you can begin doing business in the Philippines without a local entity. This not only allows your business to go to market faster, but also has the potential to save your business thousands in expansion costs.
As the only Philippines PEO with an in-house recruitment team, New Horizons will source, hire, and onboard your Philippine workforce. We hire employees in accordance with Philippine labor regulations and coordinate all expense claims and benefits payments. Although we act as your employees’ Employer of Record, you still maintain full autonomy and control over all employees.
Our Philippines PEO simplifies your expansion
New Horizons enables your business to expand its operations into the Philippines – without setting up a legal subsidiary.
New Horizons ensures day-to-day guidance to help your business navigate Philippine labor laws and regulations. We also provide mandatory monthly payroll requirements, and absorb all local employment liabilities. Partnering with our Philippines PEO is the quickest and most cost-effective way to enter the Philippine market.
Employment & Labor Laws in the Philippines
Employment contracts in the Philippines
Written employment contracts are standard practice in the Philippines. Businesses are required to provide a detailed written contract in the local Filipino language that clearly defines the employee’s duties, salary, benefits, and procedures related to termination.
Employers should also include letters of offer when hiring any new employees. Letters of offer must clearly define an employee’s salary and compensation in Philippine Pesos.
In the Philippines, probationary employment is permitted for up to six months. During this time, an employer can choose not to extend the employment relationship without recourse.
New Horizons’ Philippines PEO has established relationships with local labor organizations and guarantee employment contracts maintain full compliance.
Working hours in the Philippines
The typical work week in the Philippines is 40 hours, with the average work day being eight hours. If an employee works longer than eight hours in a work day, employers must pay overtime that is 1.25x the employee’s regular hourly rate.
For employees required to work on Sundays or paid holidays, overtime is paid at 1.3x the average hourly rate. The only circumstances where this may differ is when an employment contract stipulates otherwise.
Holidays in the Philippines
New Year’s Day
First Philippine Republic Day
Chinese Lunar New Year’s Day
People Power Anniversary
Lailatul Isra Wal Mi Raj
Maundy Thursday, The Day of Valor
Eid al-Adha (Feast of the Sacrifice)
Eid al-Adha Day 2
Ninoy Aquino Day
National Heroes Day
Yamashita Surrender Day
Feast of the Nativity of Mary
All Saints’ Day
All Souls’ Day, Additional Special Non-Working Day
Feast of the Immaculate Conception
Christmas Eve, Additional Special Non-Working Day
New Year’s Eve
Taxes in the Philippines
In the Philippines, both employees and employers are required to contribute to the nation’s Social Security System (SSS). The current deduction rate is 11% of an employee’s monthly salary and must not exceed P16,000. Employers are responsible for 7.37% of this amount, whilst employees contribute 3.63%.
Social security system
The Philippine social security system provides employees and their families with protections in the event of disability, old age, sickness, and death. All workers under 60 who earn more than P1,000 a month must contribute to this fund. Contributions are automatically deducted from an employee’s salary on a monthly basis.
In the Philippines, mandatory universal healthcare is funded through payroll taxes and the general budget. Private health care is also available to those willing to pay for it.
To stay competitive, many employers in the Philippines offer private medical insurance. Some employers will also offer a taxable allowance to cover the cost of private medical insurance.
Employees in the Philippines are entitled to five days of paid leave each year. However, many employers offer up to 15 day’s paid vacation per year. Employment contracts can establish rules for carrying over any unused portion of leave.
Technically. the Philippine government does not require employers to provide employees with sick leave. However, employment contracts often stipulate provisions that include coverage for sick leave.
During times of illness or injury, employees may be entitled to 90% of their average daily wages if they meet the following criteria:
- The employee has exhausted all sick leave provided by their employer
- The employee has paid at least three of the previous 12 monthly social security contributions – before the illness or injury arose
- The employee was hospitalized for more than three days and is approved by the social security system
If sick leave is approved in these circumstances, employers are entitled to full reimbursement from the social security system.
Maternity and paternity leave
In the Philippines, mothers who have made at least three social security contributions within the last year are eligible for maternity leave. Maternity leave consists of two month’s paid leave and is available for a woman’s first four pregnancies.
If the delivery was caesarian, mothers are entitled to 78 day’s paid leave. The benefit is equal to the mother’s regular daily wage.
Married fathers are eligible for seven day’s paid paternity leave for their first four children. Paternity leave must be used within 60 days of the child’s birth.
Termination and severance
Employers in the Philippines can only terminate employees if there are suitable grounds for dismissal. This can include:
- Serious misconduct
- Gross and habitual neglect of duty
- Willful disobedience
- Fraud or breach of trust
- Commission of a crime against the employer
No severance is required in any of the above circumstances.
There are authorized causes in which an employer can legally terminate an employee, with the employer required to pay a severance. Authorized causes include:
- Replacement of labor-saving devices
- Redundant placement
- Closure of business
- Disease or illness
- Retrenchment to prevent losses
Due process is required in any of these cases. This requires that notice must be provided to the affected employee at least 30 days before the date of termination. Notice must also be sent to the Regional Office of the Department of Labor and Employment, in the region where the employer is located. Additionally, the worker is entitled to a hearing or conference in which they can lodge a defense to the charges, present evidence, or rebut evidence.
Severance pay is based on the reason for termination and is generally one month’s wages per year of service. As an example, if an employee has worked for a business for 10 years, the employee would be entitled to 10 month’s severance pay.
Employees also have the option of appealing to an arbitrator. If the employer is found to have not followed the proper procedures, the employee may be entitled to damages, back wages, and/or reinstatement.
Navigating employee terminations and handling severance packages can be complicated for companies expanding overseas for the first time. New Horizons’ Philippines PEO can mitigate risk for foreign companies and provide guidance through this process.
The Philippines compensation and benefits
The Philippines compensation laws
Depending on where a business is located in the Philippines, the minimum wage will vary. For people living in the Philippines, it is estimated that a wage of least P9,064 is needed to make a living.
If employees work on either a Sunday or a paid holiday, they are entitled to an overtime rate that is 1.3x their regular hourly wage. If an employee works more than eight hours a day, they are typically entitled to overtime that is 1.25x their hourly wage. However, these figures may differ if an employee is part of a union or collective bargaining agreement.
Employers are also responsible for providing employees with a 13-month salary bonus. This is equal to one month’s salary and must be offered to employees prior to December 24. Most employers in the Philippines will present 13-month bonuses at the start of December. This is to ensure that employees have extra funds to purchase Christmas presents.
Minimum Wage Country Comparison Chart
(Per month in USD)
Guaranteed benefits in the Philippines
It is incumbent on employers to provide their employees with a number of statutory benefits. As an example, employees in the Philippines must receive five day’s paid leave that can be used for either vacation or sick leave.
There are two types of holidays in the Philippines. These are regular holidays and special non-working days. Employees are entitled to receive paid leave for regular holidays and unpaid leave for any special non-working days.
The Philippines benefit management
Employers in the Philippines also need to be aware of certain supplemental benefits. Whilst these benefits aren’t compulsory, many employees will still expect them as part of their compensation.
For employers that offer these benefits, it can assist them to attract high-level talent. Such benefits can include medical allowances, transportation, and even housing. Some employers will also choose to offer their employees supplementary insurances. These can include disability, life, and private health insurance.
Benefits and compensation restrictions
For expanding businesses, the most significant restriction to benefits and compensation is the establishment of a local entity. Employers are typically unable to hire and pay employees without first establishing a subsidiary in the Philippines. This process can take months to complete, which causes large-scale business delays.
With New Horizons’ Philippines PEO, you can begin operating in the Philippines in as little as 48 hours. We act as your employees’ Employer of Record, which means there’s no need to establish a subsidiary in the Philippines. And as the only global PEO with an in-house recruitment team, we can help you source, hire, and onboard top local and international talent.