Employing in Philippines
Team APAC makes employment in the Philippines effortless. We handle payroll, compliance, contracts, and everything in between—all at unbeatable rates.
Onboarding time
Minimum Wage
Employer costs
Employee costs
Onboarding time
Team APAC can onboard your talent in Philippines within an average of 48 hours.
Minimum Wage
Each of the 17 administrative regions in the Philippines sets minimum wage requirements. Minimum wages applicable in the Philippines are broadly differentiated based on whether they are for nonagricultural or agricultural work.
Each minimum wage rate consists of a basic wage rate and a cost of living allowance. The current daily minimum wage in the National Capital Region (NCR) or Metro Manila for non-agricultural workers is 645 PHP, and for agricultural workers the daily rate is 608 PHP.
Employer costs
- Philippine Health Insurance Corporation (PhilHealth): 2.5%
- Social Security: ~10%
- Home Development Fund (HDMF): PHP 200
- Philippine Health Insurance Corporation (PhilHealth) contribution is capped at PHP 2,500/month
Employee costs
- Social Security: a 4.5% deduction
- PhilHealth: 2.5%
- Home Development Mutual Fund: 1% – 2%
- Mandatory Provident Fund: PHP 22.50 – PHP 225 per month*
*This payment is applicable to contributions starting at an MSC (monthly salary credit) above PHP 20,000 with a maximum employer share of PHP 425
Payroll
The payroll process in the Philippines involves several key stages to ensure timely and accurate payment of employees. It begins with pre-payroll activities as well as setting up payroll policies and collecting employee data.
Payroll cycle
Payroll schedules typically follow a bi-weekly or semi-monthly cycle, with employers required to pay salaries within specific intervals.
Additional payments
13th Salary
The 13th month pay in the Philippines is a mandatory annual benefit provided to rank-and-file employees in the private sector under Presidential Decree No. 851. It is equivalent to one-twelfth (1/12) of an employee’s total basic annual salary and must be paid by employers no later than December 24 each year.
This benefit is distinct from discretionary Christmas bonuses and applies to employees who have worked for at least one month during the calendar year, including those who resign or are terminated. The computation excludes allowances, overtime pay, and other non-basic salary components. Additionally, under the TRAIN law, 13th month pay is tax-exempt up to PHP 90,000.
Bonuses
Although not required by law, performance-based bonus schemes are common in the Philippines. Bonuses typically range from 4% to 10% of the base salary.
Commissions
While commissions are not mandated, companies into sales and marketing often reward their employees by providing commissions.
Other allowances
It is common practice to provide an allowance to employees such as but not limited to meal, rice, and transportation.
Taxes
In the Philippines, employee income tax is a progressive tax system based on annual taxable income, with rates ranging from 0% to 35%. Individuals earning up to ₱250,000 are exempt, while those earning over ₱8 million are taxed at the highest rate of 35%. Employers act as withholding agents, deducting income tax from employees’ monthly wages and remitting it to the Bureau of Internal Revenue (BIR). Employees may qualify for substituted filing if all their income comes from one employer and taxes are fully withheld, simplifying compliance.
Employee Income Tax
The individual income tax ranges from 0% to 35%. Income tax is calculated according to progressive rates.
Income Tax
- 0% 0 PHP to 250,000 PHP
- 15% Above 250,000 PHP – 400,000 PHP
- 22,500 PHP + 20% in excess of 400,000 PHP
Above 400,000 PHP – 800,000 PHP - 102,500 PHP + 25% in excess of 800,000 PHP
Above 800,000 PHP – 2,000,000 PHP - 402,500 PHP + 30% in excess of 2,000,000 PHP
Above 2,000,000 PHP – 8,000,000 PHP - 2,202,500 PHP + 35% in excess of 8,000,000 PHP
Above 8,000,000 PHP
Employment eligibility
To be eligible to work in the Philippines, a foreigner needs to secure an Alien Employment Permit (AEP) from the Department of Labor and Employment (DOLE), which requires proof that no qualified Filipino workers are available for the position.
Employers must comply with local labor laws, including providing fair wages, social security benefits, and safe working conditions. Additionally, foreign workers must obtain a Taxpayer Identification Number (TIN) and adhere to regulations regarding working hours and overtime pay. Certain sectors may restrict foreign employment to protect local jobs.
Visa
A foreigner also needs a work visa, such as the 9(g) Pre-Arranged Employment Visa, which is tied to a Philippine-based employer.
Visa types
- 9(g) Pre-Arranged Employee Commercial Visa
- Temporary Visitor’s Visa for Business Purposes (9A)
- Special Non-Immigrant Visa: Includes various special visas like those under E.O. 226, which are issued for specific purposes such as employment in special economic zone
Compliance documents
In the Philippines, visa-related background checks typically involve obtaining a police clearance or an NBI (National Bureau of Investigation) Clearance.
Foreign nationals applying for a visa may need to provide a criminal record or police clearance from their home country. The Bureau of Immigration (BI) also conducts checks to ensure applicants do not have derogatory records that could affect their eligibility for a visa. These background checks are crucial for ensuring compliance with immigration laws and regulations in the Philippines.
Types of Work Permits
- Alien Employment Permit (AEP): Required for all foreign nationals seeking long-term employment in the Philippines. It is issued by the Department of Labor and Employment (DOLE)
- Special Work Permit (SWP): For short-term employment (up to six months) and does not require an employment contract. It is issued by the Bureau of Immigration (BI)
- Provisional Work Permit (PWP): A temporary permit issued while the work visa is being processed. It is valid for three months and renewable
- Special Temporary Permit (STP): Required for foreign nationals practicing regulated professions in the Philippines, issued by the Professional Regulation Commission (PRC)
Background check
In the Philippines, visa-related background checks typically involve obtaining a police clearance or an NBI (National Bureau of Investigation) Clearance.
Additionally, foreign nationals applying for a visa may need to provide a criminal record or police clearance from their home country. The Bureau of Immigration (BI) also conducts checks to ensure applicants do not have derogatory records that could affect their eligibility for a visa. These background checks are crucial for ensuring compliance with immigration laws and regulations in the Philippines
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Benefits
Offering health insurance in this country is not mandatory, but providing these additional health benefits can greatly enhance the healthcare experience for employees by enabling access to a wider range of providers and specialists, as well as significantly reducing wait times.
Private health insurance
Private health insurance in the Philippines is designed to cover healthcare costs not fully covered by PhilHealth, the country’s public healthcare system. It provides additional benefits and flexibility in healthcare choices.
Team APAC providers
We offers multiple health insurance options, allowing customers to choose between International Health Insurance, providing worldwide coverage on a pay-and-claim basis, or a Local Health Insurance, which offers a cashless access to treatment within the provider’s network. We offer the flexibility to cover either the employee only (single option) or the employee and their dependents (family option), tailored to meet the specific needs of your team.
- SafetyWings
- Henner
- IMG/ ALC Global
Mandatory benefits
Mandatory benefits in the Philippines include contributions to government programs such as the Social Security System (SSS), Philippine Health Insurance Corporation (PhilHealth), and Home Development Mutual Fund (Pag-IBIG). Employees are also entitled to paid leaves like service incentive leave, maternity/paternity leave, and holiday pay.
Mandatory benefits in Philippines
- Social Security System (SSS)
- Philippine Health Insurance Corporation (PhilHealth)
- Home Development Mutual Fund (HDMF, otherwise known as Pag-IBIG)
Working hours
The standard workweek is 40 hours, the standard workday is 8 hours. The standard workweek is from Monday to Friday.
Working hours per day
The standard workday is 8 hours.
Working hours per week
The standard workweek is 40 hours.
Overtime pay
Overtime payment is mandatory and can’t be included in the salary. Hours outside of standard work hours are considered overtime.
For additional hours, employees are paid:
125% of the hourly rate on working days
130% of the hourly rate on rest days and holidays
Leave
Other mandatory benefits include solo parent leave, leave for victims of violence against women and their children, and leave under the Magna Carta for Women Act. Statutory leave entitlements include public holidays.
Annual leave
Full-time employees are entitled to 5 days of paid time off (PTO) a year. PTO accrues monthly at 0.42 days per month and begins accruing from their start-date. If holidays are not used by the end of the year, employees can receive a payment. Part-time employees are not entitled to leave.
It is, however, common practice in the Philippines to provide a greater number of leaves ranging from 10-15 annual leaves.
Sick leave
Employees in the Philippines are not entitled to sick leave in addition to their vacation allowance (PTO). In practice, however, companies provide 5-15 sick leaves per year.
Parental leave
There is no specific statutory requirement for parental leave in the Philippines. However, employees may be entitled to maternity leave and paternity leave.
Married male employees are entitled to seven calendar days of paid paternity leave.. The employee will receive 100% of their average salary during this period, and the employer will be responsible for this pay. The employee can extend leave unpaid.
Additionally, single parents can apply to the Solo Parent Policy.
Maternity leave
Pregnant employees are entitled to 105 days of paid leave. An additional 15 days of paid leave will be granted if the employee qualifies as a solo parent. The employee will receive 100% of their average salary during this period, and Social Security will be responsible for this pay.
The employee can extend leave an additional 30 days unpaid.
Other types of leave
Long service leave
This varies by state and territory but generally provides additional leave after a long period of service.
Compassionate leave
All employees, including casuals, are entitled to compassionate leave of up to two days per occasion. However, only full-time and part-time employees receive paid compassionate leave, while casual employees receive unpaid leave. This leave may be availed in case of demise of an immediate family member, which includes spouses, de facto partners, children, parents, grandparents, grandchildren, siblings, and their equivalents for spouses or de facto partners.
Family & domestic violence leave
Republic Act No. 9262, also known as the Anti-Violence Against Women and Their Children (VAWC) Act of 2004 grants female employees who are victims of violence the right to take a paid leave of absence for up to ten (10) working days. The purpose of this leave is to allow victims to address medical, legal, and personal concerns related to the abuse without losing their income.
Termination
Terminating the services of employees in the Philippines is extremely difficult and the law is protective of workers. Contracts and policies must be in writing and must be understood by employees. Employers can dismiss workers for just cause, which includes several different grounds and involves the 2-notice rule. Dismissing employees due to authorized causes requires notice to the employee and the authorities plus severance pay.
Termination process
Terminations in the Philippines are complex and do not allow for at-will employment outside of the probation period. Employers must have just cause to terminate an employee. Compliant terminations can occur in several ways.
They can be voluntary, initiated by the employee, or by mutual agreement between the employer and employee. Employers can also unilaterally terminate employment during the probation period, based on objective grounds, or for disciplinary reasons.
Additionally, terminations can occur due to performance issues if an employee is deemed unsuitable for the job. Lastly, employment can end naturally with the expiration of a contract.
Termination reasons
In the Philippines, just causes for terminating an employee’s services include serious misconduct or wilful disobedience of lawful orders, gross and habitual neglect of duties, fraud or wilful breach of trust, and commission of a crime or offense against the employer or their immediate family.
Additionally, other causes analogous to these may also be considered just causes, such as theft against a third party if proven by substantial evidence, gross incompetence, failure to meet occupational standards, or severe failure to comply with company rules.
Termination for just causes requires adherence to due process, which includes serving a written notice specifying the grounds for termination, conducting a hearing, and issuing a final written notice of termination.
Lastly, redundancy is a valid reason for termination if a job is no longer needed due to operational changes, technological advancements, or business restructuring.
Notice period
The minimum notice period for employees is thirty (30 days, which may be increased depending on one’s position pursuant to a written contract.
Severance Pay
Separation pay or severance pay in the Philippines is a statutory benefit provided to employees who are terminated due to authorized causes under the Labor Code.
These causes include redundancy, retrenchment, installation of labor-saving devices, closure or cessation of business not due to serious financial losses, and health-related issues that prevent continued employment. The amount is typically calculated as either one month’s salary or one-half month’s salary for every year of service, whichever is higher.
The benefit aims to provide financial support during unemployment and is based on the employee’s most recent salary rate, with any service of at least six months rounded up to a full year. Separation pay is exempt from income tax if the termination is due to reasons beyond the employee’s control, such as redundancy or illness.
Employees terminated for just causes, such as serious misconduct or willful disobedience, are not entitled to separation pay.
Probation period
In the Philippines, a probationary period is a common practice used by employers to assess new employees’ suitability for a role. This period is not mandatory but is often included in employment contracts to provide both parties an opportunity to evaluate their compatibility.
Probation Period days
- 90 days Minimum probation period
- 180 days Maximum probation period
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