With a 5.4% GDP growth in the first quarter of 2025, the Philippines’ rising economy is now attracting international businesses looking to hire a global team.
The country is a good option for foreign employers expanding internationally or offshoring their Employer of Record (EOR) needs due to the Filipinos’ familiarity with Western culture and being one of the largest English-speaking countries in Asia. However, you must study their employment laws to expand and have a workforce within the country.
Not only do you need to know the rights of employers in the Philippines, but you also need to know the employees’ rights as well to ensure you have a great employment relationship.
Here’s an essential comprehensive guide to help you understand the different labor and employment laws, regulations, and requirements in the Philippines.
Related post: Managing Compliance: Philippines Labor Laws vs. U.S. Labor Standards
Why Hire an Employer of Record (EOR) from the Philippines?
Hiring a trusted EOR in the Philippines gives you the ability to scale your workforce quickly, without the complexities of setting up a local entity. It’s a practical solution that helps you stay compliant, reduce overhead, and focus on growing your business. Instead of managing everything yourself, an EOR takes care of key responsibilities, such as:
- Hiring and onboarding – Recruit qualified talent and bring them into your team efficiently through a locally compliant process.
- Payroll and benefits administration – Ensure employees are paid accurately and on time, with benefits handled according to Philippine labor laws.
- HR and compliance support – EORs help you stay aligned with legal employment requirements and notify you when laws change.
Additional Support You Might Need
Some EORs also offer services beyond the basics, including:
- Independent contractor engagement for projects where freelance talent is preferred.
- Work visa processing if you plan to bring in foreign staff to support or train your Philippine team.
Reducing Your Risk Exposure
One of the biggest benefits of using an EOR is risk reduction. Because the EOR is the legal employer:
- They handle labor compliance, contracts, and compensation.
- They manage working schedules, holiday pay, and rest day incentives.
- They take on employee engagement and day-to-day support responsibilities.
This shields your business from direct liability related to employment while your team on the ground remains well-supported and compliant.
A Strategic Bridge to Local Expansion
If your long-term plan involves setting up a legal entity in the Philippines, an EOR can act as a temporary bridge. This gives you time to:
- Understand local hiring practices
- Get familiar with the labor market and employee rights
- Build experience with local workplace culture before going all in
Understanding EOR Costs
EORs generally charge a monthly service fee, and some may include additional costs per full-time employee. It’s important to review both the pricing structure and the scope of services offered. This further ensures you choose a provider that aligns with your operational needs and budget.
How to Hire an EOR from the Philippines
Partnering with an EOR in the Philippines is a great option for businesses looking to seamlessly expand internationally. With an EOR, you can also avoid the complexities of foreign tax laws, labor regulations, licensing, and office setup. The EOR serves as your legal employer and takes care of essential responsibilities such as onboarding, payroll, and compliance. This allows you to focus more on growing your business instead of managing administrative hurdles.
When selecting an EOR, it’s important to choose one with experience in your specific industry. By discussing your hiring needs and budget early on, the EOR can identify and recruit the most suitable candidates for your team. While the EOR will handle regulatory tasks on your behalf, having a basic understanding of Philippine labor laws can still help you make more informed decisions as you expand your operations and build a successful remote workforce.
Philippine Labor Laws That Employers Must Know
The government established labor laws to protect employees’ rights in the Philippines. To avoid trouble with the law, you must stay compliant. Here are some of the country’s labor laws that employers must know:
• Filipino employees’ basic rights
The Department of Labor and Employment (DOLE) upholds key rights for Filipino workers, including equal employment opportunities, security of tenure, fair compensation, weekly rest days, and safe working conditions. Employers are also prohibited from hiring children under 15 years old, as stated in Republic Act No. 7610, as amended by RA No. 7658. These protections aim to promote dignity, safety, and fairness in the workplace.
• Employee contracts
No law states that you must provide an employee with a written contract. Although a verbal agreement is enough to employ a Filipino, lawyers strongly recommend providing a written contract. As employment relationships are important, however, if any conflict arises between you and the employee, you can prove they didn’t meet their responsibilities. It also provides proof of the employee’s employment status because labor law presumes that an employee with a contract is a regular employee and not contractual or probationary.
• Normal working hours
Under Article 83 of the Labor Code of the Philippines, the standard workday must not exceed eight hours. While the law now permits compressed workweek arrangements, total working hours should still not go beyond 48 hours per week. Employees are also entitled to a full 24-hour rest period after six consecutive workdays, ideally scheduled in consultation with them. Rest days and holidays must be observed, with adjustments allowed if mutually agreed upon by both employer and employee.
• Termination of employment
Various factors can cause you to terminate an employee’s contract. These reasons may arise from different factors, typically classified under just causes or authorized causes. Just causes refer to serious employee misconduct such as willful disobedience, gross neglect of duties, or committing a crime against the employer or company. Meanwhile, authorized causes involve circumstances beyond the employee’s control, such as redundancy, retrenchment, the introduction of labor-saving devices, or business closure.
Additionally, under current labor law, if there is no fixed period of employment, the employment is presumed to be regular. Either party may terminate the employment for a valid cause and upon observance of due process.
Before termination, you need to observe due process. Depending on the just causes to dismiss the employee, you must provide two written notices and give the employee a chance to be heard. For authorized causes, you must give 30 days’ written notice to both the employee and DOLE.
By not following the due process, you may pay employee damages if they decide to bring the case to DOLE.
• Minimum wage
The minimum wage in the Philippines varies by region and industry classification, such as agricultural or non-agricultural work. As of July 18, 2025, the daily minimum wage for non-agricultural workers in the National Capital Region (NCR) is ₱695, based on Wage Order No. NCR-26.
Employment Types in the Philippines
There are six types of employment recognized in the Philippines, which are:
• Regular
Employees working with an employer for at least a year, performing necessary duties, and contributing to their business scheme.
• Project-based
Employees hired by the employer for a specific project with a fixed end date or until the project is complete.
• Seasonal
Employees on a seasonal contract are hired for a season and laid off in the off-season. The law considers them regular employees during the season and because of their job nature. An example of this employee type is those working in agriculture.
• Fixed-term
Employees engaged to perform work for a definite period, the termination of which has been determined at the time of engagement.
• Probationary
Employees who are on trial for a period not exceeding six months, during which the employer determines their fitness for regular employment.
• Casual
Employees who are hired for work that is not usually necessary or desirable to the employer’s business are often engaged on a short-term or intermittent basis.
Employee Benefits and Contributions
Besides having a good employment relationship, the country’s government has outlined in the Labor Code of the Philippines several mandated benefits and contributions employers must provide their employees. This includes overtime pay, compensation adjustments during work on holidays or rest days, and more.
Benefits
• 13th-month pay
The law requires all employers to pay their rank-and-file employees 13th-month pay if they worked for a least a month in a calendar year. The employer must give their employees their 13th month’s payment no later than December 24th. In addition, 13th-month pay shouldn’t be less than 1/12th of an employee’s total basic salary.
• Overtime pay
Overtime refers to additional hours worked that exceed the standard 8 hours. The overtime pay calculation differs depending on whether the employee worked during a regular day, holidays or rest days. These rates also apply across most industries, as mandated by the Philippine Labor Code.
• Holiday pay
Employees are entitled to holiday pay equivalent to 100% of their daily wage even if no work is performed on a regular holiday, as long as they are present or on paid leave on the workday immediately preceding the holiday. If they do work on a regular holiday, they must be paid 200% of their daily wage for the first eight hours, plus an additional 30% of their hourly rate for any overtime. However, certain categories are excluded from mandatory holiday pay, including government employees, managerial staff, field personnel, domestic workers, and employees of retail and service establishments that regularly employ fewer than ten workers.
• Night shift differential
Night shift differential is compensation for private sector employees working between 10 p.m. and 6 a.m. The pay should be an additional 20% of their basic salary per hour worked. The computation for night shift differential depends on the industry and whether the employee worked during holidays or rest days. On the other hand, employees exempt from receiving night shift differential are in the same category as those exempt from receiving holiday pay.
Contributions
• SSS
The Social Security System (SSS) is a mandatory government program that provides financial protection for employees in times of sickness, maternity, disability, retirement, unemployment, or death. Employers are required to deduct a portion of their employee’s monthly salary and remit it along with their employer share to the SSS. Contribution rates are based on a monthly salary credit (MSC) schedule, which increases progressively depending on the employee’s compensation. These contributions help build the employee’s benefit entitlements over time.
• Pag-IBIG
The Pag-IBIG Fund, officially known as the Home Development Mutual Fund (HDMF), is a government-run savings and housing program established under Republic Act No. 9679. Contributions are mandatory for all covered employees, with a 2% deduction from employees earning more than ₱1,500 per month, and 1% for those earning ₱1,500 and below. Employers contribute a counterpart share of 2%, regardless of the employee’s salary level. Pag-IBIG members are eligible for housing loans, multi-purpose loans, and savings dividends, making it an essential benefit for long-term financial planning.
• PhilHealth
PhilHealth is the Philippines’ national health insurance program, now governed by the Universal Health Care Law (RA 11223). It aims to provide all Filipinos with access to affordable and quality health care services, including hospitalization, outpatient procedures, and preventive care. Employers are also required to deduct a portion of the employee’s monthly salary and contribute a counterpart share to PhilHealth. The contribution rate is set annually by PhilHealth and typically varies based on the employee’s monthly basic salary. Updated rates and income ceilings are published regularly through official circulars.
Leaves
• Sick leave
The Labor Code of the Philippines does not mandate paid sick leave beyond the standard five-day Service Incentive Leave (SIL), which can be used for either vacation or sick purposes. Any additional paid sick leave is typically granted at the employer’s discretion through company policy. However, if an employee is unable to work for at least four consecutive days due to illness or injury, they may be eligible for the SSS sickness benefit. To qualify, the employee must have made at least three monthly contributions within the 12 months before the semester of sickness and must have used up all available company sick leave. The benefit is equivalent to 90% of the employee’s average daily salary credit and is advanced by the employer, who can later request reimbursement from the SSS.
• Vacation leave
In the Philippines, employees who have rendered at least one year of service are entitled by law to five days of Service Incentive Leave (SIL) annually, which they may use as vacation or sick leave. This is the minimum leave benefit under the Labor Code, and unused SIL can be converted to cash. However, many employers grant additional vacation leave days as part of company policy or employment contracts. Rules on accrual, usage, and conversion of these additional leaves vary per employer.
• Maternity leave
Under the Expanded Maternity Leave Law (RA 11210), all eligible female employees, regardless of civil status or employment type, are entitled to 105 days of paid maternity leave for live childbirth, with the option to extend by another 30 days without pay. An additional 15 days of paid leave is granted to qualified solo parents upon submission of a valid Solo Parent ID. To qualify, the employee must have made at least three monthly SSS contributions in the 12-month period before the semester of delivery, miscarriage, or emergency termination of pregnancy.
• Paternity leave
As provided by the Paternity Leave Act of 1996 (RA 8187), all married male employees in the private and public sectors are entitled to seven days of paid paternity leave for the first four deliveries of their lawful spouse. The leave applies whether the delivery is live birth or miscarriage. To avail of the benefit, the employee must be cohabiting with his wife, unless his job requires him to be away, and must be employed at the time of delivery.
Let an EOR Be Your Guide
Expanding your business to the Philippines comes with a range of legal and administrative responsibilities, from understanding government-mandated benefits to navigating leave policies and statutory contributions. Rather than handling these complexities alone, partnering with an EOR provides a reliable solution. By taking charge of compliance, payroll, hiring, and employee management, an EOR minimizes your risks and frees up your time to focus on scaling your operations. With the right support, you can confidently enter the Philippine market knowing your business is in good hands.
Related post: Redefining Back Office Operations in Philippine GCCs
Frequently Asked Questions (FAQs)
Q1: What are the different types of employment recognized in the Philippines?
There are six types of employment in the Philippines: regular, project-based, seasonal, fixed-term, probationary, and casual. Each type has specific characteristics, and understanding them is essential for compliance with labor laws.
Q2: What are the mandated benefits and contributions for employees in the Philippines?
Mandated benefits include 13th-month pay, overtime pay, holiday pay, and night shift differential. Contributions are made to Social Security System (SSS), Pag-IBIG (Home Development Mutual Fund), and PhilHealth. These contributions provide support for disability, death, retirement, maternity, and unemployment.
Q3: What are the essential Philippine labor laws that employers must be aware of?
Employers in the Philippines must understand labor laws regarding Filipino employees’ basic rights, employee contracts, normal working hours, termination procedures, minimum wage, and different types of employment. Familiarity with these laws is crucial to maintaining compliance and building employment relationships.
Q4: How can an EOR help me navigate Philippine labor laws?
EORs offer onsite legal teams to guide you in staying compliant with labor laws. They manage administrative responsibilities, recruitment, onboarding, and employee management, reducing your risk of noncompliance. EORs also keep you informed about any changes in labor practices or laws.
Q5: How does leave entitlement work under Philippine labor laws?
Employees in the Philippines are entitled to sick leave, vacation leave (Service Incentive Leave or SIL), maternity leave, and paternity leave. The specific regulations and duration vary, and understanding them is crucial for employers to meet legal obligations.
Bringing your company to the Philippines? One CoreDev IT® makes it easy. Our EOR solutions cover every step, from legal compliance to workforce support. Contact us today to learn how we can support your expansion.
