Hiring in Philippines: A Comprehensive Guide

The strength of the Philippine tech ecosystem in the face of global economic challenges is encouraging for the nation's budding tech talent. Economically, the country has recorded the strongest growth in 2023 among major Asian countries. The steady growth in IT infrastructure complements the economic growth of this country. These factors prove why the Philippines is slowly becoming an attractive destination for global companies to recruit talent. 

With Cisco’s Ugnayan 2030 initiative, there will be greater digital resilience through a collaborative framework with government agencies, industry partners and academia. Statista projects that by 2029, 77.5% of the country will have internet penetration. With more access to digital technology, the upcoming talent pool will have a knowledgeable and latest learning background. GenZ will make up more than a third of the labour force by 2025 with the right digital skills. 

Lastly, compared to the US, the cost of living, wages and taxation are much more cost-effective in the Philippines, which benefits any company planning to seek its workforce across Asian markets. This article dives into the business culture, employee benefits and social security in the country, which you must know before hiring in the Philippines. 

But, first, let’s look over the basic background information of the country: 

Key Facts About Philippines

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Things Employers Must Know About Hiring in Philippines

When hiring from a foreign country, research the local labour laws to ensure regulatory compliance. The labour landscape and employee benefits could differ considerably from your home country. Here are some things you must know about hiring in the Philippines:  

Labour Laws of the Philippines

The Labour Code of the Philippines is the legal code governing employment practices and labour relations in the Philippines. Here are some of its important provisions that employers must know before hiring in the Philippines: 

Labour Contracts

The Philippines has five categories of employment arrangements, depending on the nature and duration of work. An employer should have a defined employment contract for each of these types:  

1. Regular employment: The employee works for an indefinite period. 

2. Probationary employment: Employees work for a stipulated period under observation to evaluate their suitability for a full-time position.
    
3. Casual employment: These are contractual employees who only work occasionally and irregularly. Casual employment may only last for a year at the most.

4. Project-based employment: The employment contract states a predetermined period until the project is completed. 

5. Seasonal or fixed-term employment: Similar to the project-based category, this has a fixed working term. Employment may be terminated at the season's end or the term's expiry. 

Employee contracts are generally drafted in English; however, an employee must also arrange for a contract in the native language of a Filipino national. 

Working Hours

The Philippines follows a regular 8-hour day shift. There is a 60-minute lunch break and employees can take short breaks of 10-20 minutes, which are counted in the work hours. There is one day off a week. 

Minimum Wages

The minimum wage in the Philippines varies according to the province. The salary range in Manila is generally higher than in other places. It also depends on the industry you are appointing in. In 2023, the minimum wage in the Philippines was 610 PHP/day (10.8 USD). 

Payroll Cycle 

In the Philippines, employees are paid bi-monthly. The employer must make payments twice a month with an interval of 16 days.  

Employee Benefits and Social Security

Leaves

Every employee in the Philippines is entitled to five days of annual leave after they complete a year of service. Some employers even offer 15 days but it is at your discretion. The provision should be mentioned in the employment contract. 

Here are the other types of leave that Filipino employees are entitled to: 

• Public holidays: There are two types of holidays: regular and special holidays. 

There are a total of 12 paid public and 6 special holidays. 

• Maternity leaves: A woman can take two months of paid maternity leave for the first four pregnancies. 
• Paternity leaves: Fathers are entitled to a week-long paid paternity leave for their first four children. 
• Solo parent leave: Solo parents can take leaves up to 7 days to complete their parental duties that require their physical presence. 
• Leave for Victims of Violence: The Republic Act No. 9262 provides employees who are victims of violence with paid 10-day leave. 
• Bereavement leave: Employees can take up to 3 days of unpaid leave in case of death in the family.

There is no regulation about sick leaves for Filipino workers however, in case of illness or accident, they are liable to 90% of their average daily wages in certain conditions. 

Overtime

The overtime payment is based on the hours of extra service by the employee. The overtime is 25% more for regular work days than the hourly rate. Employees who work on a special non-working holiday must be paid 30% more than the hourly rate. 

13tjh Month Pay

The Philippines follows a 13th-month pay for employees who have worked at least a month. All non-managerial employees are entitled to receive this salary. This salary must be released by December 24.

Termination

An employee must serve a month’s notice period in case of termination. An employer can terminate without notice in the following circumstances: 

• Wilful disobedience
• Gross negligence towards work
• Serious misconduct
• Breach of trust
• Committing a crime against any employer or team member
  There is no severance pay for these reasons. 

Social Security System Contributions

The Philippines has an elaborate Social Security System (SSS) and Employee Compensation (EC) programmes that cover several benefits. Employers contribute 9.5%, while employees contribute 4.5% monthly towards social security. The benefits include: 

• Disability benefit: If employees face a disability that prevents them from working, they are granted a monthly disability pension. To be eligible, there must be at least 36 months of contributions. 

• Pension: Eligible employees get a pension via SSS. The amount is based on the number of years worked and the industry. The maximum limit is 2,400 PHP monthly. The voluntary age of retirement is 60 years. 

• Sickness benefit: If the employee has used up all their available sick days, the employer pays them, but the SSS will reimburse it. 

Health Insurance 

Philippine Health Insurance Corporation (PhilHealth) is responsible for health insurance in the country. These 5% contributions are mandatory for both employers and employees. They are split equally; the monthly premium depends on salary and job position. 

Home Development Mutual Fund (HDMF)

The Pag-IBIG Fund provides employees with housing loans, short-term loans and savings programmes. To provide affordable housing to Filipino residents, 1-2% contributions have to be made from their monthly income. The range depends on their earnings. The maximum contribution limit is 5,000 PHP/month. 

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Employees’ Compensation (EC) Programme

This scheme aims to help workers who suffer sickness, injury or death due to their nature of work. The benefits under this EC programme are simultaneous with SSS benefits. 

Taxation 

Resident foreign corporations are taxed in the same manner as domestic companies. The standard corporate income tax rate is 25% of the total income incurred. 

Value-added tax (VAT)

A standard VAT of 12% is levied on the sale of goods and services.

Income Tax 

The Philippines has several taxable income brackets to impose taxes on its residents. People with income under 250,000 PHP are not subject to any tax. 

Business Culture in the Philippines

Each country has a distinct cultural landscape that can enhance your experience of working with its people. The business culture in the Philippines is shaped by its history, social norms and values, which emphasise respect, relationships and adaptability. Here are some key aspects:

• Hierarchical Structure: Respect for authority and seniority is valued in the country. Decisions are often made at the top, with a clear chain of command observed. It's common for employees to show deference to their superiors and not openly challenge their decisions in a group setting.
• Importance of Relationships: Building strong personal relationships is crucial in the Filipino business culture. Trust and camaraderie are highly valued and it's common for business discussions to begin with personal conversations to build rapport. 
• Communication Style: People often communicate in an indirect manner, emphasising non-verbal cues to avoid confrontation. Direct criticism is avoided and face-saving is common akin to other Asian cultures.
• Flexibility: A cultural trait known as "Bahala na" translates to "leave it up to God," reflecting a flexible and adaptable approach. While this can mean a certain degree of resilience and creativity in problem-solving, it may also lead to taking risks with uncertainty. 

Understanding and respecting these cultural norms can facilitate successful business interactions and relationships in the Philippines. 

Compliance Risks in The Philippines

Foreign companies operating in the Philippines face several compliance risks stemming from the country’s regulatory environment, cultural practices and economic conditions. Here are key areas to be mindful of

• Regulatory Compliance: When setting up a branch office or subsidiary, ensure you have all local business permits and licences obtained and updated. The Philippines has multiple layers of government (national, regional and local) and compliance requirements may vary.
  This also includes compliance with the local labour laws, which are largely pro-worker. With different employment categories, it is necessary to state the contract duration, leaves and benefits provided. The penalties for employee misclassification go up to 500,000 PHP ($8880 USD).
  Compliance with environmental laws is also critical, especially for industries that could have significant environmental impacts. Nestle has been called out for its greenwashing activities in the Philippines in the recent past.

• Tax Compliance: Tax laws in the Philippines can be complex and the Bureau of Internal Revenue (BIR) has been known to conduct rigorous audits. Companies should:
  - Ensure accurate and timely filing of tax returns.

- Keep detailed financial records.
- Seek advice from local tax professionals to navigate the complex Philippine tax system.

• Data Privacy and Cybersecurity: The Philippines’ Data Privacy Act is modelled after international data protection laws that require companies to safeguard personal data. Companies should implement robust data protection measures and monitor privacy policies and practices regularly.

Hiring in Philippines Vs. Hiring in India

The Philippines is slowly booming as a market for hiring IT talent, but one country in Asia that clearly has a better competitive edge is India. Known globally for its highly qualified professionals in the technology sector, here are some reasons to prefer India as your outsourcing destination: 

• More Talent Availability: India is among the most populous countries with the largest youth population in the world; around 66% of the total population is below the age of 35. Among these are millions of graduates passing from STEM fields. This highly educated workforce ensures a steady availability of skilled tech workers for your team. 

• Overall Hiring Costs: The cost of living in both countries is similar, but chances are you will get more knowledgeable talent at the same cost in India. Compared to the US and Western economies, India has an extreme advantage of lower salaries and rentals, as well as the ability to set up an office and hire Indian workers. 

• Economic Growth: India's economy stands out as stronger than the Philippines', primarily due to its immense scale, diverse industrial base and substantial demographic dividend. India offers various opportunities across various sectors, including technology, manufacturing and services. Its vast and youthful population provides a demographic advantage, coupled with a focus on education and skill development, particularly in technology and engineering, which positions India as an attractive destination for talent acquisition. 

Hire With Rapid in India

US companies looking to globalise their workforce can rely on Indian talent. Leverage the benefits of a talented workforce and manage the hiring process and employee benefits by partnering with Rapid, a trusted EOR. 

With 20+ years of experience in India's vibrant and ever-changing business environment, we have insight into the complexities of global business expansion. Our team's expertise ensures your company remains ahead of the curve. Rapid offers comprehensive payroll solutions, customised contracts and employee benefits to meet the specific needs of your business. In a country where compliance with regulatory requirements is both crucial and complex, our services help you stay aligned with all necessary regulations.

What sets us apart is our all-encompassing HR platform, which integrates all HRIS functionalities seamlessly. Manage all your HR operations with an all-integrated platform with all essential HR tools at your fingertips.

To know more about our services, book a demo.