Employer of Record in the Philippines

Employment Laws and Regulations in the Philippines

Employment Contracts

Employment relationships in the Philippines are governed primarily by the Labor Code of the Philippines (Presidential Decree No. 442), originally enacted in 1974 and amended multiple times through 2025. The Labor Code applies to all private-sector employment and is supplemented by republic acts addressing specific benefits such as maternity leave (RA 11210, Expanded Maternity Leave Law 2019), paternity leave (RA 8187), and 13th-month pay (Presidential Decree 851). Employees are classified as permanent, probationary, temporary, casual, or apprentice, and a written appointment letter is mandatory for all categories. The letter must specify the job category, wages, probation period (maximum six months under Article 296), hours of work, place of work, and notice period (30 days under Article 300). Permanent status is attained after six months of continuous service unless the employee is still on probation; probation cannot exceed six months regardless of performance.

Working Hours and Overtime

The standard working week in the Philippines is 48 hours, typically spread across five to six days of 8 hours per day, set by Article 83 of the Labor Code. Daily working time cannot exceed 8 hours, exclusive of a one-hour meal break, and employees are entitled to at least 15 minutes of rest after every four hours of continuous work (Article 84). Workers are entitled to at least one day of rest per week, normally a Sunday (Article 85). Overtime is work performed beyond 8 hours in a day or 48 hours per week; employees performing overtime must be compensated at a premium rate. Managerial employees, as defined in Article 82, are exempt from overtime compensation and maximum hour regulations.

Overtime pay is not optional once ordered by the employer, and employees must be compensated on the next payroll cycle. Overtime compensation is calculated on the regular rate of wages, which includes basic pay and fixed allowances but excludes bonuses, leave pay, and special allowances. An employee cannot be forced to work more than 12 hours in a single day under normal circumstances, and compulsory overtime is limited to situations involving national emergency or calamity.

Minimum Wage

The minimum wage in the Philippines is set regionally by the Regional Tripartite Wages and Productivity Boards (RTWPBs) under the Department of Labor and Employment. As of January 2026, the National Capital Region (NCR) daily minimum wage for non-agricultural workers is PHP 695 per day (National Wages and Productivity Commission), effective July 18, 2025. Other regions range from PHP 455 (MIMAROPA) to PHP 580 (Calabarzon), reflecting regional economic differences. Wage orders are updated periodically; employers must monitor the NWPC website and DOLE regional offices for the current rates in their employee’s work location. Our minimum wage in the Philippines guide covers the full regional matrix.

Probation Period

Under Article 296 of the Labor Code, the probation period for a newly hired employee may not exceed six months (180 days) from the date of engagement. The standards and criteria for regular employment must be communicated to the employee on or before the date of hire. Probation can be extended once, up to a maximum combined duration of six months, only if the extension is documented in writing before the original probation expires. During probation, either party may terminate the contract without notice or severance provided the termination is not for an unlawful reason. Once the probation period ends and the employee is continued in service, they automatically attain regular employment status and cannot be terminated without just or authorized cause.

Leave Entitlements

The Philippines’ statutory leave framework is spread across the Labor Code (Articles 92–97, covering work-year leave and holiday provisions), Presidential Decree 851 (13th-month pay), Republic Act 11210 (expanded maternity leave), and Republic Act 8187 (paternity leave). Leave entitlements are mandatory for all employees, except as noted below.

Annual Leave (Service Incentive Leave)

Employees who have rendered at least one year of continuous service are entitled to five days of paid service incentive leave per year, which may be used for any purpose (vacation, personal, or sick leave). Service incentive leave is not earned during probation. Unused service incentive leave cannot be carried over to the next year and lapses at year-end unless company policy or collective agreement allows encashment; if encashed, it is paid at the employee’s daily rate. Upon termination or resignation, any earned but unused service incentive leave must be paid in cash.

Sick Leave

The Labor Code does not mandate paid sick leave; however, employees covered by the Social Security System may claim sickness benefits (90% of regular wage for the first four days and full wage thereafter) if they have contributed for at least three months during the preceding 12 months and are confined in hospital or prescribed medical rest. Some employers provide contractual sick leave; this is determined on an individual or company basis and is not a statutory minimum.

Maternity Leave

Female employees are entitled to 105 days of fully paid maternity leave under Republic Act 11210 (Expanded Maternity Leave Law), effective March 2019, regardless of whether the birth is vaginal or cesarean. The law also permits an additional 30 days of unpaid leave at the employee’s option. Solo parents (as defined under RA 8972) are entitled to an additional 15 days of paid maternity leave, bringing the total paid entitlement to 120 days. In cases of miscarriage or emergency termination of pregnancy, the employee receives 60 days of paid leave. Maternity leave accrues from the date of notice to the employer and may be taken before, during, or after delivery; the employee must return to her former position or an equivalent role with the same pay upon return from leave.

Paternity Leave

Male employees are entitled to seven days of fully paid paternity leave under Republic Act 8187 (Paternity Leave Act) for the first four deliveries of the legitimate spouse with whom he is cohabiting. The leave must be taken within 60 days after the date of delivery. Employees may take the leave in advance (before the delivery), during recovery, or during the period of nursing the newborn. Paternity leave is paid at 100% of regular wages, including basic salary and all allowances.

Other Statutory Leave

The Labor Code recognises several additional statutory leave entitlements:

• Parental leave for solo parents: 7 working days per year to perform parental duties (RA 11861, Expanded Solo Parents Welfare Act 2022), in addition to maternity/paternity leave.
• Special leave for women: up to 2 months paid leave for female employees undergoing gynecological or obstetrician surgery or hospitalization (RA 9710, Magna Carta of Women).
• Leave for violence against women and children: up to 10 days of paid leave for employees who are victims of violence under RA 9262, with an option to extend for additional unpaid leave.
• Bereavement leave: not statutorily mandated in the Labor Code; commonly granted as 3–5 days on full pay through company policy or collective agreement.
• Public holidays and special non-working days: guaranteed days off with pay as declared by proclamation each year (see Table 4 for 2026 calendar).

The single most important takeaway for employers is that service incentive leave is earned after one year of continuous service, maternity leave is a 105-day entitlement (plus 15 days for solo parents), and paternity leave is available for the first four children. All leave entitlements must be clearly documented, and employees cannot be required to waive statutory leave.

Statutory Employee Benefits

Beyond paid leave, Philippine employers must provide several mandatory benefits funded through the Social Security System, PhilHealth, and Pag-IBIG:

• Social Security System (SSS) pension insurance: the SSS provides old-age pension, disability pension, and death/survivor benefits. The contribution rate is 15% of the monthly salary credit (10% employer, 5% employee), with contributions capped at a monthly salary credit range of PHP 5,000 to PHP 35,000 effective 2025 (SSS contribution schedule).
• PhilHealth medical coverage: PhilHealth provides hospitalization benefits, emergency benefits, and outpatient benefits. The premium rate is 5.0% of monthly basic salary (2.5% employer, 2.5% employee), with an income floor of PHP 10,000 and ceiling of PHP 100,000 effective 2025 (PhilHealth 2025 contribution advisory).
• Pag-IBIG (Home Development Mutual Fund): Pag-IBIG is a mandatory savings and home-financing program. Contribution is 2% of monthly salary for both employer and employee, based on a maximum fund salary of PHP 10,000 (maximum PHP 200 per month each), effective February 2024 and continuing through 2025 and 2026.
• 13th-month pay: mandatory under Presidential Decree 851, calculated as one-twelfth of total basic salary earned during the calendar year, paid on or before December 24 each year. Employees must receive at least the statutory minimum even if they join mid-year (pro-rated).

All three social security contributions (SSS, PhilHealth, Pag-IBIG) are withheld from employee salaries and remitted monthly by the employer to the respective agencies. Employers cannot require employees to waive these benefits, and failure to remit contributions on time can result in penalties and back-contribution demands. See our employee benefits in the Philippines guide for detailed breakdown of statutory benefits and optional add-ons.

Recent Regulatory Updates (2025–2026)

The Philippines’ employment framework has moved in several meaningful ways during 2025. Effective January 1, 2025, the Social Security System increased the overall contribution rate from 14% to 15% (10% employer, 5% employee) under Republic Act 11199, the Social Security Act of 2018, with the maximum monthly salary credit ceiling raised to PHP 35,000 (from PHP 30,000). SSS contribution rates now apply to a wider range of wage earners.

The Bureau of Internal Revenue maintained the TRAIN Law income tax brackets for 2025–2026, with the zero-tax threshold remaining at PHP 250,000 annually and six progressive brackets extending to 35% on income above PHP 2,000,000. Effective July 18, 2025, the National Capital Region’s minimum wage for non-agricultural workers increased from PHP 645 to PHP 695 per day, the largest hike in NCR’s history. Regional wage orders continue to vary; employers must monitor the National Wages and Productivity Commission website for updates in the specific regions where their employees work.

The Labor Code of the Philippines remains the governing statute for employment relationships; no major amendments were enacted in 2025. The government continues to study digital nomad visa frameworks and special economic zone employment incentives, but these remain under review and have not been legislated as of April 2026.

Work Permits and Visas in the Philippines

Work Permit Requirements

Who Needs a Work Permit

Every non-Philippine national working in the Philippines requires a work permit. Philippine nationals, Overseas Filipino Workers (OFWs) holding valid passports, and visa-exempt nationals under bilateral agreements with the Philippines are exempt. All other foreign nationals, regardless of skill level or salary, must obtain a work visa and an Alien Employment Permit from the Department of Labor and Employment.

Eligibility and Required Documents

To hire a foreign national in the Philippines, the employer files an Alien Employment Permit (AEP) application with the Department of Labor and Employment. The applicant must prove that no qualified Filipino is available for the position through a Labor Market Test, showing that the role is specialized and requires skills or experience not readily available domestically. The employer submits the AEP application with the employee’s curriculum vitae, educational qualifications, employment contract, company registration documents, and proof of financial capacity. The employee must provide a passport valid for at least 12 months, a police clearance certificate from the home country, a medical certificate from an approved clinic, and any professional licenses or certifications required by Philippine regulatory bodies (engineering, medicine, law, nursing).

Processing Time and Validity

The Alien Employment Permit typically takes 2–3 weeks to issue once a complete application is filed. Following AEP approval, the employee applies for the 9(g) Pre-Arranged Employment Visa at the Bureau of Immigration, which processes the application in 3–7 weeks depending on the applicant’s nationality and whether a background clearance is required. Citizens of countries with high security risk profiles may face delays of 8–12 weeks or longer. The initial 9(g) work visa is issued for one year and may be renewed for additional one-year periods, with a maximum cumulative duration of seven years. The visa is tied to the sponsoring employer and the specified position; a change of employer or job title requires a new AEP and visa application.

Renewal Process

Renewals must be filed with the DOLE at least 30 days before the existing AEP expires. The employer submits an updated AEP application, proof of tax and social security payments for the prior year, recent salary slips, and proof of SSS and PhilHealth remittances. The employee may continue working while a renewal is pending provided the application was filed before expiry.

Common Visa Types for Foreign Workers

The Philippines offers several employment-linked visa categories for foreign workers, administered jointly by the Bureau of Immigration (visa issuance), the Department of Labor and Employment (AEP issuance and labor market test), and the Bureau of Internal Revenue (tax residency and withholding tax registration). An EOR can sponsor each of the categories below because it is a registered Philippine employer. Tourist, student, and family-visit visas do not permit employment and are outside the scope of EOR sponsorship.

Other visa categories do not authorise paid employment and therefore fall outside EOR sponsorship:

• Tourist visa: up to 30 days (extendable), no employment rights.
• Student visa: tied to a Philippine educational institution; limited part-time work only with additional authorization from the Bureau of Internal Revenue.
• Family visit visa: accompanying spouse or dependents; a separate work visa is required if the family member wishes to work.
• Retirement visa: SRRV (Special Resident Retiree’s Visa) for foreign retirees aged 50+ or older investing in Philippine bonds or deposits; no employment rights.

How an EOR Handles Work Permits

As the Philippine legal employer, the EOR owns every employer-side step of the work permit process. It files the Alien Employment Permit application with the Department of Labor and Employment, conducts the Labor Market Test to satisfy the requirement that no qualified Filipino is available, submits the employment contract and company registration documents, and represents the employer in DOLE interviews. Once the AEP is issued, the EOR coordinates with the Bureau of Immigration for the 9(g) Pre-Arranged Employment Visa filing, submitting the visa application, passport, job offer letter, and police/medical clearances. The employee is responsible for obtaining the police clearance certificate from the home country, the medical examination from an approved clinic, and attending any biometric or interview appointments at the Bureau of Immigration. Work visa sponsorship extends the onboarding window referenced in H3 1.4 by 6–12 weeks (or 12–16 weeks for high-risk nationalities or regulated professions). Remote People’s Philippines EOR covers every employment-linked visa category in the table above, including the faster Provisional Work Permit route for urgent starts.

Payroll, Taxes, and Social Security in the Philippines

Employer Contributions

Employer contributions in the Philippines are split between the Social Security System (federal pension), PhilHealth (federal health insurance), Pag-IBIG (housing fund), and income tax withholding. SSS is 10% of the monthly salary credit (capped at PHP 35,000 effective 2025), PhilHealth is 2.5% of monthly salary (capped at PHP 100,000 income ceiling), and Pag-IBIG is 2% of monthly salary (capped at PHP 10,000 fund salary, or PHP 200 maximum per month). There is no federal unemployment insurance; the Philippines does not require employer contributions for unemployment benefits.

Employee Contributions

Employees in the Philippines contribute 5% of the monthly salary credit to the SSS (capped at PHP 1,750 maximum per month), 2.5% to PhilHealth, and 2% to Pag-IBIG. These are withheld from gross salary by the employer and remitted to the respective agencies by the 10th of the following month. Employees additionally pay progressive income tax through payroll withholding, ranging from 0% to 35% depending on annual taxable income.

Income Tax

The Philippines levies progressive personal income tax on salary income under the TRAIN Law (Republic Act 10963), effective January 1, 2023 and maintained through 2025–2026. The first PHP 250,000 of annual taxable income is exempt from tax; income above that threshold is taxed at progressive rates reaching 35% on annual income exceeding PHP 2,000,000 (PwC Philippines individual income tax). Employers must withhold tax monthly under the BIR Withholding Tax Table (WTT) and remit to the Bureau of Internal Revenue by the 10th of the following month.

Payroll Cycle

Philippine payroll is typically processed monthly, with salaries paid by the 10th of the following month (or by a set date agreed in the employment contract). Payment must be by bank transfer for all employees; cash payment is permitted but uncommon in the formal sector. Employers must issue a salary slip to each employee showing gross wages, each statutory deduction (SSS, PhilHealth, Pag-IBIG, income tax), net pay, and year-to-date cumulative totals. SSS, PhilHealth, and Pag-IBIG contributions are due to the respective agencies by the 10th of the following month. Income tax withholding must be remitted to the BIR by the 10th of the following month, supported by a BIR Form 2307 or an electronic return. The annual employer statement (BIR Form 1604-C) must be filed by April 15 for the prior calendar year.

13th Month Salary and Bonus Pay

The Philippines mandates a 13th-month pay under Presidential Decree No. 851, which applies to all private-sector employees earning a basic salary of up to PHP 30,000 per month (effectively all wage earners, as the law has not been updated to reflect inflation). The 13th-month pay is calculated as one-twelfth of the total basic salary earned during the calendar year and must be paid on or before December 24 each year. Employees who separate before year-end receive a pro-rated 13th-month pay based on months actually worked; those hired mid-year receive 13th-month pay proportional to tenure (e.g., an employee hired July 1 receives 6/12 of the standard amount). The 13th-month pay is taxable income and must be included in the annual gross income for income tax calculation. Some employers voluntarily pay a 14th-month bonus during the first quarter, but this is not mandatory; if paid consistently for two years or more, it may become an established contractual benefit that cannot be unilaterally withdrawn.

Cost of Hiring Through an EOR in the Philippines

EOR Service Fees

Remote People’s EOR fee in the Philippines sits in the $300 to $600 per employee per month band, depending on salary size, benefits complexity, and whether a work visa is sponsored. The fee covers employment contracting under the Labor Code, monthly payroll and peso disbursement, SSS, PhilHealth, and Pag-IBIG declarations, BIR income tax withholding, 13th-month pay accrual, leave tracking, statutory reporting, and compliance monitoring against the Labor Code and wage orders. Supplementary health insurance, voluntary bonuses, or specialist services such as payroll card management may carry additional charges, but are quoted transparently before onboarding.

Total Employment Cost Breakdown

The table below models the total monthly employer cost in the Philippines for a mid-level hire on a USD 1,500 gross monthly salary (approximately PHP 84,000 at April 2026 exchange rates), showing each SSS, PhilHealth, and Pag-IBIG contribution, the 13th-month pay accrual, the EOR fee, and the fully loaded cost. SSS, PhilHealth, and Pag-IBIG are all capped at statutory maximums well below a USD 1,500 gross salary, which is why those contributions come in at a relatively low percentage of gross for mid and higher salaries.

Exchange rate: 1 USD ≈ PHP 56 (April 2026). Actual employer cost may vary depending on salary level, as SSS and PhilHealth contributions hit their statutory caps at mid-range salaries.

The fully loaded employer cost sits around 43% above gross once the EOR fee is excluded, reflecting the combination of capped SSS, PhilHealth, and Pag-IBIG contributions plus mandatory 13th-month pay accrual. Because all three social security contributions hit their statutory ceilings well below USD 1,500 gross, the bulk of non-wage cost at this salary level is the 13th-month pay accrual (8.33%) and the EOR service fee (typically 30%). This makes the Philippines a relatively affordable EOR market in Southeast Asia, especially for mid-to-high salaries where the capped contributions represent a smaller percentage of total cost.

Ready to hire in the Philippines? Get started with Remote People – we handle employment contracts, payroll, SSS, PhilHealth, Pag-IBIG, income tax withholding, and full Labor Code compliance. No local entity needed.

Benefits of Using an EOR in the Philippines

The EOR model in the Philippines solves the practical obstacles to hiring in a market with a common-law legal system, statutory minimum wage boards, and active SSS, PhilHealth, and Pag-IBIG oversight. Companies choose an EOR because it compresses the timeline, removes the fixed cost of incorporation and audits, and pushes the compliance risk onto a specialised provider:

• Speed to market: an EOR in the Philippines can onboard a compliant employee in 1–2 weeks, compared to 2–4 months to incorporate a Philippine company, obtain a Bureau of Internal Revenue certificate of registration, open a local bank account, and register with SSS, PhilHealth, and Pag-IBIG.
• Compliance assurance: the EOR tracks the Labor Code Articles 83–97 (working hours, overtime, leave), Article 95 (service incentive leave), Presidential Decree 851 (13th-month pay), wage orders from the National Wages and Productivity Commission, and the latest SSS, PhilHealth, and Pag-IBIG contribution rates on your behalf, with the legal employer carrying primary liability for non-compliance.
• Cost efficiency vs entity: entity setup in the Philippines involves approximately USD 2,000–5,000 in legal, incorporation, and bank account fees, plus ongoing annual compliance, statutory audit, and BIR return filing costs; an EOR avoids all of that with a flat per-employee monthly fee.
• Local expertise: Remote People’s in-country payroll team handles salary slips in Philippine pesos, SSS PR-03 submissions, PhilHealth and Pag-IBIG remittances, BIR withholding tax calculations, and wage order monitoring that would otherwise need a local HR function or an outsourced payroll firm.
• Flexibility to scale: adding a second or third Philippine employee is a standard onboarding; removing one is a termination with 30-day notice, separation pay calculation, and final pay within five days. No Department of Trade and Industry deregistration, bank account closure, or SSS deregistration is required.
• Risk mitigation: misclassification as contractor, under-remitted SSS, or missed BIR filings can trigger BIR assessments, back contributions, and penalties. The EOR absorbs that exposure and maintains the audit trail.
• Employee experience: employees get a compliant Philippine appointment letter, SSS and PhilHealth registration, accurate peso payroll, guaranteed 13th-month pay, and access to a dedicated HR support team for questions about leave, payroll, or benefits.

Ready to evaluate the EOR model for your Philippines hire? Talk to our team to map the specific timeline, cost, and compliance setup for your first employee.

Termination and Offboarding in the Philippines

Notice Periods

Under Article 300 of the Labor Code, either party must give 30 days written notice to terminate the employment of a regular employee. During the 30-day notice period, the employee must continue working and receiving regular wages. Alternatively, the employer may pay the employee 30 days’ wages in lieu of the notice period, allowing immediate separation. For probationary employees, no notice or severance is required; the employer may terminate at any point during the six-month probation period without cause, provided the termination is not unlawful (e.g., discriminatory or in retaliation for union organizing). For employees terminated for just cause (serious misconduct, willful disobedience, gross negligence), notice is waived, but the employer must follow the Labor Code Article 279 procedure: serving a written notice of charges, conducting a hearing, and issuing a reasoned decision, or the dismissal is presumed unfair.

Notice can be waived entirely only in cases of just cause proven through the Article 279 procedure, or by mutual written agreement. Termination of a regular employee without notice or without just cause is deemed “illegal dismissal” and entitles the employee to reinstatement with back wages, or to separation pay in lieu of reinstatement if reinstatement is not possible. Casual employees hired on a day-to-day or job-to-job basis for a specified project may be terminated at the end of the project without notice or severance provided the employment was truly temporary; the burden is on the employer to prove the casual or temporary nature of the role.

Separation Pay

Separation pay in the Philippines is a statutory benefit owed when an employee is terminated due to “authorized causes” under Article 298–299 of the Labor Code (closure of business due to serious losses, installation of labor-saving devices, redundancy, health reasons), but not for “just cause” (misconduct). Separation pay is also due when an employee is laid off due to retrenchment (reduction in workforce). The formula depends on the reason for termination: one month’s pay per year of service (or one-half month per year, whichever is higher) for redundancy or business closure, or one-half month per year of service for retrenchment or installation of labor-saving machinery. “Wages” for separation pay purposes includes basic salary and regular allowances but excludes bonuses, commission, and performance pay.

Calculation Method

The separation pay formula is straightforward: (last-drawn basic salary + regular monthly allowances) × number of completed years of service × the applicable rate (1 month per year for closure/redundancy, or 0.5 month per year for retrenchment). If an employee has worked more than six months in any given year, that period counts as a full year. For example, a five-year employee earning PHP 30,000 per month who is retrenched would receive 0.5 month × PHP 30,000 × 5 = PHP 75,000. Separation pay must be paid within five days of the effective date of separation, along with the employee’s final pay, accrued leave encashment, and 13th-month pay (if due).

Caps and Exceptions

There is no statutory cap on separation pay itself under the Labor Code. However, employees dismissed for just cause forfeit all separation pay entitlements. Probationary employees (within the first six months) are not entitled to separation pay regardless of the reason for termination. Fixed-term employees who complete a full term contract and are not renewed receive no separation pay unless the non-renewal is due to an authorized cause (business closure, retrenchment); if the contract was cut short, separation pay is calculated for the actual period worked. Employees who resign voluntarily receive no separation pay, even if they provide 30 days’ notice. Only terminations initiated by the employer for authorized business or health reasons trigger separation pay.

Grounds for Termination

The Labor Code recognises two main categories of lawful termination: just cause and authorized cause. Just cause dismissal (Article 279) includes serious misconduct (theft, fraud, habitual absenteeism), willful disobedience of lawful orders, gross negligence, commission of a crime against the employer or family members, and other serious infractions. The employer must serve a written charge, conduct a hearing with the employee’s right to be heard and represented, and issue a reasoned decision. Failure to follow this procedure renders the dismissal void and exposes the employer to reinstatement with back wages. Authorized cause termination (Article 298–299) includes business closure due to serious financial losses, retrenchment, installation of labor-saving devices, redundancy, and termination due to employee illness incompatible with continued service. Authorized cause terminations require 30 days’ written notice and separation pay. Mutual separation agreements are enforceable if documented in writing and not signed under duress. Protected categories (pregnant employees, union officers, employees on sick/medical leave) cannot be dismissed without court approval, and dismissal during these periods is presumed unfair.

EOR vs. Other Hiring Models in the Philippines

EOR vs. Setting Up a Local Entity

Setting up your own Philippine subsidiary requires incorporation with the Securities and Exchange Commission (SEC), registration with the Bureau of Internal Revenue (BIR), local Mayor’s Permit, SSS/PhilHealth/Pag-IBIG employer registration, and opening a Philippine peso bank account, a two-to-four month process with initial legal, notarial, and registration costs of roughly USD 2,000-5,000. The table below compares the EOR route against a self-operated entity across setup time, upfront and ongoing cost, compliance burden, and practical team-size thresholds. Use it to decide which vehicle fits your hiring plan and exit flexibility.

For companies testing the Philippines market or hiring fewer than 15 employees, the EOR model is significantly faster and lower-cost. You skip the legal and bank setup, avoid annual audit and statutory compliance, and exit easily if the market doesn’t pan out. For companies planning to grow beyond 20 employees, hiring multiple teams long-term, or bidding on government contracts (which require a local entity), incorporation becomes the better choice economically. The EOR breaks even against a self-managed entity around the 15–20 employee mark, depending on local payroll outsourcing costs and whether you need government contract eligibility.

EOR vs. Hiring Independent Contractors

The Philippines applies strict worker-classification rules under Article 295 of the Labor Code and Department of Labor and Employment Order 174-17, using the four-fold and economic reality tests to distinguish employees from independent contractors. Treating a de facto employee as a contractor to avoid SSS, PhilHealth, Pag-IBIG, withholding tax, and 13th-month pay exposes you to back contributions, penalties, and possible criminal liability for the principal. The table below compares the two models across compliance risk, tax treatment, benefits, IP, and typical use cases so you can choose the right vehicle for each role.

The Philippines applies a strict “economic reality test” for employee vs contractor status, examining whether the worker is under your control, whether the work is part of your usual business, and whether the relationship resembles employment. Misclassification as a contractor when the relationship is truly employment exposes you to back SSS contributions, back PhilHealth premiums, back Pag-IBIG, income tax assessments, and penalties from the Department of Labor. The EOR eliminates this risk by establishing a clear employment relationship, handling all mandatory benefits, and maintaining audit documentation. Contractors make sense only for discrete, short-term projects where the contractor sets their own schedule and deliverables, and has no day-to-day management from you.

EOR vs. PEO (Professional Employer Organization)

In global hiring conversations, the terms EOR and PEO are often used interchangeably, but they describe distinct legal arrangements. An EOR is the sole legal employer of record abroad (which is why no local subsidiary is needed), while a PEO operates under a co-employment model that assumes you already own a Philippine entity and simply want to outsource HR administration and payroll processing. The table below sets out the key differences across legal employer, local-entity requirement, liability, and best-fit scenarios to help you pick the right model.

The Philippines does not have a formal PEO regulatory framework like some countries. What exists locally are professional employment service providers that function as co-employers, requiring you to have an existing entity. If you already operate a Philippine company and want to offload payroll processing and HR administration, a local payroll service or professional services firm can help. But for hiring without a local entity (the core EOR use case), the Philippines PEO market is not established. The EOR is the appropriate vehicle for that scenario.

Public Holidays in the Philippines

Philippine public holidays are governed by the Administrative Code of 1987 (Executive Order 292) as amended by Republic Act 9492, and are finalised each year through a Presidential Proclamation issued by Malacañang Palace. Holidays fall into two statutory categories: regular holidays, which entitle employees to 100% pay even if they do not work and 200% pay if they do, and special non-working days, which follow the “no work, no pay” rule unless the employer’s policy or CBA provides otherwise. The 2026 calendar below reflects Proclamation 727 (s. 2025) and should be used as the baseline when configuring Philippine payroll and leave accruals.

Regular holidays are days off with pay; employees working on regular holidays are entitled to double pay plus overtime compensation if hours exceed 8. Special non-working days are days off without pay (unless the employee chooses to work, in which case regular pay applies), and are typically used for religious observances. The EDSA People Power Revolution Anniversary (February 25) in 2026 is declared a special working day, meaning work and classes continue as usual with regular pay. Islamic holidays (Eid’l Fitr and Eid’l Adha) are observed as special non-working days each year; exact dates follow the lunar Islamic calendar and are proclaimed by Malacañang Palace typically in late December for the following year. Employers must monitor official proclamations from the Office of the President for any last-minute additions or changes to the holiday calendar.

How to Get Started with an EOR in the Philippines

1. Confirm your hiring needs and timeline. Identify the role, salary, and start date for your first Philippine employee. Determine whether a work visa is required (non-Philippine nationals) and which region the employee will be based in (relevant for minimum wage and RTWPB coverage).
2. Contact Remote People and provide employee details. Share the candidate’s full name, email, mobile number, job title, proposed salary in USD or PHP, start date, and work location. We will provide an estimate of total cost including employer contributions, EOR service fee, and 13th-month pay accrual.
3. Review and sign the EOR service agreement. Our terms cover employment contracting, payroll processing, statutory reporting, leave tracking, termination procedures, and compliance responsibilities. The agreement outlines the scope of services and any add-on fees for supplementary benefits or work visa sponsorship.
4. Prepare the employment contract and onboarding documents. We draft a Labor Code-compliant appointment letter specifying job title, wages, probation period (up to 6 months), notice period (30 days), place of work, and benefits. You and the employee review, sign, and return to us within 2–3 days.
5. Initiate SSS, PhilHealth, and Pag-IBIG registration and payroll setup. Once the signed contract is received, we file applications with the SSS, PhilHealth, and Pag-IBIG, collect the employee’s bank details for peso salary transfer, and verify BIR tax number details. This phase takes 3–7 days. For work visa cases, we simultaneously file the Alien Employment Permit (AEP) application with the Department of Labor and Employment; once the AEP is issued, the employee applies for the 9(g) Pre-Arranged Employment Visa at the Bureau of Immigration.
6. Employee starts work and first payroll processes. On the agreed start date, the employee begins work, and you activate them in your internal systems. We process the first month’s payroll in Philippine pesos, withhold income tax and SSS/PhilHealth/Pag-IBIG contributions, and transfer the net salary to the employee’s bank account by the 10th of the following month. The employee receives a detailed salary slip showing all deductions and year-to-date totals.

Ready to hire in the Philippines? Get started with Remote People today – we handle the entire employment setup, payroll, statutory reporting, and Labor Code compliance so you can focus on building your team.

Where companies hiring in the Philippines expand next

Teams hiring in the Philippines typically expand across ASEAN, where cross-border mobility and diverse multilingual talent make regional coverage natural. Teams frequently add hiring in Vietnam for ASEAN-wide talent flows and shared hiring norms; an EOR partner in Thailand often follows for ASEAN integration and cross-border mobility; Singapore is a common next step, offering the ASEAN single-market trade framework; and a team in Indonesia rounds out the regional footprint with overlapping ASEAN labor and mobility rules.