The Philippine GDP expanded by 5.2% year-on-year, maintaining the country’s position as one of the fastest-growing economies in Asia. If you’ve been planning to expand into the Philippines, there’s no better time than now. 

But, of course, there’s always a catch. Expanding your business into a new country is never as easy as it seems. If you’re used to the ins and outs of Western countries, the laws and tax regulations of the Philippines will make you feel like you’re on another planet.

As a newcomer in that market, you’ll find it tricky to stay compliant while keeping things fair for your employees. Working with a professional employer organization (PEO) can make these problems go away. Before you hire one, here’s everything you need to know about it. 

What Are PEOs in the Philippines?

A Philippines PEO is a third-party entity acting as a co-employer. Simply put, they take away the hassle of HR operations in a new country. Their services include a wide range of functions, including:

  • Payroll processing
  • Benefits administration
  • Recruiting
  • Drug testing programs
  • Ensuring compliance with labor laws
  • Workers’ Compensation Administration

By partnering with a PEO platform, you can reduce your administrative burden and focus on core operations like product development and customer service. This co-employment arrangement streamlines HR processes, minimizes compliance risks, and gives you access to a broader range of employee benefits.

Start hiring with a Philippines PEO

Let us handle the complexities of hiring, compliance, and payroll in the Philippines while you focus on growing your team.

  • Hire employees in the Philippines with a Philippines EOR
  • No local entity is needed
  • Pricing starts at USD 199 per employee
  • Remote People can also help you find the best talent in the Philippines
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Difference Between PEO and EOR

The terms “PEO” and “Employer of Record (EOR)” are often used interchangeably. But in reality, they’re very different. An EOR assumes full legal and tax responsibility as the employer, while a PEO shares these responsibilities with the client company. 

Here’s a more detailed explanation of their difference.

  • Structure: PEO is a co-employment model, which means sharing employer responsibilities with the client company. Meanwhile, an EOR is the sole employer of record. With your consent, they take over all your employer responsibilities.
  • Scale: PEO is typically best suited for small to medium-sized businesses with full-time employees. In fact, most of their clients have 10 to 99 employees. Meanwhile, an EOR can accommodate businesses of all sizes, including those with contractors and freelancers.
  • Scope: PEO outsources HR functions, such as payroll and benefits administration. As we mentioned, EOR assumes the full role of the employer, handling all employment-related matters.
  • Risk: PEO shares liability with your company, so you’re still susceptible to some of the damage. With an EOR, there’s reduced client liability since they assume total employer responsibility, mitigating risks related to labor laws and tax regulations.

Which Services Does a PEO in the Philippines Provide?

The services of a PEO all depend on what you need from them. The good news is, they can tailor their services according to your specific operations. However, all of them at least offer HR services as their core function.

Some of the common HR-related tasks that a PEO in the Philippines can assist with are:

Employee Onboarding

Getting new hires settled is key. But in a new country, it’s a lot trickier than just putting up a job listing. Luckily, PEOs make it easier by creating a clear onboarding plan.

This helps everyone understand your company. Many PEOs even provide an employee handbook with all the rules to help local employees acclimate to your new rules. 

The best part is that PEOs also handle the legal stuff. They explain everything your employees need to know about compliance and legal requirements. Compliance mistakes can be costly, so it’s best to make sure everyone’s on the same page. 

Finally, PEOs take care of all the paperwork, such as payroll, benefits, and employment contracts. You get to focus on the part that matters most: giving your new team a warm welcome.

Payroll Processing

When you’re new to a country, it’s going to take a little time to get used to all the Philippine tax and employment laws. In any other department, you’d get some leverage for your mistakes. But in areas like payroll processing, you simply can’t afford errors.

With a PEO, you don’t have to worry about this. They will:

  • Calculate your employees’ salaries and manage timely payment.
  • Withhold the correct taxes and make any contributions needed for employee benefits.
  • Manage all required reporting to local authorities.

Compliance Management

Starting a business in a new country comes with the risk of legal and compliance issues. This can damage your reputation and seriously hinder your growth. Luckily, a PEO can help you navigate this by making sure your company stays compliant with local laws and regulations.

They know all about recent changes in employment laws and policies. Plus, they maintain proper documentation for employees, including visas and permits, and keep records of all compliance documents. 

Employee Benefits Administration

In the Philippines, many employee benefits are government-mandated options, such as contributions to PhilHealth and Home Development Mutual Fund (Pag-IBIG). Then, there are those you offer to attract top talent. 

A PEO can help manage the administration of these benefits, including health insurance and retirement plans. They can also help in designing a competitive benefits package to attract top talent in the Philippines. 

Who Can Use a PEO in the Philippines?

If you want to expand your company’s operations to the Philippines, you’re in for a tricky ride. You’ll definitely need a more flexible, hassle-free approach because doing it yourself can lead to issues with compliance and employee benefits. You can benefit from partnering with a PEO.

Specifically, a PEO in the Philippines is ideal for:

  • Small to mid-sized companies
  • Companies with a short-term presence in the Philippines
  • Companies without a legal entity in the Philippines
  • Businesses trying to reduce their administrative burden and focus on core operations

If you choose not to work with a PEO, you’ll end up hiring the services of multiple providers. Sure, it does the same thing, but it can create a serious hole in your pocket. Plus, corresponding with all those different teams won’t be easy. 

With all these problems to work through on a daily basis, you’ll struggle to compete with local and international companies who already have tons of experience in the Philippines. With a PEO, you can enter the Philippines as if you’re already an expert.

How Does a PEO Work in the Philippines?

A typical workflow for partnering with a PEO in the Philippines is as follows:

Initial Consultation and Onboarding

The PEO initiates the process by conducting a thorough consultation with you. This will help them better understand your unique HR and payroll requirements. After this assessment, they’ll draft up a customized contract that will outline the specific services they intend to provide, along with the associated fees.

HR Process Management

Upon the execution of the contract, the PEO will assume full responsibility for managing all HR processes. That includes recruitment, onboarding, and ongoing employee management. Once you transfer all responsibility, you can make sure all tasks outlined in the contract are efficiently and effectively executed.

Regular Reporting

The next step is to keep things transparent and allow for more informed decision-making. To ensure this, the PEO will generate detailed reports on all HR operations on a regular basis.

You’ll get details about payroll information, employee attendance records, tax filings, and the utilization of employee benefits. The PEO will also give you some valuable insights into workforce productivity and strategies to optimize HR cost management.

Ongoing Support

The PEO diligently monitors any updates or modifications to Philippine labor laws and tax regulations. For instance, the Labor Code was recently revised to mandate that employers must pay a minimum wage that varies by region. In cases like these, they can implement proactive measures to keep your business remains compliant with all relevant regulations.

What Are the Benefits of Using a PEO in the Philippines?

Working with a PEO in the Philippines can be a game changer when entering new markets. Here are some of the key advantages of working with a Philippine PEO.

Simplified HR and Payroll Management

By outsourcing your HR functions, you can streamline their processes and stay compliant with local labor laws and regulations. PEOs handle complex payroll calculations, including deductions for taxes and social security. These can be very challenging, given the Philippines’ intricate tax system. 

Access to Top Talent

The Philippines has a massive talent pool, producing over 700,000 graduates annually. But finding the right people can be a real jungle for foreign companies. Plus, the country’s job market has its own unique rules, and cultural differences can make it tough to connect with the best candidates.

At the same time, you’re competing with local companies who know the ropes and have all the resources. That’s where a PEO comes in – they’re your local experts. They’ll help you find and hire the absolute best talent and even guide you in training and developing your team over time.

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Cost Savings

Cost savings are another huge advantage of partnering with a PEO in the Philippines. They use economies of scale to offer competitive rates for employee benefits, insurance, and compliance services. In most cases, individual businesses struggle to afford such rates. 

On average, businesses save about $1,775 per employee per year when working with a PEO. With this financial relief, you can allocate resources more effectively towards growth initiatives rather than administrative overhead. 

Improved Compliance

Philippine labor laws outline all requirements in the workspace, including employee welfare, benefits, retirement provisions, and safe working conditions. Non-compliance with these regulations will expose your businesses to serious legal and financial risks. That’s the last thing you need in a new market.

A PEO will make sure your business is always in adherence to these complex labor laws. They know everything there is to know about Philippine labor regulations and can even guide you through penalties and legal repercussions if needed.

Enhanced Employee Benefits

PEOs make your company’s employee benefits a lot more accommodating with all-inclusive packages that small and medium-sized enterprises might not be able to offer independently. These packages often include health insurance, retirement plans, and other perks that improve employee satisfaction and retention rates.

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Pricing Models for PEO in the Philippines

The way you pay your PEO will depend on their pricing model. Globally, PEOs use three main types of pricing models.

  • Flat Fee: PEOs typically charge a flat fee per employee, making it easy to budget. This fee is usually billed monthly or annually, giving you clear and predictable costs for their services. That means you can budget accordingly and save a lot over the years.
  • Percentage of Payroll: Some PEOs charge a percentage of your total payroll as their fee. For instance, if they charge 3% and your monthly payroll is $50,000, you’ll pay them $1,500. This works well if your payroll fluctuates, as the fee adjusts accordingly, but it can get pricier if your payroll grows substantially.
  • Per Employee/Per Service Fee: Some PEOs charge a per-employee fee. For example, if they charge $100 per employee and you have 50 employees, your monthly fee would be $5,000. They might also charge separately for specific services.

    If payroll management costs $500 and benefits administration costs $400, your total monthly fee for these two services would be $900. This model is good if you only need a few specific services.

How to Choose a PEO in the Philippines

For the Philippines, it’s best if you work with a global PEO (or an EOR) that has local expertise and experience in the Philippine market. Here’s what to look for in a PEO:

Experience in the Philippine Market

When choosing a PEO in the Philippines, your ideal choice is someone who already has deep roots in the local market. They should understand the nuances of labor laws, cultural norms, and local business practices. A PEO with extensive experience in the Philippines can give you tons of insights and guidance so your business can keep operating smoothly and efficiently.

Service Offerings and Pricing Models

Look at what kind of services offered they offer. You need comprehensive solutions that include payroll processing, benefits administration, tax compliance, and HR support.

While you’re at it, learn more about their pricing models. Some PEOs may charge a flat fee per employee, while others may use a percentage-based model. The one thing you want to avoid is hidden fees, so take your time to understand all the costs involved.

Technology and Platform Capabilities

We recommend opting for a PEO that uses advanced technology and user-friendly platforms. The goal is to streamline processes, not make things harder.

Such tools will also improve efficiency and give you real-time access to employee data and HR information. Look for features like online portals, mobile apps, and automated workflows.

Client Testimonials and Reviews

Before you make a decision, you can’t forget to research client testimonials and reviews. Feedback from other businesses that have used the PEO’s services can be pure gold. If you’re having trouble finding positive experiences, like excellent customer service, timely and accurate payroll processing, and effective compliance support, that’s a red flag.

Data Security and Privacy

Data security and privacy are crucial factors, especially when dealing with sensitive employee information. Choose a PEO that heavily focuses on data security and complies with all relevant data protection regulations in the Philippines.

What are their data security measures? Encryption, access controls, or disaster recovery plans? These are the answers you should have to prevent unauthorized access or breaches.

Due Diligence Process

Last but not least, you want to conduct thorough due diligence before selecting a PEO. Here are some tips:

  • Request references from current and past clients.
  • Verify their licenses and certifications to make sure they are legally operating in the Philippines.
  • Investigate their financial stability and insurance coverage.
  • Carefully review their contracts and service agreements to understand your rights and obligations.

Stay Compliant and Hire Talent in the Philippines

Expanding your business to the Philippines can feel overwhelming, especially without firsthand knowledge of the local market. Partnering with the right PEO gives you a single point of contact who can guide you through Philippine labor laws and help you stay compliant from day one.

Remote People offers that same dependable experience. We streamline employee onboarding, manage payroll in Philippine pesos, and ensure your operations align with local regulations. While we take care of your finance, IT, HR, and legal requirements, you can stay focused on growing your business with confidence.

If you’re unsure which PEO to trust in the Philippines, we’re here to help. Remote People delivers reliable, high-quality PEO services that support your expansion goals and unlock your business potential. Reach out today to get started!

Frequently Asked Questions

Yes, PEOs are legal in the Philippines. They operate under a co-employment model, where the PEO becomes the legal employer of your staff.

Industries like IT, BPO, and startups in the Philippines benefit the most from PEOs. They streamline HR processes, get rid of administrative burdens, and maintain compliance with local labor laws.   

Yes, reputable PEOs in the Philippines keep data security a top priority. They use encryption and access controls to protect employee information from unauthorized access or breaches.