The Philippines Guide: All About Employment Laws & Benefits

Introduction

The Philippines is the former colony of Spain and The United States. Today, it stands as the second-fastest growing economy of South-East Asia. It has received massive foreign investments has revised corporation codes. The diligent Filipino workforce makes it conducive for business expansions.

General Information

Currency: Philippine Peso (₱) 1 PHP = 0.0021 USD

Economic Capital: Manila

Spoken Language: English, Tagalog

GDP: 6.2% growth rate (2018)

Time Zone: UTC (+8:00)

Entitlements

Minimum Wage: P290 ($5.70) to P537 ($10.61). Rates vary from region to region and are set by tripartite regional wage boards

Payroll Cycle: Monthly or bimonthly

Pay Date: 15th or 30th of the month

Working Hours: 40 hours per week or 8 hours per day

Night Shift Differential: 110% of regular wage if the working hours are from 10:00 PM to 6:00 AM

Overtime Compensation: 125% to 130% of regular pay. But compensated mainly by time off rather than payments.

Provincial Rate / Minimum Wages Philippines 2022 

Minimum wage revision in IV-A - Calabarzon, the Philippines

The provincial rate of daily minimum wages for Calabarzon (Region IV-A), the Philippines has seen an increase according to Wage Order No. IVA-19, published on June 14, 2022. The increase, cutting across different private sector industries, is mandated in two tranches:

• 1^st Tranche, where workers in the private sector will receive PHP 3 (USD 0.051)-PHP 49 (USD 0.83) per day, in addition to the current minimum wage rates
• 2^nd Tranche (applicable six months after 1^st Tranche), where workers in the private sector will receive up to PHP 48 (USD 0.81) per day, in addition to 1^st Tranche

The minimum wage increase applies to a typical working day of working hours not exceeding eight hours per day and to all private sector workers regardless of position, status, designation, or method of wage payment.

The minimum wage increase applies to five provinces in Calabarzon including

• Cavite
• Laguna
• Rizal
• Batangas
• Quezon

The minimum wage increase is indicated, as per Wage Order No. IVA-19, in Non-Agriculture and Agriculture sectors in each province as follows:

Sector: Non Agriculture

Sector: Agriculture

The Wage Order No. IVA-19 exempts certain organizations from compliance including:

• Retail or service industries employing 10 workers or less
• Organizations affected by COVID-19, or natural or human-caused disasters

Failing to comply with Wage Order No. IVA-19 will result in legal consequences as indicated in Section 12 of RA No. 6727, as amended by RA No. 8188. 

Effective date

Wage Order No. IVA-19 is effective 15 days from when published: June 30, 2022.

Reason for wage revision

There are four reasons the minimum wage limit in Calabarzon was raised including:

• Periodic assessment, where the Regional Tripartite Wages and Productivity Board assesses minimum regional wages to determine if current wages are responsive to in-region economic conditions
• General public complaints, where public hearings and consultations show a general discontent with extraordinary hikes in prices of oil products as well as basic goods and services
• Unionized petitions, where the Regional Tripartite Wages and Productivity Board received several petitions from the Federation of Free Workers, Metal Workers Alliance of the Philippines, and the Association of Minimum Wage Earners and Advocates on recent price hikes‍
• Combined economic and social factors, including public discontent, socio-economic indicators,  the declining purchasing power of the Philippines peso, increased poverty, and impact of COVID-19.

Leaves

Public Holidays: 12 public holidays

Special Holidays: 4 holidays in a year that follow “no work no pay” principle.

Annual Leaves: Usually, it's five days after a minimum of one year of service. In some cases, it's up to 15 days.

Sick Leaves: No statutory requirement by law. However, 15 days of paid leaves is a common practice among organizations.

Work-Related Injury Leaves: This leave can be up to 6 months. The exact duration depends on recommendations from the medical authority.

Special Leaves For Women: 2 months for women who have undergone surgeries caused by gynecological disorders.

Violence Leave Against Women And Their Children (VAWC): 10 days of paid leave to female employees who are victims of physical, sexual, psychological harm or suffering, or economic abuse. Employees need to provide certification from Punong Barangay or Clerk of Court.

Maternity Leaves: 105 days paid leave for female employees who have made at least three monthly Social Security System(SSS) contributions within 12 months before giving birth.

Paternity Leaves: 7 days of paid leave for married male employees.

Parental Leaves: 7 days of paid leave for employees with a Solo Parent Identification Card and have rendered one year of continuous service.

Compassionate Leaves:  It is usually three days of paid leave in events like marriage (self), birthday (self), or death of immediate family members.

Death Grant: NA

Transfer Leaves: NA

Jury Service Leaves: NA

Taxes

Personal Income Tax: Progressive tax rates after standard deduction compensation income are:

Income Tax Return(ITR): BIR Form 1701 for self-employed individuals and BIR Form 1701A for employees. It is mandatory to file ITR on or before April 15 of each year covering income for the preceding taxable year.

Value Added Tax (VAT): 0% for goods and services exported outside the Philippines and 12% of sales of goods and services in the Philippines.

Employee Statutory Benefits

National Health Insurance Program Healthcare: Compulsory for employees included in the SSS. Individuals contribute 2.75% of their primary income, shared equally by the employer and employee.

Home Development Mutual Fund Pag-IBIG: A national savings scheme for affordable shelter. A 2% contribution is made towards the same by both employees and employers. Pag-IBIG savings are generally used for housing loans, multi-purpose loans, calamity loans, etc.  

Bonus Or 13th Month Pay: Bonus payments are made before December. The amount is equivalent to 1/12 of the basic salary received by an employee during the year. The amount gets prorated if an employee has worked for less than a year.

Employee Voluntary Benefits

Christmas Bonus: Offered in addition to the 13th-month pay to show appreciation to employees for their services during the year.

Allowances: Though allowances are rare in the Philippines, some organizations have started to provide the same. Allowances for housing, transportation, medicine, and childcare are the most common ones and can fall in the bracket of tax deductibles.

Retirals

Retirement Age: Mandatory retirement age is 65 years, but one can retire as early as 60 years and start receiving social security benefits.

Social Security System (SSS): The insurance program set by the government for all the wage earners of private organizations. The same employee contribution rate is 3.63%, while for the employer, it is 7.37%.

National Pension: It’s a 2 tier system of protection:

1. Mandatory defined benefit scheme provided by the Social Security System (SSS) provides a basic pension under the Defined Benefit (DB) Program.
2. Voluntary contribution to Personal Equity and Retirement Account (PERA) is an additional retirement fund that employees establish on an individual level. Any investment made to a PERA account serves as a tax-saving instrument.

Retirement Pay: At the time of retirement, gratitude pay is given to employees who have served in the establishment for at least five years. The retirement pay is equivalent to at least one and a half months of salary for every year of service.

Termination

Probation Period: Maximum length of the probationary period is six months. During this period, employment contracts may terminate for a just cause without any notice period.

Termination Procedure: The procedure is different depending upon the initiator of termination.

• By Employer: If termination is due to a just cause, the employee should be handed a written notice informing him/her of the charges. The employer must afford the employee an opportunity to be heard where the employee can answer the accounts with the assistance of counsel.
• By Employee: If it’s a voluntary termination, it requires submission of a letter of resignation.

Notice Period: By law, one month notice period is mandatory. In some cases, it can be longer than 30 days if agreed by you while signing the employment contract.

Separation Payment: Applicable only if an employee loses their job because it is not their fault, such as health concerns, business closure, etc. The final amount for separation pay is One-month pay or half-a-month pay for every year of service, whichever is higher.

Office Setup in the Philippines

Types of Business: Limited liability companies, Sole proprietorship, Representative office, Branch office, Foreign partnerships, and Regional operating headquarters.

Coworking Cost: Manila, Quezon City, Makati, and Cebu City are some famous coworking grounds. For a hot desk, pricing typically starts from PHP 5000 per month or more, depending on how premium the coworking is.

Visa: Mainly, there are four types of visas available for foreign nationals coming to the Philippines for business or employment purposes:

Sources:Ecomparemo, Coworker, Deloitte, Bakermckenzie, ASEAN Briefing, KPMG, Bureau of Internal Revenue, Nomura Foundation