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The Philippines Guide: All About Employment Laws & Benefits

Skuad Desk

Oct 28, 2020

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

Region

Minimum Wage

NCR (Caloocan, La Pinas, Mandaluyong, Makati, Manila, Marikina, Malabon, Muntinlupa, Navotas, Paranaque, Pasay, Pasig, Quezon, San Juan, Valenzuela, Taguig

P500 - P537

CAR (Abra, Apayao, Benguet, Ifugao, Kalinga, Mountain Province)

P340 - P350

Region I ( Ilocos Norte, Ilocos Sur, La Unión, Pangasinan

P282 - P340

Region II ( Batanes, Cagayan, Isabela, Nueva Vizcaya, Quirino)

P320 - P360

Region III( Aurora, Bataan, Bulacan, Nueva Ecija, Pampanga, Tarlac, Zambales)

P304 - P360

Region IV A (Batangas, Cavite, Laguna, Quezon, Rizal)

P303 - P400

Region IV B (Marinduque, Occidental Mindoro, Oriental Mindoro, Palawan, Romblon)

P294 - P320

Region V (Albay, Camarines, Norte, Camarines Sur, Catanduanes, Masbate Sorsogon)

P310

Region VI (Alkan, Antique, Capiz, Guimaras, Iloilo, Negros Occidental

P310 - P395

Region VII (Bohol, Cebu, Negros Oriental, Siquijor)

P351 - P404

Region VIII (Biliran, Leyte, Eastern Samar, Southern Leyte, Northern Samar, Western Samar)

P285 - P315

Region IX (Zamboanga Del, Zamboanga Del Sur, Zamboanga Sibugay)

P303 - P316

Region X (Bukidnon, Camiguin, Lanao Del Norte, Misamis Oriental, Misamis Occidental

P331 - P365

Region XI (Compostela Valley, Davao Del Norte, Davao Del Sur, Davao Oriental)

P381 - P396

Region XII (North Cotabato, Sarangani, South Cotabato, Sultan Kudarat

P290 - P311

Region XIII (Agusan Del Norte, Agusan Del Sur, Surigao Del Sur, Dinagat Island, Sirgao Del Norte

P320

ARMM (Basilan, Tawi-Tawi, Lanao Del Sur, Sulu, Maguindanao)

P290 - P325

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.

Leaves

Public Holidays: 12 public holidays

List of Holidays

Probable Date

New Year’s Day

1 January

Maundy Thursday

Movable Date

Good Friday

Movable Date

Eidul Fitr

Movable Date

Eidul Adha

Movable Date

Araw ng Kagitingan

Monday nearest 9 April

Labor Day

Monday nearest 1 May

Independence Day

Monday nearest 12 June

National Heroes Day

Last Monday of August

Bonifacio Day

Monday nearest 30 November

Christmas Day

25 December

Rizal Day

Monday nearest 30 December

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

List of Holidays

Probable Date

Ninoy Aquino Day

Monday nearest August 21

All Saints Day

November 1

Feast of Immaculate Conception of Mary

December 8

Last Day of the Year

December 31

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:

Yearly Income (PHP)

Tax Rate (%)

0 to 250,000

0

250,000 to 400,000

20 (15 from 2023)

400,000 to 800,000

25 (20 from 2023)

800,000 to 2,000,000

30 (25 from 2023)

2,000,000 to 8,000,000

32 (30 from 2023)

Over 8,000,000

35

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.

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.

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:

Visa Category

Avatar

Validity

Pre-arranged Employment Visa or 9(G) Visa

For employees having secure job in Philippines

Initially issues for 1,2 or 3 years. Can be extended upto 3 years.

Treaty Trader’s VIsa or 9(D)

For individuals belonging to countries that have bilateral agreement with Philippines

Upto 2 years

Provisionary Work Permit

Temporary visa for individuals whose 9(D) or 9(G) has not be issues

Upto 6 months

Special Work Permit

For artists, professional athletes or other temporary services

Upto 3 months

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

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