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Employer of Record (EOR) in Philippines

Employer Of Record In the Philippines

Skuad’s Philippines EOR (Employer of Record) solution can help you establish, streamline and expedite your business set-up and expansion process without forming a separate legal entity in the country. The decision to expand your business in the Philippines can be fruitful as the island country boasts of its highly educated and skilled workforce in the fields of information technology and customer-related services, etc. People in the Philippines are flexible, warm and have strong work ethics.

One of the many hindrances while business expansion is to understand the legal rules and regulations, employment laws, taxation structure, filings, payroll management and other specific details of the country. This information is necessary to do business efficiently and effectively with a considerable cost mechanism.

Skuad’s global HR platform helps you understand all business requirements in the Philippines while you are sitting in your home country. All you need is Skuad’s automated and unified platform through which you can easily manage the payroll, taxes, recruitment, training, development and compliances of the Philippines. Let us begin by taking you through some basic employment guidelines and details about the Philippines.

Employment In the Philippines

The employment rate in the Philippines stood at 91.3% in January 2021. Employment laws in the Philippines are governed by the Labor Code 1974, which defines the rules and standards regarding employment policies, wage rates, working hours, employee benefits,etc..

Skuad’s Philippines EOR (Employer of Record) solution provides stimulating opportunities for companies across the globe to enter into the Philippines market. Our automated platform reduces the time and rigidity to hire employees or to conduct administrative activities such as managing payroll solutions and offering employment contracts without any delay. 

To make the employment contract, it is necessary to know the rules for hiring and termination of private employees, the working conditions, overtime benefits, and updated guidelines of the labor code rules, if you need to stay compliant. 

Skuad helps in carrying out business operations as per the laws of the Philippines and assists the individual or company to attain the desired objectives in an accurate manner while complying with all the applicable employment laws in the Philippines. As a result, your business will grow faster and have the potential to survive for a long time.

 Let us discuss the employment laws in detail:

Entitlements Explanations

Statutory Working Hours

  • 48 hours per week

  • Exclusive one-hour lunch break

Overtime Eligibility

  • Overtime allowed - 25% extra of the basic rate pay.

  • Overtime on the rest day or any extraordinary day for more than eight hours in a day - 30% extra of the basic rate of pay

  • Any employee who works during an emergency under Article 89 in the country will be eligible for overtime compensation.

Weekly Rest Period

Between 7 workdays, a rest period on Sunday is given.

Paid Public Holidays

  • New Year’s Day (January 01)

  • Lunar New Year (February 12)

  • Maundy Thursday (April 01)

  • Good Friday (April 02)

  • Bataan Day (April 09)

  • Labour Day (May 01)

  • Eid ul-Fitr (May 13)

  • Independence Day (June 12)

  • Eid ul-Adha (June 19)

  • National Heroes Day (August 30)

  • Bonifacio Day (November 30)

  • Feast of the Immaculate Conception (December 08)

  • Christmas Day (December 25)

  • Rizal Day (December 30)

Maternity & Paternity Leave

  • Normal delivery: 60 days of maternity leave for female employees under the Social Security System upon giving birth to the first four children and eligible for 100% salary.

  • Cesarean delivery: 78 days of paid leave and eligible for a regular daily wage.

  • However, the male employee is entitled to seven days leave till the birth of the first four children.

  • Leave shall be taken within the period of 60 days of the birth of the child. The paternity leave shall be paid by the employer after submitting documents to the Social Security Program for reimbursement.

Social Security System

  • The Social Security System is established to help the employees and their families during the time of disability, illness and death.

  • It is mandatory for the employees who are below the age of 60 years and earn P1000 per month to contribute to the social security fund.

  • An amount is deducted automatically from the employee’s salary every month.

Annual Vacation Leave

  • All employees are entitled to five days of paid leave every year which is called ‘service incentive leave’ that can be used for vacation or for illness depending upon the number of working days.

  • Employers also provide 15 days of paid leave to their employees every year when the employee is at a professional level.

Social Security System

  • The Social Security System is established to help the employees and their families during the time of disability, illness and death.

  • It is mandatory for the employees who are below the age of 60 years and earn P1000 per month to contribute to the social security fund.

  • An amount is deducted automatically from the employee’s salary every month.

Medical Leave

  • There is no specific provision for sick leave to the employees in the Philippines.

  • However, some employment contracts or collective bargain agreements might include sick leave benefits to the employees.

  • Employees are entitled to 90% of their average daily wages from employers in case of illness or injury. This benefit is provided to only those employees who have paid a three month Social Security System contribution fund for 1 year prior to their illness or injury.

  • The above-mentioned clause is applicable when all the sick leave with pay due by the employer has been drained. In this case, the employer is entitled to a 100% reimbursement from the Social Security System.

Employment Protection & Anti Discrimination Rights

  • Employment contracts may be in writing or oral. Only some cases require a written contract such as for domestic helper, for working children in public entertainment and in trilateral job contracting.

  • The Labor Code provides for implied terms in employment contracts.

  • Employees are protected against discrimination as per the Anti-Sexual Harassment Act and The Safe Spaces Act. This law is applicable to all categories of workers in the Philippines.

Confidentiality of Personal Information

  • Employment contracts may be in writing or oral. Only some cases require a written contract such as for domestic helper, for working children in public entertainment and in trilateral job contracting.

  • The Labor Code provides for implied terms in employment contracts.

  • In the Philippines, Data Privacy Act 2012 protects the data of individuals and entities while processing personal data with the detailed guidelines for carrying out the process.

Contractors vs. Full-Time Employees

There are various employees’ categories in the Philippines which are protected through employment contracts in the Labor Code. Below are the meaning and scope of six category workers in the Philippines:

Type of Employee Explanations

Probationary Employees

These are the employees who serve the trial period before regularization or becoming full-time employees. Probationary employment shall not exceed six months.

Regular Employees

  • These employees are selected according to the nature of work or for the business engaged to perform activities necessary or desirable in the usual course of business.

  • Employees who serve at least for a year whether continuous or broken in respect of their business activity are also known as regular employees and enjoy the security of tenure as per the Labor Code.

Project Employees

These employees have a fixed tenure for a specific project and after completion of the same, that project ends. Employees enjoy security benefits during the term of the project.

Seasonal Employees

These employees are recruited for the work which is seasonal in nature and only for the tenure of a season.

Casual or Temporary Employees

These employees are engaged to do the work which is incidental to the organization and only for a definite period which is informed to the employee at the time of engagement. They do not enjoy retirement pay and service incentive leave pay as compared to other forms.

Fixed Term Employees

These employees are not expressly mentioned in the labor code but recognized as per the Jurisprudence of the Philippines. Employees are given contractual benefits during the duration of the contract.

Talk to Skuad to know the most suitable option for your business requirement in the Philippines while staying compliant with employment laws.

Hiring In the Philippines

Hiring an exceptional team for the growth of your business is vital for success because a good team helps in achieving the desired objectives of the organization. Before hiring, you must evaluate the skills and competency of the candidates during the interview process according to the job description. All employment-related issues are governed by the Philippines Department of Labor and Employment (DOLE) regulations.  

The system of hiring in the Philippines for government positions is through civil services exams that take around two to six months. Vacancies in the private sector are filled through various job portals namely, Google for Jobs, Pinoy jobs, jobfinderph.com, Jora, etc. Upon selection, the candidate needs to enter into a written employment contract with the company in accordance with compliances. But you must be thinking how will you stay compliant by sitting in your home country?

Book a demo with Skuad to consult on how to proceed with hiring in the Philippines for your business expansion plan.

Probation & Termination

In the Philippines, every person new to the organization needs to undergo a probationary period of up to 6 months. However, the period may be extended if any apprenticeship agreement exists between the employer and the employee. After the successful completion of this period, the employee must be considered as a regular employee whether a new contract is executed or not for the same as per the employment law in the Philippines.

Termination

Topics Explanations

Notice for Termination of Employment

  • An employee can terminate his employee-employer relationship by serving a written notice to the employer at least one month in advance.

  • An employee can also terminate his service without giving prior notice on the following grounds:

    1. Serious insult by the employer or his representative

    2. Inhuman and unbearable treatment

    3. Commission of a crime or offence by the employer

Grounds for Termination by Employer

The termination can be done by the employer as per Article 282 of Book VI, Title I of post-employment rules of Labor Relations. The grounds for termination are as follows:

  1. Wilful disobedience

  2. Gross negligence towards the duty

  3. Serious misconduct

  4. Breach of trust and fraud

  5. Commission of any crime against the employer or his representative

Project Employees

These employees have a fixed tenure for a specific project and after completion of the same, that project ends. Employees enjoy security benefits during the term of the project.

Seasonal Employees

These employees are recruited for the work which is seasonal in nature and only for the tenure of a season.

Casual or Temporary Employees

These employees are engaged to do the work which is incidental to the organization and only for a definite period which is informed to the employee at the time of engagement. They do not enjoy retirement pay and service incentive leave pay as compared to other forms.

Fixed Term Employees

These employees are not expressly mentioned in the labor code but recognized as per the Jurisprudence of the Philippines. Employees are given contractual benefits during the duration of the contract.

EOR Solution

The Philippines Employer of Record (The Philippines EOR) solution makes it easier to expand business in an accurate and compliant manner without setting up separate legal entities in the Philippines. Choosing EOR can shape your business route in smooth payroll management, company compliances, attendance management, tax filings and other employment related tasks.

Skuad global HR platform will help to manage your business in a simplified way by removing complexities through its unified and automated platform which is designed to handle monthly payroll, onboarding employees, drafting employment contracts, managing compliances and all day to day HR functions for your employees in the Philippines. Talk to a Skuad expert now.

General Employer of Record Service Terms

Taxes that apply to invoices

Standard tax rate of 12% on all supplies of goods and services.

Minimum duration of service

No specific fixed duration of service. There is a six-month probationary period, which may be terminated by either the employee or the employer on certain grounds as mentioned in the probation and termination section.

Currency Accepted

Philippine peso

Required Details and Documents

For Filipino Citizens: Personal information, ID proof, residential proof, CV, bank details, job details

For Expatriates: Personal information, job details, educational qualifications, technical qualifications, CV, copy of passport, copy of ID, Bank details, photographs, Employment contract

Types Of Visas In the Philippines

The three categories of Visas in the Philippines are Immigrant, Non-Immigrant and Special Visa, which are further classified into different types of visas as explained in the table below:

Immigrant Visas

Visa Category Explanations

A Child born abroad of an immigrant mother

A child who is born outside the Philippines during the temporary visit of the mother.

13 C

This visa is for a child born after the issuance of an immigrant visa to the accompanying parent.

13 A

It includes two types:

  1. Conversion to non-quota immigrant visa by marriage which is given to a foreign national on the basis of his valid marriage to a citizen of the Philippines.

  2. The dependent children under 21 years of age and unmarried joining or accompanying the applicant upon sufficient proof of blood relationship with the applicant.

Permanent Resident Visa (PRV)

This type of visa is granted to these four types of categories:

  1. Amendment to PRV by marriage

  2. Amendment to PRV-PROC married to Filipino

  3. Conversion to PRV-PROC married to Filipino

  4. PRV for Filipino Veterans

13 G

This is for the applicant who:

  1. was previously a natural-born citizen of the Philippines

  2. Is a naturalized citizen of a foreign country and

  3. Intends to return to the Philippines for permanent residence

Returning Visa (13 E)

This transaction is available to one who was previously granted permanent residence in the Philippines and who is returning to an unrelinquished residence in the Philippines after a temporary visit abroad.

Quota Visa (13)

This is for the nationals of the countries who have diplomatic relations with the Philippines and grant the Filipinos the same immigration privileges under the principle of reciprocity which shall not be in excess of fifty (50) of any one nationality or without nationality for any one calendar year.

Non-Immigrant Visa

Visa Category Explanations

A Child born abroad of an immigrant mother

A child who is born outside the Philippines during the temporary visit of the mother.

13 C

This visa is for a child born after the issuance of an immigrant visa to the accompanying parent.

13 A

It includes two types:

  1. Conversion to non-quota immigrant visa by marriage which is given to a foreign national on the basis of his valid marriage to a citizen of the Philippines.

  2. The dependent children under 21 years of age and unmarried joining or accompanying the applicant upon sufficient proof of blood relationship with the applicant.

Permanent Resident Visa (PRV)

This type of visa is granted to these four types of categories:

  1. Amendment to PRV by marriage

  2. Amendment to PRV-PROC married to Filipino

  3. Conversion to PRV-PROC married to Filipino

  4. PRV for Filipino Veterans

13 G

This is for the applicant who:

  1. was previously a natural-born citizen of the Philippines

  2. Is a naturalized citizen of a foreign country and

  3. Intends to return to the Philippines for permanent residence

Returning Visa (13 E)

This transaction is available to one who was previously granted permanent residence in the Philippines and who is returning to an unrelinquished residence in the Philippines after a temporary visit abroad.

Quota Visa (13)

This is for the nationals of the countries who have diplomatic relations with the Philippines and grant the Filipinos the same immigration privileges under the principle of reciprocity which shall not be in excess of fifty (50) of any one nationality or without nationality for any one calendar year.

Special Visa

Visa Category Explanations

Visa Upon Arrival (SEVUA

  1. Foreign investors and businessmen duly endorsed by the Board of Investments (BOI), the Philippine Retirement Authority (PRA), the Philippine Chamber of Commerce and Industry (PCCI), local business councils, or local as well as foreign chambers of commerce and industry;

  2. Athletes and delegates to sports competitions, conventions or exhibitions duly endorsed by its organizers and/or sponsors;

  3. Delegates and participants to, resource speakers in, international conventions, symposia, conference and similar gatherings duly endorsed by its organizers and/or sponsors;

  4. Foreign investors and their executives in investments that are endorsed by the government, or those resulting from bilateral agreements as well as those in response to Presidential Invitations for Investments during presidential trips or State Visits abroad;

  5. Officials of World Bank, Asian Development Bank, and other international development partners, including their dependent spouse and unmarried minor children;

  6. Other foreigners who, at the discretion of the Commissioner, may be entitled to the benefits of this program.

Special Visa for Employment Generation

This visa is applicable for a qualified non-immigrant foreigner who shall actually employ at least ten (10) Filipinos in a lawful and sustainable enterprise, trade or industry

Special Employment Visa for Offshore Banking Unit

This includes:

  1. Conversion to non - immigrant visa of offshore banking unit under PD 1034

  2. Extension of non - immigrant visa of offshore banking unit under PD 1034

Special Visa under E.O. 226 as amended by R.A. 8756

This includes:

  1. Conversion of special non-immigrant visa

  2. Extension of special non-immigrant visa

Source:Visa Upon Arrival (SEVUA)

Work Permits

Skuad local partners in the Philippines can help you in managing work permits for your organization. As an EOR in the Philippines, Skuad manages all the employment requirements and responsibilities in a simplified and compliant manner. On Skuad’s HR platform the client company can handle their employees’ day-to-day employment activities and operations. For a work permit in the Philippines, you are required to apply for Employee Visa 9G at the Bureau of Immigration Philippines. The documents required are as follows:

  1. Copy of passport
  2. Employment Contract
  3. Alien Employment permit issued by the department of labor and employment
  4. Application Form
  5. Additional information on the applicant’s children (if needed)
  6. Notarized certification of the number of foreign and Filipino Employees

After the documents checklist preparation, Skuad will help to manage further processes for application. Consult with us now.

Payroll and Taxes In the Philippines

To manage payroll and taxation in the Philippines, you must be aware of the local employment rules and tax structure of the country as it may vary from one category to another. Taxation structure includes different types of tax laws like business tax, withholding tax, employee compensation, social security and more.

Skuad’s EOR solution will keep you compliant with payroll in the Philippines. The social security system also consists of a home development fund and the Philippines health insurance corporation (PhilHealth). Let us discuss the tax rates in detail.

Taxes in the Philippines

Tax Explanation

Income Tax Rates

Taxable Income (PHP) Rate

Up to 250,000

0%

250,001 - 400,000

20%

400,001- 800,000

25%

800,001- 2,000,000

30%

2,000,001- 8,000,000

32%

8,000,001- Over

35%

Non-resident aliens not engaged in trade or business in the Philippines- 25% based on gross income.

Tax Year

31st December (Calendar year)

Filing & Payment

The annual income tax return must be filed by the 15th of April of the year following the calendar year.

Penalties

P1,000 for basic tax, not more than P5,000.

P3,000 for basic tax more than P5,000 but less than P10,000

Withholding Tax (For non - residents)

Dividends: 20% and 25% for non - resident aliens not engaged in trade or business.

Interest: 15%

Royalties: 20%

Sales Tax

12% on all goods and services

Payroll Tax

No specific payroll taxes

Social Security Contributions

The Social security contribution is 13%

Health Insurance

Healthcare benefits are given by state-subsidized public healthcare under the Philippines Health Insurance Corporation (PhilHealth) and these are non-taxable.

Public Pension

Pensions in the Philippines are governed by the government Service Insurance System and Social Security System.

Incorporation: How To Set Up Subsidiaries In the Philippines?

We can help you make your company compliant in every corner of the country. The forms of business you can set up in the Philippines are a corporation, branch office, regional headquarter or foreign partnership. It also depends on the nature and activities of your business. So let’s discuss the requirement in detail.

For Filipino subsidiary establishment you need to file certain documents with the Securities and Exchange Commission and obtain necessary licenses along with the following documents:

  • Articles of Association
  • Memorandum of Association
  • Declaration from the Treasurer’s office
  • Company name verification and approval paper
  • Registration datasheet
  • Obtaining Tax Identification Number (TIN)
  • Registration with the social security system

It will take around 30 days to incorporate a subsidiary in the Philippines, after which you can directly do your business with ease. And as Skuad is your global EOR solution provider, you don’t need to worry about how to fulfil the legal formalities including business compliances, training, development and hiring of your employees in the Philippines. Our goal is to simplify your business process so that you focus on core areas of business expansion.

Consult with SKUAD to understand the process in detail from experts.

Professional Employer Organization (PEO)

Professional Employment Organization (PEO) is an outsourced HR department where organizations merge with small and medium-sized businesses to handle your company compliances, payroll management, tax filing, recruitment and other services. So when you avail of the services of PEO, that organization smoothly handles your business operation without setting up any separate entity. PEO offers customized services according to the client requirement e.g. employee benefit, payroll processing, administration of workers compensation, business compliances, recruitment and others.

With the Philippines’ EOR solution you don’t need to associate with any small or medium size organization because you can directly become the legal employer. With Skuad’s EOR solution you can easily handle employee benefits and compensation, tax filing, payroll, compliance, attendance management and all other day-to-day activities related to HR.

Depending upon the nature, size and operations of your business, you may opt to hire directly by becoming a legal employer or tie-up with a Professional Employment Organization (PEO). Both options are available.

To decide, Book a DEMO WITH SKUAD.

Conclusion

While setting up business in the Philippines, you need to be aware of the local laws, rules and regulations to expand your business line in an accurate manner. A business requires a one-stop source where an effective and efficient EOR solution can be provided to complete the outsourcing needs of the business. Therefore, Skuad is a one-stop source to handle payroll, compliances, tax filing, managing the hire to retire cycle and more.

Still not sure on how to begin, connect with Skuad to make the right choice about your business expansion dream in the Philippines with our automated and unified platform.

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