The Philippines, a technologically advanced nation, has become a magnet for remote tech talents and organizations building distributed teams due to its exceptional skills and comparatively low operational costs. However, reaping the benefits of this skilled workforce requires a firm grasp of the employment laws in the Philippines. In particular, understanding specifics such as retirement pay, labor code, minimum wage, and employee benefits are fundamental. This article walks you through the critical aspects of these laws, aiming to help tech professionals and companies navigate this intricate legal landscape successfully.
Main Sources of the Employment Law in the Philippines
Navigating the employment landscape in the Philippines requires a solid understanding of its legal sources. The country's employment laws are derived from several crucial areas, including national legislation, administrative regulations, jurisprudence, and private agreements.
The Labor Code of 1974
The cornerstone of Philippine employment law, the Labor Code of 1974, provides the foundational structure for labor relations, employment practices, and workers' rights in the country. It details essential aspects such as working conditions, employment benefits, wage structures, retirement pay, labor relations, and dispute resolution processes. Notably, it also establishes the responsibilities and boundaries for employers, ensuring fair treatment and appropriate compensation for all employees. It is a crucial aspect for anyone navigating the employment contract and code of the Philippines. In addition, the Labor Code also covers rules about separation pay, probationary employment, holiday pay, service incentive leave, night shift pay, and guidelines for the weekly rest day.
The Civil Code of the Philippines
The Civil Code of the Philippines also plays a significant role in employment law. It details aspects of contractual obligations and serves as a general law where specific legislation, such as the Labor Code, does not apply. It can help define employment contracts, establish liability for breach of contract, and provide guidance for disputes relating to contracts. Specific employee types, such as solo parent employees, are also considered within this framework.
Other Special Laws
Several other laws have a specific focus or tackle issues not covered in the primary codes. For instance, the Expanded Maternity Leave Law, Anti-Sexual Harassment Act, and the Occupational Safety and Health Standards Act are all separate pieces of legislation that influence employment practices in the country. These laws also cover aspects like holiday pay and are overseen by bodies like the Philippine Overseas Employment Administration.
Employment practices in the Philippines are also influenced by administrative regulations. The Department of Labor and Employment, known as DOLE, is a key regulatory body in this regard. It promulgates rules, issues interpretations of labor laws, and has the power to inspect employers for compliance with labor standards and regulations. For instance, understanding the probationary period in an employment relationship is essential to comply with the rules.
Philippine employment law is significantly shaped by jurisprudence or the decisions made by courts in previous cases. These judicial interpretations can influence the application and understanding of employment laws and regulations. Furthermore, the national health insurance program and the service incentive leave are key areas that are impacted by these interpretations.
Collective Bargaining Agreements and Company Policies
Finally, collective bargaining agreements (CBAs) and company policies also serve as important sources of employment law in the Philippines. CBAs are agreements between an employer and a recognized labor organization representing the employees, outlining terms and conditions of employment. Company policies, on the other hand, provide additional guidelines and rules within the framework of existing laws and regulations.
With all these sources, complying with the labor code in the Philippines can be a complex task. Employers of record, or EORs, can help navigate this complexity, and guidelines exist to aid them in maintaining regulatory compliance.
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Types of Workers in the Philippines
In the dynamic and diverse world of work in the Philippines, workers can be classified into various categories, each with unique employment conditions and legal considerations:
- Regular Employees: Regular employees are those who are employed to perform activities that are necessary or desirable in the usual business or trade of the employer. They have the most extensive protection under Philippine labor laws, including security of tenure and entitlement to various benefits.
- Project Employees: Project employees are those hired for a specific project or undertaking, the completion of which has been determined at the time of their engagement. The employment of these workers is coterminous with the project and they are entitled to separation pay if the project concludes before the agreed-upon date.
- Seasonal Employees: Seasonal employees are those who perform work or services that are seasonal in nature. They are considered in regular employment during the time of the activity and are on leave during the off-season.
- Casual Employees: Casual employees are those whose employment is not regular, but they perform activities necessary or desirable in the employer's usual business or trade. If they render at least one year of service, whether continuous or broken, they become regular employees.
- Independent Contractors: Independent contractors offer their services to the general public under terms and conditions they usually determine themselves. They are not considered employees and therefore do not enjoy the protection of labor laws. Misclassifying an employee as an independent contractor can result in serious financial and legal penalties.
Many tech companies are choosing to use Employers of Record (EOR) partners. EORs enable companies to hire workers without establishing a local entity in the Philippines. They take care of compliance and legal complexities including adhering to employment laws and regulations.
Anti-Discrimination Laws in the Philippines
The Philippines is committed to promoting equality in the workplace through a variety of anti-discrimination laws, with an aim to ensure every worker's right to fair treatment. These laws of country's legal framework, provide robust protection against workplace discrimination.
Labor Code Provisions
An important law for workplace equality in the Philippines, the Labor Code, strictly forbids discrimination in regards to wages, work hours, and other terms of employment. It specifies that no employee should be disadvantaged on the basis of their sex, race or creed.
Civil Service Commission Guidelines
The Civil Service Commission (CSC) has established policies to prohibit discrimination in government offices. These guidelines, as enforced by the CSC, protect against discrimination based on factors such as disability, age, civil status and political affiliation, to provide a level playing field for all government employees, including those in probationary employment.
Specific Anti-Discrimination Laws
In addition to the general anti-discrimination provisions, specific laws target particular areas of discrimination. The Magna Carta of Women (Republic Act No. 9710) specifically protects women from discrimination, promoting gender equality in public and private life. Furthermore, the HIV and AIDS Policy Act (Republic Act No. 11166) safeguards the rights of workers with HIV, prohibiting discrimination in terms of employment, promotion and training opportunities.
The Importance of Complying with Anti-Discrimination Laws
Compliance with these anti-discrimination laws is not just a legal requirement but can also contribute to a more harmonious and productive working environment. Companies that respect diversity and inclusion can benefit from a wider range of skills and perspectives, fostering creativity and innovation. Moreover, companies found guilty of discriminatory practices may face serious penalties, such as fines, imprisonment, or both.
Minimum Employment Terms in the Philippines
Understanding the minimum employment terms as per the Philippine law is a vital part of hiring and retaining tech talents in the country. These regulations, laid down by the Labor Code of the Philippines and various other special laws, ensure fair working conditions for employees while helping employers maintain regulatory compliance.
As a starting point, the Philippines follows a strict minimum wage policy, which varies depending on the region. The Regional Tripartite Wages and Productivity Boards, a governmental body, determines the daily minimum wage rates, ensuring that all employees receive fair compensation for their work.
Mandatory Employee Benefits
Apart from the wage system, Philippine law mandates certain benefits for all employees. These include:
- Social Security System (SSS): A social insurance program for employees in the private, professional, and informal sectors. It provides members with benefits such as sickness, maternity, disability, retirement, death, and funeral.
- PhilHealth: Health insurance for all Filipinos, providing financial health protection in case of illness or emergencies.
- Pag-IBIG: A savings system providing affordable shelter services to Filipino workers.
- 13th-month pay: A mandatory benefit provided to employees, equivalent to one-twelfth of their basic annual salary.
For an employer considering hiring international employees with an Employer of Record(EOR) in the Philippines, these benefits need to be factored into the employment contracts. You can find more information on how an EOR operates in the Philippines on Skuad's blog.
Safe and Healthy Working Conditions
Employees have a right to safe and healthy working conditions under Philippine law. For remote tech teams, this might translate into ensuring ergonomic working conditions, providing necessary health insurance, and ensuring a healthy work-life balance.
Leave Rights in the Philippines
Understanding leave rights is a critical part of the labor code in the Philippines. It ensures employees' well-being and work-life balance while contributing to their productivity. Here are the different types of leave that employees are entitled to:
Vacation and Sick Leaves
Most employers in the Philippines grant their employees vacation and sick leaves, although there's no specific legal mandate for these. The quantity of leave days can vary depending on company policies.
Under the Expanded Maternity Leave Law of 2018, female employees are entitled to 105 days of paid maternity leave for live childbirth, regardless of the mode of delivery. This leave benefit also applies to every instance of pregnancy, miscarriage, or emergency termination of pregnancy, regardless of frequency.
An additional 15 days of paid leave is provided if the female worker qualifies as a solo parent. Moreover, a female worker has the option to extend for an additional 30 days without pay. For more details about maternity leave rights, visit this page.
Paternity leave is granted under the Paternity Leave Act of 1996. It provides seven days of paid leave to male employees for the first four deliveries of their legitimate spouse with whom they're living.
Solo Parent Leave
The Solo Parent's Welfare Act of 2000 grants seven days of paid leave annually to any solo parent employee who has rendered service for at least one year.
Special Leave Benefits for Women
Under the Magna Carta of Women, female employees who have undergone surgery due to gynecological disorders are entitled to a special leave benefit of two months with full pay.
Data Privacy in the Philippines
The legal landscape for data privacy in the Philippines is comprehensive and intricate. The primary legislation overseeing data privacy is the Data Privacy Act of 2012. This piece of legislation has significantly impacted how organizations, including those employing remote tech talents and building distributed teams, handle personal data.
The Data Privacy Act of 2012
This groundbreaking legislation was put into effect to protect individual personal information in information and communications systems both in the government and the private sector. As an employer, it's crucial to understand the Data Privacy Act's implications on your practices, particularly in managing employee records and engaging third-party services.
The Act stipulates that personal data can only be processed based on the principles of transparency, legitimate purpose, and proportionality. This means that data must be collected for specified and legitimate purposes, and processing should be adequate, relevant, suitable, and not excessive in relation to these purposes.
National Privacy Commission
The National Privacy Commission, established under the Data Privacy Act, is responsible for ensuring compliance with standards of data protection. The commission also educates the public about their rights under the Data Privacy Act, investigates complaints, and monitors compliance of data processing systems.
Compliance for Remote Teams and Tech Companies
For tech companies and remote teams, complying with the Data Privacy Act is crucial. Not only does it help maintain trust between you and your employees, but it also helps prevent potential legal issues down the line. Ensure you have robust data protection policies in place that align with the requirements of the Act.
Importantly, tech talents who are working from abroad should also be made aware of their rights under the Act. Employers should also consider partnering with an Employer of Record to navigate complex data privacy and employment laws, especially when managing international employees.
Termination of Employment Contracts
Termination of employment in the Philippines is a sensitive process that must be carried out with caution to protect both the employer's and the employee's rights. It is governed by strict regulations to ensure fairness and legality in employment practices.
Just Causes for Termination
Just causes for termination refer to those that arise from the fault or negligence of the employee. According to the Labor Code, these include serious misconduct, willful disobedience to lawful orders, gross and habitual neglect of duties, fraud or breach of trust, commission of a crime or offense against the employer or their family, and other similar causes.
Authorized Causes for Termination
Authorized causes, on the other hand, refer to reasons that are not necessarily due to the fault or poor performance of the employee. These include redundancy, installation of labor-saving devices, retrenchment or reduction of personnel to prevent serious business losses, closure or cessation of business operations, and disease or illness that is incurable within a period of six months.
Due Process in Termination
Employers must observe due process when terminating an employment contract. The Labor Code mandates that the employer should provide two written notices to the employee: a notice to explain the grounds for dismissal and a notice to inform the employee of the decision to dismiss.
Furthermore, employees working remotely should also be given the same level of fairness and legality during termination. Employers should be aware of the legal and tax risks that come with handling remote employees, including the termination process.
Upon termination, employees may be entitled to certain benefits, depending on the cause of termination. For instance, in cases of authorized causes such as redundancy and retrenchment, the employee is entitled to separation pay equivalent to one month's pay or at least one-half month's pay for every year of service, whichever is higher.
For more detailed information on the benefits and consequences of hiring international employees with an employer of record, visit here.
Stay Compliant in the Philippines with Skuad
Staying compliant with the Philippines' employment laws not only allows your organization to bypass avoidable fines and penalties but also contributes to a productive workspace.
Skuad, a complete Employer of Record platform, empowers organizations to compliantly hire and onboard contractors and employees in over 160 countries, including the Philippines. Legal risks and penalties become relics of the past with Skuad, as it ensures your organization is fully aligned with the specific laws and regulations of each country.
To learn more, schedule a demo with Skuad.
Is overtime mandatory in the Philippines?
Yes, the employment law in the Philippines mandates employers to make provisions for overtime pay when an employer works more than 8 hours in a day.
Is employment contract legally binding in the Philippines?
Yes, an employment contract is legally binding. However, the law in the Philippines does not require a written or "formal" employment contract to establish an employer-employee relationship in the Philippines.