Hire in the Philippines

How to Hire Employees in the Philippines

Thanks to globalization, companies are no longer limited to hiring talent within their physical borders. 

Whether you are hiring in the Philippines or hiring from the Philippines, you have three popular options to consider: 

1. Setting up a local entity

Setting up a local entity in the Philippines will give you the most control over your hiring process. This option lets you directly manage your Filipino employees and establish a physical presence there. 

However, it also involves upfront investment, complex procedures, and ongoing responsibilities. 

To begin with, you must register with the Securities and Exchange Commission (SEC) and secure a business name and legal structure (say, corporation, branch office, representative office, partnership, or sole proprietorship). 

You must obtain necessary permits and licenses from the Department of Trade and Industry (DTI), Bureau of Internal Revenue (BIR), and others depending on your industry. 

After securing a minimum capital requirement, understanding foreign ownership restrictions, and learning about labor law complexities and payroll requirements, you can begin to hire in the Philippines. 

2. Hiring employees via EOR

Choosing an Employer of Record (EOR) offers a streamlined approach to hiring Filipino talent without the complexities of establishing your business presence in the Philippines. 

An EOR acts as a legal employer on your behalf, handling all employment-related tasks for your Filipino hires. 

While EORs typically charge fees for their services, which can be a percentage of the employee's salary or a fixed monthly payment, you will gain the following benefits:

• Start quickly without the need for company registration or obtaining permits and licenses.
• Ride along the local expertise of EORs to ensure you comply with regulations regarding payroll taxes, social security contributions, and employee benefits.
• Reduce your administrative burden with payroll processing, benefits administration, and managing tax payments.
• You can quickly scale your global team as EOR handles the legalities of onboarding and offboarding employees.

3. Hiring contractors through AOR

Agent of Records (AOR) is a specialized solution for hiring contractors in the Philippines. An AOR acts as a middleman, helping you find and manage independent contractors in the Philippines. 

Moreover, global companies prefer to mitigate legal risks associated with employee misclassification and non-compliance with labor laws.

AOR offers labor law compliance support and contract negotiation with independent contractors when you are looking to hire from the Philippines. 

Post-hiring, you can partner with EOR/AOR solutions to effectively onboard and ensure payroll compliance and benefits administration.

Furthermore, here are some best practices to increase your chances of attracting and retaining top Filipino talent for your team: 

• Draft a compelling employer brand highlighting your company culture, career growth opportunities, and competitive packages to attract top talent.
• Write detailed job descriptions outlining responsibilities, qualifications, and expectations. 
• To reach a broad audience, take advantage of popular online job boards like Jobstreet, Kalibrr, and Indeed. You can also utilize social media platforms like LinkedIn for targeted outreach.
• Furthermore, Filipinos value education but prioritize candidates with the right skills and experience for their specific needs, not just a high degree.

What is the Cost of Hiring in the Philippines

When asking how to hire talent in the Philippines, you must also consider how much it costs to employ in the country. The average cost per hire in the Philippines is around 16.2% on an annual salary of USD 60,000 (~ PHP 34,63,950). Here's a breakdown of potential expenses to consider when hiring:

• Costs associated with job postings, online platforms, recruitment agency fees
• Background checks and skills assessment fee
• Pre-employment medical exam fee 
• Gross salary for the employee, plus mandatory benefits like 13th-month pay, health insurance, and social security contributions (Try our salary calculator for more insights.)
• Costs associated with calculating taxes, deductions, and remittances
• Expenses related to setting up and maintaining a physical workspace
• Costs associated with legal advice, registration fees (local entity), or EOR/AOR service fees

While the table summarizes the cost of hiring employees in the Philippines, you can utilize Skuad’s hiring cost calculator for better results.

What are the Employment Laws in the Philippines?

The employment law in the Philippines prioritizes worker security and well-being through the following provisions: 

• Strong protection against dismissal, with just causes and due procedures required for termination.
• The minimum wage varies by region and is reviewed periodically.
• Standard working time of 40 hours per five-day week
• Employers must provide benefits like 13th-month pay, health insurance, and social security contributions.
• Employees are entitled to various paid leaves, including vacation, sick, and maternity/paternity leave.

Various other laws contribute to employment law in the Philippines:

• Philippine Constitution: Establishes fundamental worker rights like security of tenure and freedom of association.
• Labor Code of the Philippines (Presidential Decree No. 442): It is the cornerstone of Philippine employment law, outlining regulations regarding working conditions, wages, benefits, termination, and employee rights. 
• Social Security Law (Republic Act No. 11199): Mandates social security contributions for both employers and employees.
• Maternity Leave Law (Republic Act No. 11210): Provides benefits and job security for pregnant women on maternity leave.
• Paternity Leave Act of 1996 (Republic Act 8187): Grants paternity leave benefits and job security for new fathers.
• Occupational Safety and Health Standards (Department of Labor and Employment): This agency establishes regulations for workplace safety and hazard prevention.
• Other relevant laws, such as the recent ones, address the need to update Filipino workers' skills and promote digital technologies.

Challenges of Hiring in the Philippines

Here are some challenges you might face when hiring in the Philippines:

1. Employment laws in the Philippines

One challenge of hiring in the Philippines is complying with the local labor laws and regulations for the following reasons. The Department of Labor and Employment recognizes six different employment types: regular, casual, project, seasonal, fixed-term, and probationary. 

You must set up proper systems to hire in the Philippines before classifying them appropriately for compliance. Furthermore, the law clearly defines the differences between employees (supervised, indefinite term, benefits) and contractors (self-employed, fixed term, no benefits). 

You may be exposed to misclassifying employees as contractors, resulting in significant fines, back pay, benefit reimbursement, and even jail time.

For companies used to more flexible termination policies, you cannot hire staff in the Philippines and terminate employment “at will”. 

The prescribed regulations expect you to follow the due process for termination of employment, including a minimum of 30 days of notice and at least one month’s salary for every year of service as severance pay.

You must factor in stringent Occupational Safety and Health (OSH) compliance requirements to hire staff in the Philippines. Moreover, you may be fined up to PHP 100,000 per day until the violation is resolved. 

The law also empowers Filipino workers to be informed of workplace hazards and refuse to work in unsafe conditions. 

Additionally, the presence of a strong union can influence your decision to hire in the Philippines. During the selection process, you may be required to consider seniority or union membership alongside qualifications.

Subsequently, most companies prefer to partner with Employer of Record solutions to hire employees in the Philippines and stay compliant with labor laws.  

2. Payroll in the Philippines

Payroll considerations may not directly impact your hiring process in the Philippines, but they can add administrative burdens and unforeseen costs like. We’ve answered how to pay in the Philippines, for you, below: 

• While the minimum wage is PHP 610 per month, payroll involves calculating income tax (progressive rate from 0% to 35%) and employer contributions (around 16.2% on a specific salary), which can be complex.
• You must provide a 13th month of pay to non-management employees by Christmas Eve. So, to hire employees in the Philippines, you must consider additional payroll costs, proration calculations, and compliance reporting. 
• Moreover, minimum wage and some employer contributions might vary by region.
• Global companies need to factor in currency conversion rates and potential fluctuations in the Philippine Peso, which adds another layer of complexity to the payroll process.

Here is why global companies outsource payroll compliance to specialized service providers in the Philippines.  

3. Competitive talent landscape 

Companies in the APAC region face increased competition for top candidates. In the Philippines, job hopping is relatively standard. 

Thus, to attract and retain the best talent, you must develop strong employer branding and offer competitive compensation packages. 

The Philippines is among the top remote work hubs. To accommodate a more remote workforce, you must adapt the right talent acquisition strategies. 

This includes developing processes for interviewing and onboarding remote employees and ensuring that they have the tools and resources they need to be successful.

Hire in the Philippines, quickly and compliantly, with Skuad

Building a global team is now easy with Skuad. 

Skuad is your one-stop solution for hiring and managing Filipino employees and talent across 160+ countries without setting up a local entity.

Our Employer of Record (EOR) and Agent of Record (AOR) solutions take care of all the legal complexities – from payroll processing and tax compliance to benefits administration – ensuring you remain compliant with local regulations.

Contact Skuad today and book your demo to hire someone in the Philippines - and beyond!

FAQs

Q1. How much does it cost to hire employees in the Philippines?

A1. The cost to hire employees in the Philippines is around 16% of an annual salary of USD 60,000. This includes salary benefits, payroll processing, taxes, and contributions. 

Q2. Why hire people in the Philippines?

A2. The APAC region, specifically the Philippines, boasts a highly skilled and multilingual workforce at competitive rates. Filipinos are known for their strong work ethic, cultural adaptability, and excellent English communication skills. 

Q3. What is the average salary in the Philippines in US dollars?

A3. The average salary in the Philippines is around USD 800 and varies based on region and job title. This is significantly lower than many Western countries, making the Philippines an attractive option for businesses seeking cost-effective talent.

Q4. How do you hire a contractor from the USA in the Philippines?

A4. You can hire a Filipino contractor from the USA using online platforms or offline agencies. Further, most US companies partner with Agent of Record (AOR) solutions like Skuad to mitigate employee classification risks and set up a clear contract with payment terms.