Guide to Hiring in Philippines

Labour Law – Basics

What are the basic requirements for employers in the Philippines?

What to remember when hiring new employees?

The steps to hiring an employee in the Philippines include:

1. Ensuring the employee is legally allowed to work in the Philippines
2. Background Checks – A legal procedure in the Philippines with the consent of the employee, background checks are mandatory for certain jobs in the Philippines.
3. Offer Letter – The offer letter should include the employee’s position, working hours, compensation, benefits, and the employing company’s termination policy in detail.
4. Filing paperwork – The employer is required to file tax documents, non-disclosure agreements and register the employee under the Social Security System (SSS), PhilHealth, Corporate Pag-IBIG Fund (HDMF) and the Employees’ Compensation Commission. This step is mandatory.

Calculate how much it would cost to hire an employee in the Philippines through an Employer of Record!

What are the different discrimination laws in the Philippines?

Employers in the Philippines are not allowed to discriminate employees on account of:

• Sex
• Age
• Marital status
• Pregnancy status
• Solo parent status
• Disability
• Mental health condition
• Ethnicity
• Actual or suspected HIV status
• Suffering from tuberculosis
• Actual hepatitis B
• Having cancer or being a cancer survivor
• Union membership.

• Philippines Anti-Sexual Harassment Act of 1995 (Republic Act No. 7877) makes it mandatory for employees to create workplace policies that prevent the act of sexual harassment in the workplace.
• The Safe Spaces Act (Republic Act No. 11313) places the duty on employers or other persons of authority to prevent acts of gender-based sexual harassment in the workplace.
• Late 2022, Philippines approved House Bill No.4479 which amends Article 135 of Presidential Decree No. 442 or the Labor Code of the Philippines, which lists the acts of discrimination prohibited. The bill seeks to strengthen the anti-discrimination provisions of the law by providing that it “shall be unlawful for any employer to discriminate against any woman employee with respect to terms and conditions of employment solely on account of her sex or characteristics of her sex, whether actual or presumed.”

What are the working hours in the Philippines?

The daily working hours of an employee must not exceed 8 hours per day, as stated in Article 83, Chapter I, Title I, Book Three of the Labor Code of the Philippines.

An employee who works more than 8 hours per day is entitled to overtime of:

• 25% overtime pay of their hourly rate during regular working days.
• 30% overtime pay of their hourly rate during rest days and special holidays.

It is important to note that employees who are supervisors or managers are not included in the overtime payment system as mentioned above.

What is the legal probation period in the Philippines?

The probationary period in Philippines should not exceed more than 6 months which consists of 180 days. However, there are some exceptions to the 180-day probation agreement, as follows:

1. Apprenticeship agreement and
2. Teaching personnel in the private sector.

As stated in Article 13, the first day on the job should be excluded from the probationary period.

What are the minimum wage requirements in the Philippines?

Daily Minimum Wage Rates – National Capital Region (NCR):

*The above covers the Cities of Caloocan, Las Pinas, Makati, Malabon, Mandaluyong, Manila, Marikina, Muntinlupa, Paranaque, Pasay, Pasig, Quezon, San Juan, Taguig, and Valenzuela and Municipalities of Navotas and Pateros.

Minimum Wage Rates for Domestic Workers – National Capital Region (NCR):

Minimum wage rate = Php 6,000.00

*The above covers the Cities of Caloocan, Las Pinas, Makati, Malabon, Mandaluyong, Manila, Marikina, Muntinlupa, Paranaque, Pasay, Pasig, Quezon, San Juan, Taguig, and Valenzuela and Municipalities of Navotas and Pateros.

What to note for existing employees?

• 13^th-month Pay: As part of the employment law, private sector employees who have worked for at least one month within the calendar year is entitled to a yearly 13^th-month compensation. Employers are required to pay it by December 24 each year.
  • Calculating the 13^th-month pay:
    • Total basic salary per year (minus unpaid absences) / 12
  • The 13^th-month pay is taxable if it exceeds ₱90,000.

• Income Tax:
  • Individuals – Filipino resident citizens who are earning an income within or outside the Philippines. As stated on the Bureau of Internal Revenue of the Republic of the Philippines’ guidelines, these individuals include:
    • Employees deriving purely compensation income from two or more employers, concurrently or successively at any time during the taxable year.
    • Employees deriving purely compensation income regardless of the amount, whether from a single or several employers during the calendar year, the income tax of which has not been withheld correctly (i.e. tax due is not equal to the tax withheld) resulting to collectible or refundable return.
    • Self-employed individuals receiving income from the conduct of trade or business and/or practice of profession.
    • Individuals deriving mixed income, i.e., compensation income and income from the conduct of trade or business and/or practice of profession.
    • Individuals deriving other non-business, non-professional related income in addition to compensation income not otherwise subject to a final tax.
    • Individuals receiving purely compensation income from a single employer, although the income of which has been correctly withheld, but whose spouse is not entitled to substituted filing.

• Non-Individuals – As stated on the Bureau of Internal Revenue of the Republic of the Philippines’ guidelines, these non- individuals include:
  • Corporations including partnerships, no matter how created or organized.
  • Domestic corporations receiving income from sources within and outside the Philippines.
  • Foreign corporations receiving income from sources within the Philippines.
  • Estates and trusts engaged in trade or business.

Termination of Employment – Seperation Pay & Long Service Payment

Employers in the Philippines can terminate employees on the following conditions:

• Willful disobedience
• Gross negligence towards duty
• Serious misconduct
• Breach of trust and fraud
• Commission of any crime against the employer or his/her representative.

There is no seperation pay that is required to be paid for the above conditions.

• Replacement of labor-saving devices
• Redundant placement
• Closure of business
• Disease or illness
• Retrenchment to prevent losses.

Seperation pay is required to be paid for the above conditions. Severance payment is usually one month’s wages per year of service.
When termination is done under a ‘just cause’, the employer is required to provide the employee with 30 days of notice which can be in the form of:

• A notice of intent to dismiss the employee which must specify the dismissal grounds.
• A conference or hearing allowing the employee to respond to the charges.
• A notice of dismissal that the company has established grounds to justify termination.

The employer must provide the employee with:

• A written copy of the notice. This must also be provided to the Regional Office of the Department of Labor and Employment (DOLE) that governs the company’s region.
• Severance pay which depends on the reason for termination. If the employee is not at fault upon termination, the employer must provide one month’s pay or one month’s pay per year of service, whichever stands at a higher point.

What is the retirement age in the Philippines?

The mandatory retirement age for civil servants in the Philippines is 65 years. However, early retirement at the age of 60 years is an option.

Employment dispute channels

Employees can act through The National Labor Relations Commission (NLRC).

Is employment insurance compulsory in the Philippines?

All employed persons under the age of 60 who earn more than ₱1,000 are required to contribute to:

• Social Security System (SSS) – Made to protect private employees, seafarers, and Overseas Filipino Workers (OFWs) from financial burdens, Philippines’ Social Security System (SSS) requires a monthly contribution of:
  • 5% for employers with a cap of ₱1,900
  • 5% for employees with a cap of ₱900

As members of the SSS, employees can benefit from:

• Maternity Benefits
• Sickness Benefits
• Retirement Benefits
• Salary Loan Benefits
• Disability Benefits
• Death Benefits
• Funeral Benefits

• Philippine Health Insurance Corporation (PhilHealth) – Philippine’s state health insurance fund requires employers to contribute 4% of employee’s base monthly wage, with an income ceiling of ₱80,000.

Types of PhilHealth Members:

• Formal economy members – All employed individuals working with the government or private sectors in the country.
• Informal economy members – Unemployed, self-employed, informal workers, naturalized Filipinos and foreigners living in the country who are voluntary or individually paying their premiums to PhilHealth.
• Overseas Filipino Workers (OFWs)
• Senior Citizens – Automatic members of PhilHealth for Filipinos aged 60 years old or above.
• Lifetime members – Aged 60 years old or above and have paid a minimum of 120 monthly premiums to PhilHealth.
• Sponsored members – Members whose contributions are made by a sponsor.
• Indigent members – Members without a source of income.
• Qualified dependents – Members whose contributions are covered by a principal member (spouse, children or parents).

• Home Development Mutual Fund (HDMF) – Also known as the Pag-IBIG Fund, the HDMF helps employees finance a new home. Monthly contributions are mandatory for all Social Security System covered employees. The maximum monthly compensation allowed to compute each employee’s Pag-ibig contribution is currently set at ₱5,000.
  • Employers contribute 2% to all employee salaries.
  • Employees contribute 1% on salaries of ₱1,500 or below and 2% on salaries over ₱1,500.

HDMF gives employees the chance to take loans for housing and emergency purposes. The membership allows members to loan residential properties that do not exceed 1,000 sqm.Other benefits under HDMF include:

• Home financing
• Savings
• Calamity loan
• Multi-purpose loan (MPL)
  • Employees’ Compensation Program (EC) – A government program made to provide a compensation package relating to work-related sicknesses, injury or death to both public and private employees.
    • Employer contribution is ₱10 for employees earning over ₱14,749.
    • Employer contribution is ₱30 for employees earning over ₱14,749.