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Hiring in Philippines? Read on to find out the employment norms (like taxes, payroll and benefits) and EOR (Employer on Record) norms in Philippines.
Employment Norms in Philippines
The Philippines or the Republic of Philippines is an island country in Southeast Asia. It consists of more than 7000 islands with around 2000 inhabited islands. It is situated in the Pacific Ocean. The country is known for its rich cultural and natural heritage. The Philippines have excelled in tourism and agriculture along with industries. The country holds an 'easy' tag in the 'ease of business doing' index.
General Information:
- The Philippines currency is Philippine Peso (PHP).
- Manila is the capital of Philippines.
- Philipino and English are the official languages of the Philippines. Documentation can be in Philipino or English.
- As of 2021, the GDP of Philippines was reported to be 394.09 billion US dollars.
The Filipino labor laws protect employees from harassment and discrimination in the workplace. It oversees wages, leaves, work hours, health and social benefits, etc.
Table of Contents
- Agreements
- Onboarding Process
- Visa
- Minimum Wage
- Payroll Cycle
- Annual Bonus
- Health Benefits
- Working Hours and Overtime
- Leaves
- Social Security
- Taxes for Employers
- Taxes for Employees
- Probation
- Termination
- Severance Pay
- Employees or Contractors
- Final Words
AgreementsOnboarding ProcessVisaMinimum WagePayroll CycleAnnual BonusHealth BenefitsWorking Hours and OvertimeLeavesSocial SecurityTaxes for EmployersTaxes for EmployeesProbationTerminationSeverance PayEmployees or ContractorsFinal Words
Agreements
The employment agreement in the Philippines must contain all the terms and conditions related to the employment. It can be in either Philipino or English. The Philippines have three main types of employment agreements:
- Indefinite or Open-term agreement: It is a general thumb rule to hire employees on an indefinite agreement. All regular and permanent employees are hired through indefinite agreements.
- Definite or Closed-term agreement: The fixed-term employment agreement must not exceed 1 year. If an employee keeps working more than the tenure, it will be considered a regular agreement.
- Project agreement: Project employment involves hiring employees for a specific project in a set period.
- Seasonal agreement: Seasonal employees are hired only for a specific time or season.
- Casual agreement: An employee under this agreement must not be hired for more than 1 year.
Onboarding Process
The onboarding process in the Philippines is as follows:
- Job descriptions are created by HR departments. They collaborate with the department that has an opening.
- The job description is then published on the company's official website as well as other websites, like LinkedIn.
- Some companies may even advertise job openings in local newspapers. It can take up to a week for the advertisement to be taken down.
- Candidates demonstrate their eligibility before submitting applications. These are further reduced after numerous screenings and interviews.
- Finally, selected candidates then haggle over terms and conditions with the business. An agreement is reached with the company, and the candidate is hired.
Visa
The Philippines has three main types of Visas:
- Philippines non-immigrant visas: It is the short-term stay visa that is issued to foreigners for shorter stays, such as tourist, business, student, and work visas. This visa is valid for 59 days only before re-entering the country.
- Philippine immigrant visa: The Immigration Quota refers to highly skilled Filipino people who are advanced degree-holding foreign nationals from countries with which the Philippines has reciprocal agreements.
- Philippines special visa: Special Investors Resident Visa (SIRV) and Special Visa for Employment Generation (SVEG) are issued to foreigners investing in the Philippines.
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Minimum Wage
There is no legally fixed minimum wage in the Philippines. It varies from region to region and ranges from PHP 282 to PHP 547.
Payroll Cycle
The payroll cycle in the Philippines is monthly. It can be paid bi-weekly as well.
Annual Bonus
There is a legal provision for paying an annual bonus in the Philippines. The 13th salary must be half of the regular salary of the employee.
Health Benefits
- Health benefits in the Philippines include medical facilities, sick leaves, etc.
- The employer is responsible for providing healthy and safe working conditions.
Working Hours and Overtime
- Work hours: The standard working hours in the Philippines is 8 hours per day or 40 hours per week. The regular working week starts from Monday to Friday.
- Break: An employee is entitled to 20 minutes of break in between continuous work hours.
- Overtime: The overtime work in the Philippines must be paid 125% of the regular rate. Employees working overtime on holidays must be paid 130% of the regular rate.
Leaves
Sick Leave
- Employees have 5 days of paid leave after 1 year of service as there is no sick leave in the Philippines.
- It is called service incentive leaves and is paid by the employer.
Maternity leaves
- Female employees are eligible for up to 105 days of paid maternity leave.
- 14 days must be taken before childbirth and remaining after childbirth.
- Single mothers get 15 days of leave.
- The employee draws the pay from the social security fund.
Paternity leaves
- Male employees are entitled to 7 days of paid paternity leave paid by the employer.
Other Leaves
- Victims of Violence Against Women and Children: VAWCs are entitled to 10 days of leave with certification.
- Special leave for women: Female employees can take up to 2 months of leave after surgery for gynecological issues.
- Solo parent leave: Certified solo parents can take 7 days off.
Public Holidays (for the Calendar year 2023)
- New Year's Day (1st January)
- New Year holiday (2 Jan)
- EDSA people power revolution anniversary (25 Feb)
- Easter (6-8 April)
- Araw Ng Kagitingan (9-10 April)
- Labor Day (1 May)
- Independence Day (12 June))
- Ninoy Aquino day (21 August)
- National Heroes Day (28 August)
- All Saints' Day (1 November)
- All Souls' Day (2 November)
- Monday, closest to Bonifacio's day (27 November)
- Feast of the immaculate conception of Mary (8 December)
- Christmas Day (25 December)
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Taxes for Employers
Employers have to pay the following taxes in Philippines.
- Public Health Insurance - 2.0%
- Pension Fund - 0.71%
- Social Security - *.57%
- Home Development Mutual Fund- 2%
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Taxes for Employees
Employees have to pay the following taxes in the Philippines:
- Home Development Mutual Fund-
- Below 1500 PHP/Month - 1%
- Above 1500 PHP/Month -2%
- PhilHealth- 3.5%
- Social Security- 4.5%
Income taxes in the Philippines are as follows:
- Up to PHP 250,000 - 0%
- Up to PHP 400,000 - 20%
- Up to PHP 800,000 - 25%
- Up to PHP 2,000,000 - 30%
- Up to PHP 8,000,000 - 30%
- Over PHP 8,000,000 - 35%
Probation
The probationary period in the Philippines is up to 6 months.
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Termination
Any of the following situations could lead to the employment relationship termination:
- When an employee resigns, reaches retirement age, the employment contract expires or is not renewed, and gets fired for serious misconduct (such as theft, fraud, etc.),
- The worker must be given 1 month's notice before being dismissed.
Severance Pay
- Severance pay in the Philippines is calculated based on the cause of termination, including allowances.
- One month or half month salary is paid.
Employees or Contractors
- Misclassification of employees or contractors in the Philippines is a punishable offense.
- If found guilty, the employer is responsible for paying the overhead surcharges.
- The company is obligated to cover any related interests and penalties on behalf of a misclassified employee
- The company may also have to pay taxes retrospectively on behalf of the misclassified employee.
Final Words
The Philippines is an island country in Southeast Asia. It is known for its cultural and natural heritage, tourism, agriculture, and industries. With flexible labor laws and ease of doing business, it has been attracting investors over the last few decades. For businesses looking to expand their entities in the Asia Pacific region, the country is a great choice.
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