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Manage Employment in Philippines Without the Hassle

Services available in this country:

  • Employer of Record Services
  • Local Payroll Solutions
Overview:
The Philippines, an archipelago of over 7,600 islands in Southeast Asia, is a growing economy with a strong service sector, especially in business process outsourcing (BPO). The country’s economy is driven by remittances, manufacturing, and agriculture. Major urban areas like Manila, Cebu, and Davao are economic hubs, and the Philippines shares maritime borders with Taiwan, Vietnam, Palau, Malaysia, and Indonesia. As part of the Pacific Ring of Fire, the country is prone to natural disasters, including earthquakes and volcanic activity.

Risks of misclassification

Philippines, like many other countries, treats self-employed individuals or contractors and full-time employees differently. Misclassification of contractors in Philippines may lead to fines and penalties for the offending company.
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Hiring:
Networking is a vital part of the hiring process, with referrals playing a significant role in identifying qualified candidates. Graduates often find better job prospects, particularly in cities with higher demand for skilled professionals. The unemployment rate among graduates tends to be lower, and those with specialized skills in technology, healthcare, and finance can command competitive salaries and enjoy ample career growth opportunities.

The Philippine labor market is competitive, and attracting top talent often requires companies to offer attractive compensation packages that include benefits like health insurance, performance incentives, and career development opportunities.

Recruitment:
Recruitment relies heavily on digital channels, with job seekers actively exploring opportunities through online job portals and professional networks. Recruitment agencies also play a significant role in connecting employers with skilled candidates, especially for specialized roles in fields like technology, healthcare, and finance. Professional networking is crucial in the recruitment process, as personal connections and referrals are highly valued in Filipino culture. Many candidates are discovered through word-of-mouth, recommendations, and social media connections, which can expedite the hiring process.

Companies tend to prioritize candidates with a strong educational background and relevant experience. Graduate recruitment programs are commonly offered by large corporations, particularly in sectors like IT, customer service, and engineering, providing young professionals with a structured entry into their careers.

Interview:
The interview process in the Philippines typically begins with a screening interview, often conducted via phone or video call, to assess basic qualifications and motivation. This is followed by an in-person interview, where candidates undergo technical assessments and behavioral interviews to evaluate their skills, problem-solving ability, and cultural fit. Employers usually place importance on soft skills like communication, teamwork, and adaptability, with a focus on language proficiency for roles requiring English communication. The process may vary from company to company, but once the interview stages are complete, candidates may be asked to submit additional documents before receiving a formal offer letter outlining the terms of employment.
Employment:

In the Philippines, the standard parameters of employment are as follows:

  • Working Hours (Varies by company): Typically 8 hours a day, Monday to Friday, with a maximum of 48 hours per week for regular employees.
  • Probation Period (Varies by company): Commonly lasts 6 months, allowing employers to assess a candidate’s performance and suitability before offering permanent employment.
  • Payroll Cycles: Pay cycles in the Philippines are generally semi-monthly (this is mandatorily requirement by DOLE)
  • Official Deductions: Deductions include income tax, Social Security System (SSS), Philippine Health Insurance Corporation (PhilHealth), and Home Development Mutual Fund (Pag-IBIG).
  • Working Hours: Typical work hours in  Philippines – 9 am to 6 pm, Monday to Friday, with a 1-hour lunch break.
  • Public Holidays: These vary and are categorized as regular holidays or special non-working holidays, as determined by the government.
  • Casual/Sick Leave: Employees are entitled to between 5 to 15 days of casual or sick leave annually, depending on company policy.
  • Maternity & Paternity Leave: Female employees receive 105 days of paid maternity leave, which can be extended by 30 days unpaid. Fathers are entitled to 7 days of paid paternity leave.
  • Earned Leave: Typically, employees are granted 10 to 15 days of vacation leave annually, depending on company policy.
Payroll:

The payroll process in the Philippines is structured around the employee’s gross salary, with specific statutory deductions:

  • Take-Home Pay = Gross Salary – Statutory Deductions (Income Tax, SSS, PhilHealth, Pag-IBIG).
  • Salary After Tax: This refers to the net income that the employee takes home after mandatory deductions such as taxes and government-mandated contributions.
  • Total Tax Due: Includes income tax and mandatory contributions to SSS, PhilHealth, and Pag-IBIG.
  • Payroll Cycle: The typical payroll cycle is semi-monthly (15th and 30th) or monthly, depending on company policy.
  • 13th Month Salary: Employers are required to pay a 13th-month salary, equivalent to one-twelfth of an employee’s annual basic salary, no later than December 24th each year.
  • Overtime: Overtime pay is mandatory if employees work beyond 8 hours a day or during rest days, public holidays, or special holidays. Overtime pay rates are set according to the Labor Code, with premiums differing based on the type of workday.
Business Setup:
If you’re a non-citizen planning to start a business in the Philippines, there are several key steps and regulations to consider:

1. Understand the visa process

Non-citizens must secure the appropriate visa before establishing a business in the Philippines. The Bureau of Immigration oversees business visas. The application process involves submitting necessary documents, such as proof of investment, business registration, and passport. You’ll also need to fulfill the requirements outlined by the Department of Trade and Industry (DTI) or the Securities and Exchange Commission (SEC), depending on your business type.

2. Choose the Right Business Visa

There are different visa options available for foreign nationals intending to establish a business:

  • 9(d) Treaty Trader’s Visa: Available for nationals of countries with trade agreements with the Philippines. This visa allows you to engage in substantial trade or establish a business.
  • 9(g) Pre-Arranged Employment Visa: Issued to foreign nationals employed in executive, managerial, or specialized roles within a Philippine-based company.

3. Business Registration Process

Once you have the appropriate visa, you need to follow these steps to register your business:

  • Select your business structure (Sole Proprietorship, Partnership, or Corporation).
  • Register your business name with the DTI for sole proprietorships or the SEC for corporations.
  • Obtain necessary permits such as the Barangay Clearance, Mayor’s Permit, and BIR Registration.

4. Taxation and Compliance

Foreign businesses in the Philippines are subject to corporate income tax and VAT. It’s important to comply with the Foreign Investments Act (FIA), which places foreign ownership limits on certain industries. Make sure to understand the tax requirements and ensure your business is in compliance with local regulations.

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