International business expansion into the Philippines allows companies to access new markets, gain competitive advantage, and grow revenue. However, companies must attract top talent and maintain a motivated workforce to succeed. One of the best ways to do this is via robust employee benefits in the Philippines.
As a result, many Philippine employers are happy to offer employees additional compensation, such as extra medical care, paid leaves, and retirement benefits. However, keeping those employee benefits compliant can be a challenge.
Therefore, this article discusses the importance of employee benefits in the Philippines and how companies can profit from outsourcing such duties to an Employer of Record (EOR) abroad.
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Understanding the Importance of Employee Benefits
Job seekers often consider employment benefits as one of their priorities when evaluating job opportunities. In fact, according to one study in 2021, as many as 60% of respondents claimed it was a top priority. Such benefits promote employee satisfaction and are crucial for talent retention and high workplace morale.
Failure to provide minimum benefits can cause serious legal problems. On the other hand, failure to provide competitive benefits will leave you without the skilled employees you need to succeed.
Similarly, employee health and wellness benefits help to improve your worker’s overall well-being, leading to timely and consistent work outputs.
As a result, the Labor Code in the Philippines demands employers safeguard numerous employee benefits, threatening fines and penalties for noncompliance.
The Risks and Penalties of Not Providing Mandatory Employee Benefits in the Philippines
Employees can check if employers are remitting their Pag-IBIG, PhilHealth, and SSS contributions. Employees can file a complaint if they believe their employers aren’t managing their mandatory benefits compliantly. In this case, an employer that isn’t holding up their end of the employment contract might be fined or even jailed.
There are numerous potential legal penalties that happen to a non-compliant employer concerning employee benefits in the Philippines. These include:
- Employers who do not contribute correctly to an employee’s Home Development Mutual Fund (Pag-IBIG) can face a fine of 2X all expected amounts plus up to 6 years of imprisonment. Late payments can also include a fine of 0.1% of the missing amount per day of lateness.
- For employers who don’t correctly contribute to their employees’ PhilHealth fund, there are fines ranging from ₱5,000 to ₱10,000 for each of the affected employees of a company. Late payments can also include a fine of 2% of the missing amount per month of lateness.
- Fines of ₱5,000 to ₱20,000, plus imprisonment for up to 12 years, are possible for employers who don’t properly manage their employees’ Social Security Fund payments. Late payments can also include a fine of 3% of the missing amount per month of lateness.
Who is Entitled to Benefits in the Philippines?
The Department of Labor and Employment administers Philippine labor laws. Employee benefits in the Philippines depend on the form of employment contract held by a worker. Full-time positions have access to the full range of employee benefits in the Philippines.
The Social Security System (SSS) regulates the pension scheme and all required retirement benefits in the Philippines.
Every worker in the Philippines has a right to fundamental job safety and protection. General minimum conditions of employment regarding working hours, rest periods, overtime, night shift, and holidays apply to all workers, with some exceptions for jobs requiring specific working arrangements.
Mandatory Employee Benefits in the Philippines
The following types of benefits are considered mandatory employee benefits in the Philippines:
- Social Security – Home Development Fund, Healthcare, Pension, etc.
- Paid Leave – Sickness, Maternity/Paternity, Annual Leave, Public Holidays, etc.
- Monetary Compensation – Overtime, 13th Month Bonus, minimum wage etc.
Retirement Benefits in the Philippines
Retirees must have paid 10 years of contributions to the SSS before retirement to be eligible for a monthly pension.
The compulsory retirement age for civil servants in the Philippines is 65 years, but there is the option to take early retirement at 60. In this case, or for workers who have paid contributions for less than 10 years, it’s possible to receive a lump sum equal to their total contributions and interest earned.
Medical Care Benefits in the Philippines
The Philippine Health Insurance Corporation (or PhilHealth) is the state-owned health insurance program covering all Filipino employees.
Employers split monthly contributions with employees, with premiums currently being the equivalent of 4.5% of an employee’s base salary with a cap of ₱90,000.
PhilHealth covers inpatient and outpatient services, and the insurance scheme covers the treatment of diseases that may require extensive treatments and other common ailments like malaria. However, many medical services will still include a minimal charge.
Unemployment Benefits in the Philippines
Employees in the Philippines who are «involuntarily separated» from work can receive an allowance based on the length of their service and their salary before termination. These payments are funded through SSS contributions paid during employment.
To be eligible for unemployment allowances, workers must have paid into their SSS for at least 6 months, and their termination must not have been due to actions such as gross misconduct.
In most cases, employees can receive payment of up to 50% of their salary before termination for 2-6 months while looking for another job.
Work-Injury and Disability Employee Benefits in the Philippines
These are employee benefits in the Philippines available to those who are sick, injured, or disabled and unable to work. This benefit is funded purely by employers who typically contribute around ₱30 per month.
Employees in the Philippines who develop permanent disabilities can apply for a minimum monthly pension of between PHP 1,000 (Philippine peso) and PHP 2,400, depending on years of service, plus a PHP 500 supplemental monthly allowance.
Maternity Benefits and Paternity Benefits in the Philippines
Female workers in the Philippines must receive at least 105 days of paid maternity leave for their first 4 pregnancies. This rises to 120 days in the event of a Caesarean delivery or complications with the birth. Additionally, workers can apply for up to 30 days of unpaid leave.
Access to paid maternity leave depends on contributions to the SSS for at least 3 months during the prior 12-month period. Maternity Benefits in the Philippines mandate that workers on maternity receive 100% of their pay via their Social Security Fund.
Male workers can have 7 days of paternity leave for the first four pregnancies of their wives.
Single parents can have an extra 7 days of paid leave each year to take care of their parental responsibilities.
Vacation and Leave Policies
Filipino employees are eligible for paid leave on the country’s 12-13 nationally recognized public holidays. Those required to work on a public holiday are eligible for 200% of their standard salary.
Similarly, full-time employees have a minimum of 5 paid vacation days per year according to leave laws.
Commonly Seen Extra Employee Benefits in the Philippines
Additional Healthcare Coverage or Life Insurance
Some employers in the Philippines may offer extended healthcare coverage, including massage therapy or physical therapy, dental, and vision coverage. This add-on insurance is in addition to the mandatory medical insurance.
Many employers in the Philippines save money on these plans by approaching insurance companies through group plans. You can even provide this to your employees through an EOR or HR services provider.
Performance-based Incentives
Filipino employers may use performance-based incentives to reward employees. Popular performance metrics include meeting sales targets or reaching project milestones.
Incentives are often cash bonuses, gift cards, or other non-monetary rewards. Such incentives can motivate employees to excel at work or align their efforts with the company’s objectives.
Additional Vacation Time or Other Leave
While the labor law mandates a minimum of 5 days of paid leave per year for employees, in reality, most companies provide more as an incentive. In fact, the average amount of annual leave in the country is 15 days.
You can also combine this with increased sick leave or more leave leave allowance to improve job satisfaction.
Work Allowances
It’s common for employers to offer to pay for or subsidize various costs around work, like transport or meals. Traditionally, this may include a quarterly rice subsidy for employees with families, given the importance of the foodstuff for Filipino families.
14th Month Bonuses
In addition to the required 13th-month bonus in December, many employers also provide their workers with a mid-year bonus.
Conclusions: Current Trends Around Employee Benefits in the Philippines
1. A focus on training and opportunities through upskilling
According to a 2018 survey, a surprising 16% of business leaders worldwide considered themselves digitally proficient. Now, digital skills play an essential role in the majority of jobs.
That’s why many companies are now beginning to offer extensive training programs or allowances as employee benefits in the Philippines. By encouraging employees to take advantage of these programs, companies are increasing employee satisfaction and proficiencies at the same time.
2. The use of automation and analytics in determining and applying employee benefits in the Philippines
In 2020, almost half of the HR leaders asked in one study said they would implement automation within the next couple of years. Since the pandemic, this number has risen even higher.
Digital tools can improve the HR experience, from data-driven hiring, to compliance assurance in the payroll and benefits management stages. However, many of the software platforms or tools available require professional skills or support. As a result, it be hard to correctly integrate these tolls across multiple countries without specialist knowledge.
3. More companies hiring independent contractors in the Philippines
The gig economy has been growing for years, and this is a trend expected to continue into the next decades.
These types of workers interact with labor laws in the Philippines differently. Because of the inherent risks, it’s up to employers to apply employee benefits in the Philippines correctly and avoid misclassification errors when working with contractors.
4. Offering flexible work arrangements
Since spiking to 85% of workers during the pandemic, around half (49%) of Filipinos now prefer remote or hybrid work options. This dramatic shift in working patterns and culture requires HR departments and companies to reconsider the kind of options they offer.
5. More health and well-being perks
85% of businesses in the Philippines now offer some kind of extra well-being program to attract new talent. These plans generally revolve around supporting employees’ physical as well as mental health.
By doing so, companies are reducing stress and the likelihood of burnout through better work-life balance.
Considering Expansion?
INS Global Can Help You Ensure Safe and Accurate Employee Benefits in the Philippines and 100+ Countries Worldwide.
Companies can incentivize workers or hire talented employees by offering attractive employee benefits in the Philippines. Nevertheless, it’s a hassle for companies to navigate complex legal and administrative systems in the Philippines.
Therefore, many companies outsource their employer duties by using an Employer of Record (EOR) instead. An EOR in the Philippines handles all employer liabilities, including hiring, tax management, labor law compliance, employee benefits administration, and social security management on your behalf. With an EOR you can work from wherever you want to.
This simplified approach eliminates the need to establish a new company entity in the Philippines. Instead, your EOR partner becomes the legal employer, offers employee benefits in the Philippines, and handles your employment and HR-related duties while you focus on core business activities.
Are you expanding operations into the Philippines? Contact INS Global for a free consultation today and learn more about ensuring seamless market entry.
FAQ
What are the mandatory employee benefits in the Philippines?
Mandatory benefits include Social Security (SSS), PhilHealth, and Pag-IBIG Fund contributions, as well as 13th-month pay and holiday pay.
How does SSS work for employees in the Philippines?
Employees and employers both contribute to the SSS fund each month as part of payroll, providing insurance, loans, and retirement benefits.
Do expatriate employees have access to the same benefits?
Yes, expatriates working in the Philippines are generally entitled to the same mandatory benefits as Filipino employees, but this requires being registered with the SSS.
What is the process for filing complaints or disputes related to employee benefits?
Employees can file complaints with the Department of Labor and Employment (DOLE) or appropriate local government agencies for resolution.
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