How to start a business in Philippines How to start business in Philippines

Table of contents

  • Philippines Public Holidays
  • Working hours
  • Overtime
  • Rest periods
  • Holiday entitlement
  • Philippines Maternity Leave
  • Sick leave in the Philippines
  • Termination/Severance
  • Healthcare
  • Philippines Tax
  • Additional Information
  • Why INS Global

Business environment in Philippines

Amidst times of uncertainty in parts of the world, the Philippines largely remains a relatively strong economy, having enjoyed six years of consecutive growth over 6%. Benefits of doing business in the Philippines include access to an English speaking market, a young workforce and strategic location for contact with other markets in Asia. Recently, the Philippine government is injecting spending into improving its infrastructure by the end of 2022. Plans are underway to meet project deadlines that span railways, airports, telecommunications, toll roads, and many more. Major industries include manufacturing and agribusiness but new industries such as fintech are gaining traction in the country.

Doing business in Philippines: Things to know

Philippines Public Holidays

In the Philippines, public holidays are divided into two categories: Regular Holidays and Special Non-Working Days.

Although regular holidays are fully paid days off, if the employee is required to work, they must be paid double their regular wage. In the case where the regular holiday falls on the scheduled rest day, work performed on that day must be paid an addition 30% of the employee’s regular holiday rate.  Special Non-Working Days are classed as non-paid holidays. If an employee is called to work on a Special Non-Working Day, they must be paid an additional 30% on top of their regular wage rate.

There are 10 regular holidays:

  • New Year’s Day
  • Maundy Thursday
  • Good Friday
  • Araw ng Kagitingan
  • Labor Day
  • Independence Day
  • National Heroes Day
  • Bonifacio Day
  • Christmas Day
  • Rizal Day

Special Non-Working Days are determined and announced in advance and may change from year to year. In 2020, there are 9 Special Non-Working Days:

  • Chinese New Year
  • EDSA People Power Revolution Anniversary
  • Black Saturday
  • Ninoy Aquino Day
  • All Saints’ Day
  • Feast of the Immaculate Conception
  • Last Day of the Year
  • All Souls Day
  • Christmas Eve

Working hours

The regular Philippine work week is 40 hours per week, with a standard work day of 8 hours.

Overtime

Work in excess of the standard eight hours per day on an ordinary work day is considered to be over time and the employee is thus subject to be paid an overtime premium. For working overtime, an employee is entitled to an additional 25% of their regular basic rate wage. This rises to 30% if the employee works for less than eight hours on a rest day or holiday.

Employers in the Philippines do not offer compensation in time off rather than wages.

Holiday entitlement

Employees who have been continuously working for an employer for at least 12 months are entitled to a statutory allowance of five paid days off vacation leave, referred to as ‘Service Incentive Leave’ by the Labour Code. However, in practice, most employers in the Philippines offer around 15 days annual leave and 15 days paid sick leave. There is no law that stipulates rules regarding carry over of annual leave. Carrying over annual leave is a matter of arrangement between the employer and employee.

Philippines Maternity Leave

Female workers in the Philippines who have made at least 3 months’ contributions to the Social Security System (SSS) in the 12 month period prior to her childbirth are entitled to 60 fully paid days maternity leave in the case of normal delivery, or 78 fully paid days in the case of a caesarean delivery. The employer pays the employee as normal at the time of maternity leave. Proof of payment must be submitted to the SSS for the employer to receive a state reimbursement.

Married male employees in the Philippines are eligible for seven days paternity leave with full pay for their first four children, as long as they both reside in the same household.

Sick leave in the Philippines

Employees who have made at least three monthly contributions to the SSS in the 12 month period prior to the period of sickness or injury is entitled to a daily sickness benefits equivalent to 90% of their basic daily wage rate for each day in the sickness period. This allowance will only be paid once all sick leave with full pay from the employer has been used. The employer is entitled to 100% reimbursement from the SSS once it receives satisfactory proof of payment to the employee.

Termination/Severance

Probation periods in the Philippines are usually set at six months or less.

Unlike the United States, The Philippines does not adopt an ‘at-will employment’ doctrine. Employers in the Philippines can only terminate an employment agreement based on just and authorised causes. 

Article 296 of the Philippine Labour Code describes just causes for dismissing employees as the following:

  • Serious misconduct or wilful disobedience
  • Gross and habitual neglect of duties
  • Fraud or breach of trust
  • Committing a crime against the employer, their family or representative

Article 297 of the Philippine Labour code describes authorised causes for dismissing employees as the following:

  • Installation of labour-saving devices
  • Redundancy
  • Entrenchment to previous losses
  • Closure of business
  • Illness or ailment

Healthcare in the Philippines

The Philippines has a universal health coverage system administered by PhilHealth, a government owned corporation. Enrolling in PhilHealth is mandatory for all expats working in the Philippines. Contributions are made up from the employee, employer and the state. English is widely spoken in in the Philippines meaning that there should be few language barriers to treatment when using PhilHealth.

Private healthcare is a popular option among expats working in the Philippines who wish to take advantage of better equipped facilities and faster treatments. The cost of private healthcare is considered to be expensive by locals but cheap by expat standards.

Philippines Tax

Foreign nationals are liable to pay income tax on income that they receive in the Philippines. Income is taxed progressively, with the maximum band being 32% on income over PHP500,000.

Employees working in the Philippines are required to make contributions to the mandatory Philippine Social Security System, which comprises of the following elements:

  • Social Security System (SSS): Deductions are taken automatically from the employee’s salary every month.
  • Home Development Mutual Fund (HDMF)
  • Philippine Health Insurance (PhilHealth)

The current contribution rate for the Social Security System (SSS) is 11% of the monthly salary not exceeding PHP16,000, shared between the employer (7.37%) and the employee (3.63%).

Develop your business in Philippines : Why INS Global

Since our founding in 2006, INS Global has successfully delivered on vast portfolio of expansion projects for our clients, allowing them to employ internationally, start a legal entity, and remove the burden of administrative tasks from their shoulders to ours. With over 15 years’ experience in the Asia-Pacific market, your expansion into the Philippines you’re in safe hands. Contact us today to make your expansion into the Philippines a reality. Our expert advisers can help you identify the most appropriate avenues for growth, taking into account your long-term development goals.

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