If you’re looking to expand your workforce and aren’t sure how to hire employees legally in the Philippines, this guide from INS Global walks you through everything you need to know, including why the market is compelling, what you must consider beforehand, how to hire legally (whether via entity, EOR, or contractor), how to stay compliant, and how we can help you execute this effectively.
Why Hire in the Philippines?
- Skilled Workforce with Competitive Salaries – The Philippines offers a strong pool of talent across sectors, especially in services, back-office, IT, remote/outsourced roles. Many global employers cite the ability to access capable professionals at cost levels below Western markets as a major draw.
- Growing, English-Proficient Talent Market – English is widely used in the Philippines (both spoken and written), and the country has a culture aligned with Western business practices, which makes remote or hybrid staffing in the Philippines comparatively smooth.
- Business-Friendly and Tech-Adaptive Economy – The Philippines continues to position itself as a location suited for outsourcing, remote teams, and global employers through continuous infrastructure investment and legal reform.
What to Know Before Hiring in the Philippines
Understanding Local Business Culture
While the Philippines aligns well with international corporate culture, local norms matter: respect for hierarchy, the importance of personal relationships, negotiation of benefits, and local employment expectations (e.g., leave, bonuses) all factor in. Good preparation here, as well as an inclusive working environment, helps to smooth onboarding and retention.
Importance of Labor Protections and Worker Rights
It’s essential to recognize that employees in the Philippines enjoy many legal protections, including statutory benefits, mandatory social security contributions, leave entitlements, and more. Ignoring these exposes you to reputational and legal risk.
The Legal Landscape for Employment
The primary legal framework is provided by the Labor Code of the Philippines (and associated statutes), which governs employment relationships, hours, leave, termination, and so on.
Foreign employers need to be especially aware of work-permit/visa issues, classification risk, and the obligation to comply with local registration and contribution rules should be a major focus of any market entry strategy.
The 3 Most Common Options for Hiring Workers in the Philippines as a Foreign Business
1. Set Up a Legal Entity
If you plan to hire many staff, build a long-term presence, and have operational assets, then setting up a local entity gives you full control and direct employment relationships. That said, entity setup involves upfront investment, ongoing maintenance, and detailed compliance at a minimum.
2. Partner with an Employer of Record (EOR)
Partnering with an EOR allows you to hire employees in the Philippines without establishing your own entity. The EOR becomes the legal employer, handles payroll, contributions, and local compliance, while you direct the employee’s work. All this makes the strategy ideal for faster market entry and lower administrative burden.
3. Hire Independent Contractors
Contractor models offer flexibility and lower commitment. However, in the Philippines, classification risk is real. If the worker functions like an employee (controlled, supervised, integrated), you may face misclassification issues.
Employees vs. Contractors in the Philippines
Legal Definitions and Key Differences
In the Philippines, an employee is someone engaged to perform activities that are “usually necessary or desirable in the business or trade” of the employer.
Contractors, by contrast, should have independent business operations, control how and when they work, and bear their own business risk.
Control, Supervision, and Work Structure
The extent of control over the worker’s schedule, tools, supervision, and integration into your organization is a key test.
For example, if you supervise the worker closely, set their hours, provide equipment, and treat them like staff, local authorities may deem them an employee regardless of label.
Contractor Misclassification Risks and Penalties
Misclassification can lead to serious liabilities: back payments for social contributions, taxes, benefits, and even criminal penalties in severe cases (e.g., failure to remit contributions).
Labor Laws You Must Follow When Hiring in the Philippines
Employment Contracts (Probationary and Regular)
Under the Philippine Labor Code, probationary employment may not exceed 6 months from the employee’s start date, unless extended under an approved apprenticeship agreement.
To be valid, the performance standards must be clearly communicated at the time of hiring; otherwise, the employee is deemed regular. Termination during probation is permitted only for just cause or for failure to meet the stated standards.
Once an employee continues beyond six months, they automatically gain regular employment status, which provides full labor protections, including security of tenure and full benefits.
While employment contracts can be oral, written agreements are strongly recommended. They should specify the job title, responsibilities, rate of pay, work hours, probationary terms, benefits, and termination clauses. Written documentation minimizes disputes and helps demonstrate compliance in audits or inspections.
Minimum Wage and Salary Structure
The Philippines sets minimum wage rates by region and industry, determined by the National Wages and Productivity Commission (NWPC) and the corresponding Regional Tripartite Wages and Productivity Boards (RTWPBs).
As an example, in mid-2025, the daily minimum wage in the National Capital Region (NCR) is ₱695 for non-agricultural workers and ₱658 for agricultural or retail/service establishments with fewer than 15 employees.
However, rates vary widely across the country and may be subject to rapid change, for example, minimum wages in rural or lower-cost regions may be around ₱390–₱470 per day.
Employers must confirm the applicable regional wage order before hiring and review updates regularly, as wage boards issue new adjustments almost every year.
Working Hours and Overtime Regulations
The standard work schedule in the Philippines is 8 hours per day, typically over six days per week. Flexible and compressed workweek arrangements are permitted if approved by the Department of Labor and Employment (DOLE) and agreed upon in writing with employees.
Overtime pay must be provided at 125% of the hourly rate for hours worked beyond eight in a day. Work on a regular holiday earns 200% of the basic wage for the first eight hours, while overtime on that day is paid at an additional 30% of the hourly rate.
Work performed on a rest day or a special non-working day generally requires a 30% pay premium, with additional overtime pay. Employers should maintain detailed attendance and time-keeping records to ensure full compliance.
Paid Leave, Sick Leave, and Holidays
- Service Incentive Leave (SIL) – All rank-and-file employees who have completed at least one year of service are entitled to 5 days of paid Service Incentive Leave This may be used for vacation or sickness. Unused SIL can often be converted to cash, depending on company policy.
- 13th-Month Pay – Every rank-and-file employee is entitled to a 13th-month pay equivalent to one-twelfth (1/12) of their basic annual salary. This must be paid on or before December 24 of each year. The 13th-month pay is a statutory requirement and cannot be waived or replaced with performance bonuses.
- Holiday Pay – The Philippines observes regular holidays (such as New Year’s Day, Independence Day, and Christmas) and special non-working days.
Employees working on regular holidays must receive double pay (200%) for the first eight hours. Those who do not report for work on a regular holiday are still entitled to 100% of their daily wage, provided they were present or on leave the previous working day.
Social Security System (SSS), PhilHealth, and Pag-IBIG Contributions
- Social Security System (SSS) – As of January 2025, the SSS contribution rate is 15% of the employee’s monthly salary credit, up to a maximum of ₱35,000. Employers contribute 10%, while employees contribute 5%.
Employers are required to register new employees and remit contributions monthly. Non-remittance or late payment carries a 2% per month penalty and potential criminal liability under Republic Act 11199 (the Social Security Act of 2018). - PhilHealth – PhilHealth contributions remain at 5% of monthly basic salary, with a ₱10,000 floor and ₱100,000 ceiling for 2025. The premium is shared equally by employer and employee. Employers must remit these payments by the monthly deadline to avoid surcharges or interest.
- Pag-IBIG (Home Development Mutual Fund) – The standard Pag-IBIG contribution is 1–2% of the employee’s monthly salary, depending on the employee’s income bracket, with the employer contributing an equivalent amount. Late or non-remittance can lead to fines and possible criminal prosecution under Republic Act 9679.
Unionization and Labor Organizations
Employees in the Philippines have a constitutional right to self-organization. They may form, join, or assist legitimate labor unions and participate in collective bargaining.
The Bureau of Labor Relations (BLR) under DOLE registers labor organizations and maintains a database of certified collective bargaining agreements (CBAs).
CBAs generally remain valid for 5 years, though economic provisions are typically renegotiated every 3 years. Employers must respect the union’s status as the exclusive bargaining agent for its members and may not interfere with union activities.
For foreign employers, understanding existing union agreements and labor-management protocols is essential before implementing workforce changes, restructurings, or redundancies.
Payroll, Taxation, and Contributions
Employer Payroll Contributions in the Philippines
All employers operating in the Philippines must register with the country’s key government agencies, namely the Bureau of Internal Revenue (BIR), Social Security System (SSS), PhilHealth, and Pag-IBIG Fund (HDMF), to ensure correct and timely remittance of all required payroll contributions.
Statutory Contributions (as of 2025)
Contribution Type | Employer Share | Employee Share | Notes |
SSS | 10% | 5% | Applied to Monthly Salary Credit up to ₱35,000. |
PhilHealth | 2.5% | 2.5% | 5% total of monthly basic salary (₱10,000–₱100,000 salary range). |
Pag-IBIG Fund (HDMF) | 1–2% | 1–2% | Based on monthly compensation bracket. |
ECC (Employees’ Compensation Commission) | 1.0% | 0% | Fully employer-paid, covers work-related injury or illness. |
Employers must remit all contributions on or before the deadlines prescribed by each agency (usually the 10th to 15th day of the following month, depending on the size of the company and payment channel). Delays result in surcharges and interest penalties, and failure to remit may trigger criminal liability under Philippine law.
Proper payroll documentation, including payslips, government contribution receipts, and payroll summaries, must be maintained for at least 3 years for audit and compliance verification.
Income Tax Withholding and BIR Compliance
Under the National Internal Revenue Code (NIRC), employers act as withholding agents for the Bureau of Internal Revenue (BIR) and are responsible for managing all required tax process, including the correct filing of forms as appropriate.
This means they are responsible for deducting and remitting employees’ income taxes directly to the government.
Key Employer Tax Obligations
- Withhold tax at source based on the BIR’s graduated income tax table (ranging from 0% to 35% depending on annual income).
- Remit monthly withholding tax (Form 1601-C) and submit a summary of withholding taxes every quarter.
- Provide each employee with a Certificate of Compensation and Tax Withheld (Form 2316) at year-end.
- File the employer’s Annual Information Return (Form 1604-CF) to summarize all tax remittances for the year.
- Maintain accurate payroll and withholding records for at least 10 years, in accordance with BIR retention rules.
Employers must also ensure all employees are registered with the BIR and have valid Taxpayer Identification Numbers (TINs) prior to salary release. Any unregistered employee or missing remittance can result in administrative penalties and interest charges.
Filing Monthly and Annual Tax Returns
Payroll compliance in the Philippines follows a monthly, quarterly, and annual cycle that includes both tax and social contribution filings.
Monthly Filings
- Withholding taxes (Form 1601-C) due on or before the 10th day of the following month.
- SSS, PhilHealth, and Pag-IBIG contributions due between the 10th and 15th of the next month (depending on remittance schedule and payment platform).
Quarterly and Annual Filings
- Quarterly withholding tax return due within 30 days after the close of each quarter.
- Annual Information Return (BIR Form 1604-CF) due by January 31 of the following year.
- Annual registration renewal (BIR Form 0605) for employers, due every January 31.
- Year-end payroll reconciliation to verify accurate withholding, benefits, and contribution totals.
Employers are encouraged to implement automated payroll systems or partner with a local payroll provider or Employer of Record (EOR) to manage compliance efficiently, particularly when employing multiple workers or managing remote teams across different regions.
Paying Contractors vs. Employees (Tax Withholding Rules)
Hiring and paying independent contractors in the Philippines involves different tax and reporting obligations compared to hiring regular employees. The key distinction lies in whether the worker is considered self-employed (with their own business registration) or employed under your supervision.
For Employees:
- Employers withhold income tax using the standard graduated tax rates.
- Employers must remit all payroll contributions (SSS, PhilHealth, Pag-IBIG) on the employee’s behalf.
- Employees appear in all monthly and annual employer tax reports.
For Independent Contractors:
- Contractors typically have their own BIR registration as self-employed professionals or sole proprietors.
- The hiring company may withhold 2–10% of the payment as expanded withholding tax, depending on the type of service and contractual arrangement.
- The contractor is responsible for filing their own income tax returns and VAT (if applicable).
Classification and Compliance Risks
If a contractor works under conditions similar to an employee, such as fixed schedules, company supervision, or exclusive service, then authorities may classify them as an employee in disguise. This can lead to penalties, back taxes, and mandatory retroactive contributions to SSS, PhilHealth, and Pag-IBIG.
Foreign employers must exercise particular care in distinguishing between contractual engagements and employment relationships, ensuring that written agreements, payment methods, and work supervision align with the worker’s true classification.
Work Permits and Visas in the Philippines
Alien Employment Permit (AEP)
When hiring foreign nationals to work in the Philippines, the employer must secure an AEP from the Department of Labor and Employment (DOLE).
9(g) Pre-Arranged Employment Visa
Once the AEP is granted, the foreign worker may apply for a 9(g) visa through the Bureau of Immigration for longer-term employment.
Special Work Permit (SWP) for Short-Term Assignments
For short-term assignments (less than a certain period) there is an SWP option, but this depends on the nature of the work, employer, and duration. Always check with local counsel.
Sponsorship Responsibilities for Foreign Employers
As the employer, you take on obligations: you may need to demonstrate that the foreign hire cannot be filled locally, ensure immigration compliance, maintain records, etc. Ignoring this exposes you to regulatory risk.
Hiring Costs in the Philippines
Base Salary Ranges by Industry
Salary benchmarks will vary by role, region, and industry. While minimum wages may be modest (depending on location), to attract skilled talent, you may need to pay above local minimums.
Statutory Contributions and Benefits
Employer costs don’t stop at base salary: you must factor in the employer’s share of SSS, PhilHealth, Pag-IBIG contributions, mandatory 13th-month pay, leave costs, and other statutory benefits.
Additional Costs: Bonuses, Allowances, and 13th Month Pay
The 13th-month pay (equal to at least 1/12 of the annual basic salary) is mandatory. Many employers also provide additional bonuses or allowances to remain competitive.
Cost Comparison: Contractor vs. EOR vs. Entity Setup
- Entity setup – Offers the highest control and brand visibility, but highest overhead (entity registration, local HR functions, compliance, accounting).
- EOR – Requires a somewhat higher unit cost per hire but provides far lower set-up cost and savings on a lower administrative burden.
- Contractor model – Typically the lowest cost commitment, but will often include higher risk (classification, compliance, benefits, liability).
Choosing between these depends on your business strategy, headcount, risk appetite and time-to-market.
Compliance Risks to Watch For
Payroll Errors and Incorrect Filings
Failing to register employees promptly, under‐remitting social contributions, incorrect withholding, or late filings can trigger fines, interest, and regulatory scrutiny.
Misclassification of Workers
Treating someone as a contractor when their role is functionally that of an employee exposes you to back payments, penalties, and reputational damage. Always assess control, supervision, and integration.
Permanent Establishment Risk
If your operations in the Philippines become sufficiently integrated (staff, assets, premises, local contracts) you may risk creating a local taxable presence (“permanent establishment”) with tax and regulatory implications.
Breach of Labor Codes or Union Regulations
Failure to respect probationary period rules, contract terms, overtime pay, leave entitlements, or collective bargaining requirements can lead to labor litigation, sanctions, or reputational harm.
Onboarding Workers in the Philippines
Before the First Day: Compliance Checks and Documents
- Ensure the worker has valid identity documents, Tax Identification Number (TIN), SSS, PhilHealth, and Pag-IBIG registration where needed.
- Issue an offer letter or employment contract that sets out the role, salary, working hours, location, probation period, and benefits.
- Set up payroll registration, banks, social-agency registration, and tax withholding.
First Day: Orientation and Policy Training
Introduce company culture, local working practices, expectations, tools, equipment, data privacy, security, and relevant local policies (e.g., remote work, code of conduct).
First Week: Tools, Systems, and Local Practices
Ensure the new hire has access to necessary systems and understands local working norms (time zones, holidays, leave policies). Check that payroll and benefits set-up are running smoothly.
Ongoing: Compliance Monitoring and Employee Support
Monitor performance, ensure benefits contributions continue correctly, stay updated on changes in the regulatory environment, provide employee engagement and support to maximize retention.
Hiring and Paying Independent Contractors in the Philippines
Legal Framework for Contractors
If engaging an independent contractor, ensure the contract clearly states independent business provision of services, including provisions on self-management, working with multiple clients, and the use of their own equipment where possible. Going forward, avoid any treatment equivalent to that of an employee.
Tax Obligations and Invoicing Requirements
Contractors must issue invoices, may be subject to withholding tax rules, and you should verify that they have valid registration for the services they provide.
How to Pay International Contractors from the Philippines
If your contractor is based in the Philippines but working for you from abroad, you must still check local tax implications, source-of-income rules, and whether Philippine withholding applies. The safest route is to have local counsel or payroll/EOR partner clarify these details.
Converting a Contractor into a Full-Time Employee
If your business evolves and the contractor’s role becomes more like an employee (supervision, schedule, tools, integration), consider converting to full employment to avoid classification risk.
This transition comes with the increased risk of regulatory scrutiny, so be sure to document the change carefully and register the new employee accordingly.
When to Use an Employer of Record (EOR) in the Philippines
- Fast and Compliant Market Entry – If you need to hire quickly in the Philippines, EOR support enables you to onboard employees fast while the local entity registration process runs in parallel or is delayed.
- Eliminate Entity Setup Burdens – Rather than setting up your own legal entity (which can take time, cost, and administrative investment), an EOR manages local employment, contributions, local HR, and compliance, allowing you to focus on business.
- Ensure Accurate Payroll and Contributions – A reputable EOR will handle local payroll, social security contributions, tax filings, and local labor law compliance, thereby reducing your risk of omissions or errors.
- Avoid Compliance and Classification Risks – By using an EOR, you shift the legal employment relationship to a partner that is already local and compliant, reducing misclassification, agency risk, and other regulatory hurdles.
How INS Global Can Help You Hire in the Philippines
End-to-End Employment and Compliance Support
INS Global provides full support for all local employment processes, including forming job contracts, local labor law compliance, payroll administration, social security registrations, tax filings, and ongoing monitoring. With INS Global, you get a single partner that manages all your local administrative operations.
Payroll, Contracts, and Tax Filing Covered
We take care of the technical paperwork like employment contracts drafted to Philippine law, payroll set-up and remittance, monthly and annual tax documentation, social agency registration.
Local Expertise + Global Coordination
With INS Global’s on-the-ground knowledge of the Philippines, combined with our global HQ support, you benefit from best practice local advice and seamless integration into your broader workforce strategy.
Scale Your Workforce Without Legal Barriers
Whether you hire one employee or dozens, we enable you to scale in the Philippines without worrying about entity formation, HR compliance, local tax regime, or labor law changes.
Expanding your workforce into the Philippines offers access to skilled, English-proficient talent at a competitive cost.
At the same time, you must navigate a complex regulatory environment of labor law, social contributions, tax, and local business culture. INS Global is here to simplify that journey: helping you hire, pay, and support your Philippine workforce compliantly, efficiently, and without administrative overwhelm.
Contact us today to explore how we can support your Philippines hiring strategy.
Final Checklist Before Hiring in the Philippines
- Draft Compliant Contracts – Ensure your employment contracts cover role, salary, probation, working hours, benefits, regulation compliance, and termination terms, aligning with Philippine law.
- Choose Between EOR, Entity, or Contractor – Based on your headcount, risk appetite, and business horizon, decide whether to (a) set up your own entity, (b) partner with an EOR, or (c) engage independent contractors.
- Register with Government Agencies – Create employer registration with SSS, PhilHealth, Pag-IBIG; ensure new employees are registered promptly; establish tax withholding agreements; secure necessary visas if hiring foreign nationals.
- Prepare Payroll and Benefits Setup – Set up payroll frequency, salary currency (typically Philippine pesos, PHP), contributions and withholding mechanism, leave policy, 13th month pay, and overtime. Confirm local calendar (holidays, etc.).
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