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Hiring in the Philippines
Background check in the Philippines
Types of workers in the Philippines
Language requirements in the Philippines
Payroll system in the Philippines
Simplify international expansion with CXC
Employer of Record in the Philippines
The Philippines presents unique opportunities as a market for businesses looking to expand their workforce. With a young and increasingly skilled workforce, the country has become an attractive location for companies around the world.
However, understanding the employment laws and regulations, as well as the hiring process in the Philippines, can be complex, posing potential challenges for employers. As a solution, modern companies are turning to the Employer of Record (EoR) service to bypass all these hurdles. With an EoR solution, you can hire talent anywhere in the world without the hassle of setting up a legal entity. If you are looking to hire talent in the Philippines, for instance, you can simplify and streamline the entire process by leveraging employer of record services. To ensure seamless market entry in the Philippines and maintain compliance with local labour laws, partnering with a reliable EoR service provider like CXC is essential.
In this guide, we will provide the necessary information for you to compliantly hire, manage, and pay talent in the Philippines, covering topics such as hiring, employee background checks, payroll set up and how to leverage employer of record services for your international recruitment efforts.
Hiring in the Philippines
Here are key factors you need to know when hiring employees in the Philippines:
Obtaining necessary employee documents and permits
As a company hiring in the Philippines, you are required to obtain a local business registration with the government and acquire other necessary documents and permits, such as government-approved employment contracts and clearances. For example, for a corporation, you need to register with the Security Exchange Commission (SEC), while a sole proprietorship should be registered with the Department of Trade and Industry (DTI).Adherence to the Philippine Labour Code
You must comply with the Philippine Labour Code, which protects employees’ rights and welfare in the country. Familiarize yourself with relevant labour laws, such as mandatory employee benefits and social security contributions.Offering competitive compensation and benefits
To attract highly skilled talent in the Philippines, you must provide competitive compensation packages, including mandatory benefits such as 13-month pay and health insurance. It is also common in the Philippines for employers to offer retirement savings plans, performance-based bonuses, and opportunities for career advancement.Establishing an employment contract
To formalize the employment relationship, you must establish a written employment contract that should outline the duration of employment, compensation, benefits, job description, and other relevant employment terms.Maintaining accurate records for compliance
Securely store employee information, including social security numbers, income tax returns, and other government forms to avoid potential legal risk.Engaging independent contractors
Depending on your business needs, engaging with independent contractors can be a flexible and cost-effective solution for hiring highly skilled talent in the Philippines.
Hiring foreign workers in the Philippines
Understanding the complexities of hiring foreign workers in the Philippines requires careful consideration. Here are some factors you need to keep in mind:
Understanding the legal requirements
For companies hiring foreign workers in the Philippines, you must secure appropriate visas and work permits for foreign nationals, which are facilitated through the Department of Labour and Employment (DOLE) and the Philippine Bureau of Immigration.Complying with local labour laws
You must ensure that the employment of foreign workers is compliant with the local labour laws and regulations to avoid any legal repercussions. This includes adhering to working hour limitations and benefits mandated by the law.Leveraging Employer of Record (EoR) service
To simplify the process of hiring and managing foreign workers in the Philippines, you can consider partnering with a reliable EoR service provider like CXC to help you with legal and administrative tasks, ensuring compliance with the Philippines’ employment laws and regulations.Providing cultural orientation and support
You should also consider providing cultural orientation and support for foreign workers to help them adapt to the Philippines and integrate smoothly into the workplace. This may include familiarizing them with local customs, laws, and business practices.Fostering an inclusive work environment
Creating an inclusive work environment is essential for the well-being and productivity of all employees, including foreign workers. Employers can foster inclusivity by promoting diversity, equity, and inclusion initiatives that ensure all employees feel equally valued and respected.
Employers should also ensure that foreign workers receive the same level of care and attention as local employees, with equal access to benefits, professional development opportunities, and a safe working environment.
Conducting recruitment and screening in the Philippines
Recruitment and screening of applicants must comply with the Philippine labour laws, such as fairness in hiring practices, anti-discrimination, and equal opportunity. The recruitment process in the Philippines may involve sourcing from various channels, such as job boards, referrals, and social media.
Employers may also utilise popular job hiring sites in the Philippines, such as JobStreet, LinkedIn, Online Jobs PH, and Kalibrr. You can post your job openings on these job hiring sites and receive applications from candidates. While these job hiring sites can help you in your recruitment efforts in the Philippines, referrals from trusted sources can also be a valuable way to find highly skilled workers in the Philippines.
Background check in the Philippines
While conducting employee background checks is not mandatory in the Philippines, it is a common practice, particularly in industries such as banking, finance, and business process outsourcing. Most companies opt to entrust background check services to a third-party. These services typically include criminal record verification, education verification, and employment history checks.
Philippines’ law on background checks
The Data Privacy Act of 2012 is the Philippine law governing employee background checks. This law provides guidelines for the processing of personal information, including that of job applicants and employees. When conducting background checks, employers need to be cautious to avoid discriminatory practices and ensure that the information gathered is relevant to the job requirements.
Consent and disclosure
Before conducting a background check in the Philippines, you must obtain the applicant’s consent and provide a clear disclosure of the nature and scope of the checks to ensure compliance with the data privacy laws.
Types of background checks in the Philippines
The common types of background checks in the Philippines include criminal records verification, employment history verification, character reference checks, and education verification. Each type of background check provides insights into the candidate’s qualifications and integrity. It is crucial to verify educational and professional qualifications to ensure that applicants possess the necessary skills and expertise for the role and prevent misrepresentation of credentials.
Criminal background check in the Philippines
Employers have the right to request job-relevant information from applicants, which may include conducting criminal record checks.
It is a common practice for employers in the Philippines to ask job candidates for a copy of their clearance from the National Bureau of Investigation (NBI). The NBI provides information regarding any criminal cases tried in municipal or regional trial courts.
Permissible requirements for pre-hire checks in the Philippines
While not mandated by the law, some employers request that candidates provide a transcript of their records for educational verification, a certificate of employment from their previous employer, and a birth certificate issued by the National Statistics Office (NSO).
Pre-hire requirements for foreign workers in the Philippines
While there are no regulatory pre-hire requirements for foreign workers, employers must secure an employment permit from the Department of Labour and Employment (DOLE). The permit is granted if no suitable local candidate is available for the position. In addition, foreign workers must also obtain a working visa from the Bureau of Immigration.
Types of workers in the Philippines
Regular employee in the Philippines
In the Philippines, “regular employment” refers to an employment relationship where the employer engages the employee to perform tasks that are typically necessary and desirable for the employer’s business. It entails a non-fixed-term employment agreement with certain rights and benefits. Regular employees are entitled to receive a 13th-month pay, which is an additional month’s salary provided by the employer. This benefit is mandated by law and must be paid no later than December 24th each year.
Benefits: A regular employee in the Philippines is also entitled to various benefits, including social security and healthcare under the Philippine Social Security System (SSS), health insurance through the Philippine Health Insurance Corporation (PhilHealth), and contributions to the Home Development Mutual Fund (Pag-IBIG). Employers must adhere to these requirements to ensure compliance with labor laws and regulations.
Employee protection: A regular employee in the Philippines enjoys more extensive legal protections, such as security of tenure, compared to contractual or probationary employees.
Termination: When terminating a regular employee in the Philippines, employers must adhere to labor laws and regulations. Termination must be for valid reasons and should undergo due process. In cases of authorized terminations, employers may need to provide separation pay or other benefits as required by law.
Casual employee in the Philippines
Casual employment in the Philippines typically refers to a temporary and non-fixed-term employment arrangement where employees are hired on an irregular or seasonal basis. Employers often engage casual employees to meet short-term business needs or to handle temporary fluctuations in workload.
Work hours and compensation: A casual employee in the Philippines is usually paid on an hourly or daily basis, depending on the hours worked. Unlike regular employees who have fixed working hours, casual employees work as needed and are compensated accordingly. Overtime pay rates apply when casual employees work beyond the standard hours.
Benefits and entitlements: A casual employee in the Philippines is also entitled to certain benefits such as holiday pay, overtime pay, and night differential pay as prescribed by labor regulations in the Philippines. They may not receive the same benefits as regular employees, but they are entitled to certain statutory benefits based on the hours worked.
Termination of engagement: As long as it complies with labor laws, employers can terminate casual employment without the need for lengthy notice periods or severance pay. Employers should follow the appropriate procedures and communicate clearly with casual employees regarding the end of their engagement.
Independent contractors in the Philippines
Independent contractors in the Philippines refer to individuals or entities contracted to perform specific tasks or projects for a company or client. They are not considered employees and are responsible for their own taxes, insurance, and other business expenses.
Classification of independent contractors: It is important for businesses to classify independent contractors correctly according to their contract terms, scope of work, and overall relationship with the company. Misclassification can lead to legal issues and labor disputes. Independent contractors should not be given employee benefits and should not be required to comply with company policies.
Contractual agreements: Independent contractors in the Philippines should have written contracts that specify the nature and scope of the work, payment terms, duration of the engagement, and other relevant details. This helps avoid misunderstandings, delays, and disputes. Contracts should be carefully crafted to protect both the company and the independent contractor.
Tax and insurance obligations: As independent contractors are not considered employees, they are responsible for managing their own taxes and other business requirements, including social security and health insurance payments, tax compliance, and record-keeping. Companies should not handle tax or insurance obligations on behalf of independent contractors.
Intellectual property rights and confidentiality: Companies engaging independent contractors in the Philippines should define intellectual property rights to ensure that they own any copyrighted, patented, or trademarked work produced by the independent contractor. Confidentiality agreements also help protect the company’s trade secrets, proprietary information, and business processes.
Termination and renewal of contracts: Contracts with independent contractors in the Philippines should outline termination clauses, renewal options, and other relevant terms for flexibility and protection. Terminating independent contractors should follow legal processes and be carried out in compliance with local laws and regulations.
Agency workers in the Philippines
Agency workers, also known as manpower or staffing agency employees, are individuals who are employed by a third-party agency but work under the supervision and direction of a client or host company. These workers provide additional manpower to client companies to meet specific short-term or project-based needs.
The law prohibits labour-only arrangements, in which the agency merely refers employees, and the principal only pays the agency or contractor the employees’ salaries. In such cases, the principal and the agency are jointly liable for any labour-related claims. However, an outsourcing arrangement, where the agency directs and controls the employees, is permissible. In fact, such agencies have the option to register as independent contractors under DOLE’s Department Order No. 174 Series of 2017.
Seek legal advice when hiring in the Philippines
Given the complexities of employment regulations in the Philippines, it is advisable for employers to seek legal counsel or consult with HR professionals to ensure compliance with labour laws and regulations. Companies can also partner with a reliable employer of record (EoR) provider like CXC to bypass all these challenges while maintaining compliance with labour laws and regulations.
Language requirements in the Philippines
Language requirements in the Philippines may vary depending on the nature of the job, the industry, and the employer. There are no statutory conditions regarding language requirements when working in the Philippines.
However, since English is widely spoken and used as a medium of instruction in schools and universities, it is often a requirement for many jobs, particularly those that involve communication and customer service.
English language proficiency in the Philippines
English language proficiency is an important skill for employees in the Philippines, given its widespread use in business settings. Employees with good English language skills are more competitive in the job market and can potentially earn higher salaries.
Employers who hire employees with excellent English language proficiency can benefit from improved communication, higher productivity, better customer service, and the ability to work with international partners and clients.
Employers should consider their business needs and industry requirements when establishing language requirements. For example, certain industries may require specialised language skills, or employers may need to consider multilingualism to cater to a diverse customer base.
Payroll system in the Philippines
Payroll processing in the Philippines
To start processing payroll in the Philippines, you must register your business to specific government agencies depending on your business structure. For example, corporate employers need to register with the Securities and Exchange Commission, while sole proprietorships must register with the Department of Trade and Industry.
Companies hiring in the Philippines must also meet social security system (SSS), Home Development Fund (PagIBIG), health insurance (PhilHealth), labour and tax obligations. Aside from that, you need to obtain business permit from the relevant city or municipality regulatory body where your business operations are based.
How to do payroll in the Philippines
Determine compensation and benefits: Define salary structures, allowances, bonuses, and benefits in adherence to labor laws and company policies. Understanding minimum wage requirements, overtime rates, and benefits such as 13th-month pay is essential for accurate payroll calculations.
Collect employee information: Gather accurate information for each employee, including tax identification numbers, SSS and PhilHealth numbers, and other relevant details. Keep records updated to facilitate payroll processing and comply with statutory requirements.
Calculate wages and deductions: Compute gross wages based on regular pay, overtime, allowances, and bonuses. Deduct statutory contributions for taxes, SSS, PhilHealth, and Pag-IBIG fund, as well as any voluntary deductions.
Process payroll timely: Establish a clear payroll schedule and ensure timely processing to maintain employee satisfaction and compliance with labor laws. Set deadlines for submission of timesheets, review payroll reports thoroughly, and provide pay slips to employees for transparency.
Stay updated on tax laws: Stay informed about changes in tax laws and regulatory requirements that may impact payroll processing. Regularly review tax rates, thresholds, and compliance obligations to avoid errors and maintain legal compliance.
Reconcile and review: Conduct regular audits and reconciliations to ensure payroll accuracy and address any discrepancies promptly. Verify payroll data against timesheets, attendance records, and employee contracts to identify errors and ensure compliance.
Options for managing payroll in the Philippines
Employers in the Philippines have several options for managing payroll. They can handle it in-house, outsource to a local payroll provider, or use payroll software. Each option has its advantages and considerations, such as cost, expertise, and data security.
Given the complexities of managing payroll, companies looking to hire employees in the Philippines can partner with a reliable employer of record (EoR) provider to ensure compliance. An EOR solution enables companies to quickly and compliantly hire talent in the Philippines and anywhere in the world, managing time-consuming administrative and HR tasks so you can focus on your core operations.
Simplify international expansion with CXC
As you expand into new markets, we understand that navigating country-specific labour laws and regulations can be overwhelming — requiring careful attention to maintain compliance and mitigate risks.
That is where CXC excels. With CXC, you can confidently find, hire, manage, and pay workers anywhere in the world, all while remaining fully compliant. By leveraging our Employer of Record (EoR) solution, you can bypass the complexities and expenses of setting up a legal entity, allowing you to focus on what truly matters: growing your business.
Speak to our team today and learn how we can support your global expansion efforts in more than 100 countries worldwide.
Compliantly hire workers anywhere with CXC
With our EoR solution, you can engage workers anywhere in the world, without putting your business at risk. No more worrying about local labour laws, tax legislation or payroll customs — we’ve got you covered.
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