How to use an Employer of Record in the Philippines

Did you know that hiring a distributed team has solid benefits for businesses that are looking to expand globally? 69% of people working in a distributed workforce say retention has increased, and in response, companies are adjusting their hiring practices.

If you’re looking to build an international team with professionals based in the Philippines, you’ll have to open a local entity in the country, stay in compliance with local employment policies, and manage various HR functions for your employees. 

The process of hiring employees in the Philippines can seem daunting. However, partnering with an employer of record (EOR) can set you up to hire employees, manage salaries and benefits, and meet government obligations without having to establish your own local entity

There’s a lot to learn about hiring remote employees in the Philippines using an employer of record. In this article, we’ll explain how you can use EOR to expand your global team, costs, benefits, and how you can go about selecting the right provider for your business.

Six steps to hiring employees in the Philippines using an employer of record

An employer of record will help scale your international hiring faster by:

• Setting you up with the infrastructure to legally employ workers in the Philippines

• Managing administrative tasks like paying salaries and benefits

• Staying compliant with local employment laws.

It can be difficult to find the right EOR to grow your remote team, especially if you’re just getting started hiring internationally. Use the following steps to find the EOR that suits your business needs.

Step 1: Weigh up the pros and cons of each potential partner

First, you need to figure out the features needed to simplify your hiring experience, such as:

• A local entity that qualifies you to hire workers in the Philippines

• Global payroll processes to ensure employees are always paid on time

• Compliance with changing local regulations

• Benefits management such as the ability to offer health insurance, vacation, pensions, etc. which are in line with country-specific laws

• Issuing employment contracts to employees

• Terminating an employment relationship if necessary

Use the above list of features to see if your potential EOR addresses your requirements. Analyze the pros and cons of each EOR, and shortlist the providers which best meet your international hiring needs.

Step 2: Take the time to select the most appropriate EOR service provider 

An employer of record needs to have a local entity registered with the appropriate authorities before you can use them as a third party. EOR providers often opt to use partner agencies to offer local employment services. 

And why not? It’s cheaper and helps them support more countries quickly. However, there are no guarantees they’ll keep your data secure or treat your employees well. Since third-party EOR services are so far removed from you, they can increase prices unexpectedly (that’ll get passed along to you). 

That’s why it’s essential that your chosen EOR partner owns its own entity in the Philippines rather than outsource their services to third parties. Read our article on owned-entity vs. partner-dependent global employment companies to learn more about this.

Step 3: Check the online reviews about your shortlisted providers

Reading reviews and testimonials on third-party review sites like Trustpilot, G2, Capterra, and Saasworthy can help you gauge the sentiment around an EOR provider. Check out the company website, online press coverage, and client testimonials to learn more about EOR’s operations and the customer service they provide. 

Step 4: Ensure that the EOR solution provides the best-in-class employee experience

Since the EOR hires on your behalf, make sure that the EOR is capable of providing a positive and engaging employee experience. Your vetting process should be optimized to choose a provider that demonstrates they have a track record of:

• Paying salaries on time

• Quickly resolve any issues your employees report

• Onboarding new employees seamlessly

• Offering detailed explanations for any levies and taxes deducted from your employees’ paychecks.

Step 5: Work with your partner to provide a fair and equitable compensation package 

Salaries for remote roles can vary wildly, depending on an applicant’s skill, market rates, local cost of living, etc. To attract and retain the best talent, you’ll have to offer competitive and equitable benefits and compensation packages. The benefits package needs to factor in market rates, local labor laws in the Philippines as well as the potential employee’s experience, role, and skill level.

Step 6: Make sure your partner guards your intellectual property and maintains data security for your business

An employer of record should demonstrate that they’re equipped to protect your intellectual property and your data. This can be done by taking a look at their security certifications and ensuring that employment contracts cede invention rights for any intellectual property your employees produce, to you.

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What are the benefits of using an employer of record in the Philippines?

An employer of record acts as your legal partner that helps you stay compliant with local labor laws and manage day-to-day HR administrative tasks, such as:

• Educating you on how to stay compliant with changing local employment laws

• Managing payroll and benefits, such as healthcare, vacation, sick leave, pensions, etc.

• Benchmarking salaries for your employees that factor in the minimum wage, market rates, skill, etc.

• Classifying your employees and contractors to avoid legal fallout

• Issuing contracts that clearly state the terms of employment

• Safeguarding your sensitive data and securing rights to your intellectual property.

How much does it cost to use an EOR in the Philippines?

EOR costs vary depending on the kind of services provided, and the location and number of workers you want to hire. Generally, costs range from $599 to upwards of $2,000 per employee per month.

Businesses looking to hire internationally can either opt for established legacy providers that charge significant amounts for a wider range of services or growing startups that cost less but may not offer quite the same quality of service.

Smaller EOR operations typically charge less, except that they may not offer the full stack of services required for your international hiring needs. So, you may up end up depending on other providers to manage payroll, benefits, etc.

In contrast, Remote offers a comprehensive employer of record solution for businesses looking to hire internationally without disruption, at an affordable cost. Our services include:

• Fully owned entities that qualify you to hire in the Philippines

• Localized benefits designed for your employees in the Philippines

• Equity incentive planning if you’re looking to give ownership to your employees

• Fast, secure, and reliable payroll

• Integrations with the HR tools you already use

• GDPR and SOC 2 compliance — we’ll never leak your data

• Simple, comprehensive employment contracts

More than just another EOR with hastily registered local entities, Remote combines all you need to hire an international team into our easy-to-use platform — all for one flat rate.

Learn how Remote compares to the competition (the difference is clear!) and how we can help you build a truly borderless team without breaking the bank.

Hiring in the Philippines

Understanding how the Philippines’ employment laws work will help you choose an employer of record equipped with the infrastructure you need to legally hire Filipino talent, treat your employees humanely, and stay compliant with the law.

The Philippines Labor Code is the primary employment legislation and applies to Filipinos and non-nationals based in the country. Our guide to hiring in the Philippines further explains Philippine labor laws, statutory employment benefits, and how to navigate hiring Filipino employees.

Employment contracts and agreements in the Philippines

Verbal and written contracts are equally valid under Philippine law, although it’s advisable to opt for the latter to clearly state terms of employment, like:

• The names and details of both parties

• Job position and status

• Job description

• Salary and benefits

• Intellectual property provisions, and

• Confidentiality and non-compete clauses

Contracts signed in person and electronically are equally valid.

Labor compliance in the Philippines

Employers are required to provide a conducive work environment where workers’ rights are protected to ensure they can dispense their duties without physical, mental, or emotional harm.

This will require setting up measures such as:

• Protecting employees from any form of discrimination or harassment due to race, religion, nationality, ideology, political affiliation, sex, financial, social, or physical condition

• Limiting working hours to eight hours daily, with a one-hour lunch break every day

• Providing dignified and safe working conditions

• Paying employees a premium (30% extra) if they’re required to work overtime

• Paying non-managerial staff a 13th-month salary — employees are eligible if they’ve been employed for at least one month in a calendar year, etc.

Payroll and payroll taxes in the Philippines

Personal income and payroll taxes are capped at 35% and 8.25% respectively, both of which are to be withheld by the employer.

Employer payroll taxes are capped at 12.25%, covering:

• Social security (8.5%)

• Home Development Mutual Fund (2%)

• PhilHealth (1.75%; 3.5% split with employees)

Read our helpful article for further information on hiring and paying remote workers in the Philippines.

Employment benefits and compensation in the Philippines

A healthy pay package and the right mix of benefits and perks will help you stand out from other businesses looking to hire Filipino talent.

Maternity and paternity leave

Expectant mothers are entitled to 105 days of maternity, with an additional 15 days off if they’re single, and an option for 30 unpaid days off to supplement the maternity leave. Female employees are equally entitled to 60 days' leave in the event of a miscarriage.

Fathers are entitled to seven days’ paternity leave with full wages.

Vacation and holidays

Employees are entitled to 20 paid holidays and five days of paid service incentive leave (SIL) although it’s not uncommon to see employers offer at least 15 days paid leave annually for professional positions.

Remote can help you figure out which benefits to offer that’ll help you attract the best brains in the Philippines, stay compliant with employee welfare laws, and guarantee a healthy work-life balance for your employees.

Severance pay and employee terminations in the Philippines

Employees can be terminated for just cause or other authorized causes and should be notified in writing so that they can appeal the decision at a hearing if they wish to challenge the decision. Pregnant and postpartum employees enjoy special protection and cannot be terminated.

Employees who’re let go for authorized causes (financial considerations, etc.) are entitled to severance pay equal to one month’s pay or half a month’s pay for every year of service, whichever is greater.

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What are the risks of employee misclassification in the Philippines?

Contractors and employees are classified differently in the Philippines. Generally, contractors don’t enjoy the same benefits and protections under Philippine law as employees.

Sometimes, employers could intentionally misclassify their workers to avoid paying taxes or offering benefits. However, whether it’s done accidentally (with the contractor taking on duties that are similar to that of an employee) or deliberately, it can lead to serious consequences for employers.

Misclassifying your employees or contractors in the Philippines can put you on the hook to pay back taxes, back pay, or even face penalties for not providing benefits like the 13th-month stipend we mentioned above.

The best way to mitigate misclassification risks is to work with an EOR who can help you classify your workers correctly. Partnering with Remote can ensure you’re not unknowingly withholding mandatory benefits for your workers, and are staying compliant with local labor rules.

Get started with an employer of record in the Philippines

The ease of doing business in the country, the low cost of hiring, and its skilled workforce, all make the Philippines an attractive destination to hire remote workers.  

To hire in the Philippines (and beyond), you’ll have to manage the legal legwork, set up a local office, and spend a significant amount of time and resources to hire and pay employees in the Philippines compliantly. But this does not have to stop you from hiring abroad. An EOR service like Remote can make it easy to hire and pay workers abroad quickly and easily. Remote’s global employment solution makes it easy to: 

• Stay compliant with changing local regulations

• Manage payroll easily and pay your workers on time, every time

• Manage benefits like healthcare, vacation, PTO, and employee development by clicking a few buttons on a dashboard (yes, it’s that easy)

• Protect your data and secure the rights to your intellectual property

• Classify your workforce accurately to avoid penalties and fines

• View and manage all your employees within a single dashboard.

Learn more about how Remote can make global expansion easy, fast, and safe. If you’re ready to hire a team in the Philippines, get started with Remote, and we’ll get you up and running in minutes.

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