However, compliance with Philippine labor laws is paramount to establishing a stable and legally sound workforce.
Drawing from the Philippine Labor Code, this guide provides foreign companies with a comprehensive overview of the country's labor laws, ensuring they navigate hiring processes effectively and maintain compliance.
Why Hire Talent in the Philippines?
With over 50 million in the workforce, the country offers a skilled, English-proficient labor pool adaptable to global business needs.
Key advantages include:
Cultural Compatibility: Filipino workers excel in accounting, administrative support, customer service, IT, healthcare, and creative industries due to their English proficiency and affinity with Western markets.
Cost-Effectiveness: Labor costs remain very competitive compared to other global markets.
Legal Framework Support: The Philippine Labor Code ensures transparent guidelines for employers and employees, fostering a stable work environment.
However, hiring Filipino talent involves adhering to legal standards, from employment contracts to mandated benefits.
Employment Contracts: Drafting with Compliance in Mind
Legal Framework: Philippine Labor Code
The Labor Code of 1974 is the primary legal framework governing employment in the Philippines, which should, for example, specify:
Job Responsibilities: Clearly define roles and expectations.
Compensation and Benefits: Adhere to minimum wage regulations.
Termination Clauses: State lawful termination grounds.
Confidentiality Agreements: Protect sensitive information.
Types of Employment:
Regular: Applies to essential business roles and includes security of tenure.
Probationary: Limited to six months, after which employees are regularized unless otherwise terminated.
Project-Based: Tied to specific projects with defined duration.
Employee Rights and Protections
Minimum Wage and Compensation
Minimum wage rates are region-specific and regularly updated by the Regional Tripartite Wages and Productivity Board. Employers must stay informed to ensure compliance.
Standard Work Hours and Overtime Pay
Regular Work Hours: 8 hours/day, 48 hours/week, with one hour for meal breaks.
Overtime Pay: Required for work exceeding standard hours, with overtime (OT) rates starting at 25% above the regular hourly wage.
Mandatory Leaves and Rest Days
Service Incentive Leave: Five days annually after one year of service.
Other leaves include maternity leave (105 days), paternity leave (7 days), and bereavement leave (3 days).
Current Daily Minimum Wage Rates
NCR (National Capital Region)
| Industry | Current Minimum Wage Rates |
| Non-Agriculture | PHP 645.00 |
| Agriculture (Plantation and Non-Plantation) | PHP 608.00 |
| Service/Retail Establishments employing 15 workers or less | PHP 608.00 |
| Manufacturing regularly employing less than 10 workers | PHP 608.00 |
Effective July 17, 2024, Per Wage Order No. NCR-25
This includes the cities of Caloocan, Las Piñas, Makati, Malabon, Mandaluyong, Manila, Marikina, Muntinlupa, Navotas, Parañaque, Pasay, Pasig, Quezon City, San Juan, Taguig, and Valenzuela, as well as the municipality of Pateros.
Anti-Discrimination and Workplace Inclusion
Laws such as the Anti-Sexual Harassment Act and the Magna Carta for Persons with Disabilities prohibit workplace discrimination. Employers must create inclusive environments to comply with these regulations.
Government-Mandated Benefits
Foreign companies must also comply with the following contributions:
Social Security System (SSS): Covers retirement, disability, and maternity benefits.
PhilHealth: Provides access to healthcare services.
Pag-IBIG Fund: Supports housing loans and financial stability.
13th-Month Pay: Equivalent to one month’s salary, required by law to be paid before December 24.
Compliance with Benefit Remittance
Late remittance of mandatory contributions results in penalties and reputational risks. Employers offering additional benefits (e.g., healthcare subsidies, and retirement plans) can also attract top talent.
Compliance with Philippine Labor Laws
Foreign companies must fulfill these requirements:
Business Registration
Corporations or partnerships: Register your business with the Securities and Exchange Commission (SEC).
Sole proprietorships: Register with the Department of Trade and Industry (DTI).Tax Identification Number (TIN)
Visit the Bureau of Internal Revenue (BIR) office in your business's jurisdiction to apply for a TIN.Employee Enrollment
Enroll employees in the SSS for retirement, disability, and death benefits.
Register them with PhilHealth for healthcare coverage and Pag-IBIG for housing and short-term loans.Permits
Obtain a Mayor's Permit or Business Permit from the LGU where your business will operate.
Ensure compliance with zoning laws and secure a barangay clearance.
DOLE Oversight
The Department of Labor and Employment regularly inspects workplaces to ensure adherence to labor laws and employee welfare standards.
Alternative Approach: Hiring Philippine Talent Without Incorporating
Foreign companies not ready to incorporate can hire Filipinos talent through a Staffing or Employer of Record (EOR) partner.
The partner manages local employment, including payroll, benefits, and compliance, while you retain operational control.
Emerging Trends in Philippine Labor Laws
Remote Work Compliance
The Telecommuting Act mandates equal benefits for remote employees, ensuring compliance with standard labor protections.
Gig Economy and Flexible Arrangements
With the rise of freelancers, DOLE emphasizes clear contracts and voluntary registration for benefits. Flexible arrangements, such as compressed workweeks, are also gaining traction.
Why Compliance Matters
Failing to comply with Philippine labor laws can lead to severe penalties, including business suspension and fines.
Proactively addressing compliance not only reduces risks but also builds a strong reputation in the market. A well-structured workforce is a critical component of your business's long-term success.
How Proseso Consulting Can Help
Understanding Philippine labor laws is essential for hiring and retaining top talent. Proseso Consulting specializes in assisting foreign businesses with registrations and compliance, staffing and payroll services.
From hiring, drafting contracts, to remitting government-mandated benefits, we ensure seamless operations, allowing you to focus on growth.
Remember, a well-structured workforce is the backbone of business success—and with the right strategies, your venture in the Philippines can thrive!
(1) Philippine Labor Code (1974): Governs wages, working hours, benefits, and employee rights.
(2) Department of Labor and Employment (DOLE): Administrative guidelines and compliance inspections.
(3) Social Security System (SSS), PhilHealth, Pag-IBIG Fund: Mandatory contributions for employers.
(4) Bureau of Labor Relations: Data on collective bargaining agreements and labor trends.
(5) Open Data Philippines: Government datasets on employment and labor statistics.
(6) Expanded Maternity Leave Law: Provides 105 days of maternity leave with pay.
(7) Anti-Sexual Harassment Act (RA 7877): Workplace inclusion and anti-discrimination law.
(8) Occupational Safety and Health Standards Act: Workplace safety requirements.
By leveraging these sources, foreign companies can ensure they remain informed and compliant in their operations.
Proseso Consulting - Your Modern Finance Expert - For Seamless Growth in the Philippines and Singapore
For more information on our Services or if you have any questions, you may contact the team at contact@proseso-consulting.com.
We are a team of dedicated accountants, consultants, and business support professionals offering modern finance and administrative solutions.
With our deep local expertise and modern solutions, we enable businesses to leverage the region’s dynamic opportunities and scale with seamless, profitable growth.
This blog article does not constitute professional or legal advice. It is only intended to provide general information on a subject.
