One of the benefits of hiring a remote team is the access to global talent. Gone are the days when your staffing options were limited to your physical location. Technology has enabled us to keep in touch with the entire world, giving us the ability to access a global talent pool. One of the popular countries for hiring employees is the Philippines.
If you’ve been looking at hiring Filipino workers as your next chunk of talent but are unfamiliar with the process of hiring in the Philippines, local labor law requirements, and more, we’ve got you covered. We listed down some FAQs that cover almost everything you need to know about the topic.
Being one of the biggest economies in Southeast Asia, the Philippines, with its large population, suffers no shortage of skilled talent for potential employers. The Philippines also has a relatively young workforce, with the median age of an employee at 23 years old.
It is common for most Filipinos to obtain a college degree, with the top 5 most popular degrees being Business, Education, Engineering, IT, and Agriculture.
Besides this, two other factors also come into play, which make hiring Filipino workers a top choice. The first is low wages and the cost of living. The average daily minimum wage in the Philippines ranges from PHP 290 (USD 5.70) to PHP 537 (USD 10.61), depending on the employee’s location. The second factor that many employers take into consideration when hiring Filipino workers is language. After Spain ceded the Philippines to the US in 1898, the Philippines became an American colony for 48 years before gaining independence in 1946. During colonization, the Americans greatly influenced the country and its language.
Today, English remains the second official language of the Philippines, with approximately 90% of the population being able to understand and speak English. The lack of a language barrier, coupled with the other factors mentioned previously, are all reasons why people turn to hire in the Philippines.
Typically, one of the best ways of hiring in the Philippines is through referrals. If you know someone in the Philippines who can refer somebody to you, that would be ideal. However, if you have no contacts in the Philippines, you can check out this post for more insights into hiring in the Philippines.
The following cities are considered to be preferred places when looking to hire in the Philippines
Most of the country’s top universities are also located within these cities. Generally speaking, you can expect the English proficiency and education level to be higher for talents from these areas.
The minimum wage in the Philippines depends on the region. For Metro Manila, the minimum wage is PHP 537.00 ($10.24) per day. The average minimum wage for the whole country is PHP 343.63 ($6.22) per day.
Salaries are one of the key things to keep in mind when you hire Filipino workers. The average salary will depend on the nature and the location of the job.
Here’s an approximation of the average yearly salary for six different positions:
But let’s put some more context into the average salary figures. The Philippine Institute for Development classifies families into various income groups based on their monthly income:
Check out all the details of benefits and compensations you need to know when hiring workers in the Philippines.
Filipino employees usually work an average of 8 hours a day, across 5 days a week. Filipinos are also required to have at least a 1 hour break each day by law. Should you require your employee to do overtime, this will cost you an additional 25% of the employee’s hourly pay rate. There are no maximum hours for overtime, and will be up to your discretion.
For more information about income tax, you can visit the local government website here.
The Philippines is one of the Southeast Asian countries with the highest corporate (currently at 30%) and personal income tax (currently at 32%). Because of such high tax rates, many Filipinos indulge in finding ways to avoid paying their taxes completely. Many justify not paying taxes by questioning the local government’s accountability and financial prudence in spending the taxpayer’s money.
Due to COVID-19, the Philippine freelance market has exploded. In 2018, approximately 2% of the Philippine population worked as freelancers – roughly 1.5 million Filipinos – and the numbers have grown exponentially. However, one big issue with Filipino freelancers is the payment of taxes. Without a locally registered company withholding income tax for them, freelancers can fail to pay their income tax or simply state that their income is below taxable income.
After hiring in the Philippines, you can help your employees comply with local taxation laws by using Professional Employer Organizations (PEOs) like Multiplier, who will take care of payroll and taxes for you.
An important thing to consider when hiring in the Philippines is the local working hours. Filipino employees usually work an average of 8 hours a day, across 5 days a week. They must also have at least a 1-hour break each day by law. Should you require your employee to do overtime, this will cost you an additional 25% of the employee’s hourly pay rate. There are no maximum hours for overtime, and it will be up to your discretion.
Statutory benefits are one of the most important things to consider when hiring in the Philippines. These benefits directly impact the cost of hiring Filipino workers. Employee benefits mandated by the Philippine law include
13th-month pay: In the Philippines, 13th-month pay – a payment that is 1/12 of an employee’s annual pay – is mandatory. The payment is usually prorated if the person is not a full-time employee. This is paid on or before December 24 or with the first December salary.
Annual/Sick Leaves: The Philippines Labour Code states that an employer must allow employees a minimum of 5 days of annual leaves. Take note that these 5 days also include sick leaves. If your employee takes less than 5 days of leave in one year, then by law, the unused leaves shall be paid by the employer at the end of the year.
In 2019, President Rodrigo Duterte signed into law Republic Act No. 11210, or the “105-Day Expanded Maternity Leave Law,” which extended paid maternity leave from 60 days to 105 days. Before this, paid maternity leave was only granted for the first four pregnancies, and paternity leave was only granted to married men. The new law seeks to remove discriminatory measures, aiming to be inclusive for all women regardless of their mode of delivery, civil status, legitimacy of a child, and employment status.
Insurance and social security: Other benefits, which are already included in the tax deductions, include monthly contributions to the Social Security System (SSS), PhilHealth (PHIC), and the Home Mutual Development Fund (HMDF), otherwise known as ‘Pag-Ibig’.
Social Security System (SSS): The purpose of the SSS is to help private employees and their dependents avail of maternity, sickness, disability, retirement, funeral, and death benefits. It is mandatory for all employees under the age of 60 (who earn more than PHP 1,000 per month) to make regular contributions to the SSS. To compute the contributions necessary for SSS, refer to this table.
Philippine Health Insurance Corporation (PhilHealth): While most employers will seek more reliable health insurance for their employees, it is still mandatory to make contributions to PhilHealth. Contributions to PhilHealth are currently at 3% of the employees’ monthly basic salary. Take note that this increases by 0.5% every year. Click here for the circular on contributions to PhilHealth.
Home Mutual Development Fund (HMDF/Pag-Ibig): The HMDF, or Pag-Ibig as it is more commonly known, was established to provide a national savings program and affordable house financing for Filipinos. Like SSS and PhilHealth, this contribution is also mandatory. If the employee’s monthly salary is below PHP 1,500, the Pag-Ibig contribution is 1% of the monthly basic salary. If the employee’s monthly salary is above PHP 1,500, the Pag-Ibig contribution is 2% of the monthly basic salary.
While not mandated by law, it is quite common to provide non-taxable allowances for your remote employees, and it's expected by the employees. These can include stipends for business and equipment expenses, internet and telecom allowances, and even transportation allowance – if your remote employee works from a co-working space.
Philippine law also allows de minimis benefits, which are facilities or privileges given to promote your employees' health, goodwill, contentment, or efficiency. De minimis benefits are also not subject to income or withholding tax.
Here are the allowable de minimis benefits for Filipino employees:
In the Philippines, holidays are generally divided into two categories: Regular Holidays and Special Non-Working Days. Regular Holidays are scheduled on a fixed date, such as New Year’s Day, Christmas, Independence Day, National Heroes Day, Labor Day, etc., while Special Non-Working Days are more flexible and sometimes only apply to certain areas.
If you require your Filipino employee to work on a Regular Holiday, you must pay them 200% of their daily rate for the first 8 hours. On the other hand, if you require your employee to work on a Special Non-Working Day, you will be required to pay them 130% of their daily rate for the first 8 hours.
For 2021, the Philippines will have a total of 19 holidays. For an updated list of Philippine holidays, click here.
If your business is registered in another country, the easiest way of hiring from the Philippines would be through a Professional Employer Organization. PEOs like Multiplier make it easy for you to hire remote talent, comply with local labor laws, and pay your employees in time. Instead of jumping through the legal and financial hoops of setting up a business entity in another country, Multiplier will act as your representative and abide by all the necessary laws for you.
Hiring in the Philippines brings along the general expenses spent while hiring any candidate. The cost of hiring Filippino workers may vary depending on the industry and the level at which you are looking to employ. Some of the costs that contribute to hiring in the Philippines are
No, probation periods are not necessary when hiring in the Philippines. However, if you do decide to include one, by Philippine law, it cannot exceed 6 months.
After hiring Filipino workers, the easiest way to pay your remote talent would be through PEOs like Multiplier. You won’t have to worry about payroll or compliance with local taxes and labor laws, as they will take care of everything for you.
Typically, Filipinos get paid bi-monthly (every 15th and 30th of the month); however, it is not uncommon for employers to request monthly payments when hiring in the Philippines. Just be sure to notify your potential employee beforehand.
When you hire Filipino workers, it is common for you to base your remote employees' salaries on the U.S. dollar. However, it is recommended that they get paid in their local currency. This makes it easier to compute things such as withheld taxes, contributions to social security, healthcare, and more.
While hiring in the Philippines, agreeing on a flat rate in the local currency is beneficial as it helps avoid any effects of the fluctuating exchange rate. If you use PEOs like Multiplier, they will provide your employee with a fixed rate, make sure your employee is paid in their local currency, and take care of the taxes.
Termination and severance pay in the Philippines depends on the cause of termination.
Due to the onerous termination process in the, most employers choose to have a lengthy probation period (maximum of 6 months) when they hire Filipino workers.