How to hire employees in the Philippines

The Philippines boasts a growing economy and a strategic location in Southeast Asia, making it an attractive destination for sourcing skilled talent across various industries like technology, manufacturing, and services.

To capitalize on this rich talent pool, businesses need to understand the local job market dynamics and comply with employment regulations.

This guide aims to provide insights into navigating the hiring process in the Philippines, from recruitment strategies to legal compliance, enabling organizations to effectively tap into the country's vibrant workforce and drive business growth.

What you need to know before hiring employees in Philippines

Job market in Philippines

In the dynamic Philippines job market, digital transformation is reshaping opportunities for businesses and job seekers alike. With e-commerce sales soaring to $17 billion in 2021 and a thriving online community of 73 million users, platforms like Lazada and Shopee offer a bustling marketplace for enterprises of all sizes. Amidst this digital boom, there's a growing demand for individuals skilled in data analysis, cybersecurity, and digital marketing. By investing in upskilling initiatives, employers not only empower their workforce but also ensure greater competitiveness in today's fast-paced environment. Embracing digital innovation isn't just a necessity—it's a strategic imperative for businesses looking to thrive in the Philippines' evolving job landscape.

 Philippines hiring trends

• The Philippines' job market is vibrant and evolving, with a strong focus on leadership and innovation, especially in sectors like shared service centers.
• There's a growing emphasis on environmental and social responsibility, attracting professionals dedicated to sustainability.
• The demand for tech-savvy individuals in automation, digitalization, and emerging technologies is rising, reflecting the digital revolution's impact.
• Remote work trends are redefining productivity and work culture, promoting flexibility and adaptability among professionals.
• Success for companies in this landscape involves attracting and retaining top talent through competitive salaries, growth opportunities, and supportive work environments.
• Emphasizing a future driven by innovation, sustainability, and inclusivity is key to aligning with the current job market trends in the Philippines.

How to hire employees from the Philippines

1. Set up an entity in the country

For businesses intent on making a mark in the Philippines and cultivating their operations, creating a new entity and hiring local talent proves to be an advantageous strategy. This approach affords companies full autonomy in their hiring processes. However, it's beneficial primarily to those with the necessary budget and management capacity to support a large employee base in the country. Establishing a physical presence necessitates having fixed assets in the Philippines and employing a multi-currency payment system for offshore employees. Thus, this strategy is recommended for firms with a long-term commitment to expansion in the region.

2. Hire independent contractors

Alternatively, companies can opt for contractors in the Philippines for specialized projects or niche skills. This model presents a leaner legal and compliance framework, as contractors operate as self-employed individuals under a contract for a specified duration. This route offers a streamlined solution for businesses seeking specialized skills for short-term projects.

3. Partner with an EOR in the country

Businesses can also engage Filipino employees without the prerequisite of establishing a local entity. An EOR acts as a legal intermediary, facilitating the hiring, payment, and management of employees in the Philippines on behalf of the company. This arrangement simplifies adherence to local legal and compliance guidelines, allowing businesses to concentrate on the day-to-day management of their employees' work.

Utilizing an EOR is particularly beneficial for firms looking to:

• Experiment with offshore hiring strategies
• Efficiently establish a workforce
• Initiate offshore operations with minimized investment and risk

Compliance risk while hiring in Philippines

When exploring the complexities of hiring in the Philippines, it's essential to remember the human dimension amidst compliance considerations. Beyond legal frameworks, ensuring accurate payroll contributions speaks to a deeper commitment to supporting Filipino employees through various life circumstances, fostering a workplace culture rooted in care and stability. 

Understanding statutory benefits and holidays not only reflects compliance but also showcases respect for local customs, enhancing employee satisfaction and engagement within the organization.

Moreover, addressing misclassification risks underscores the importance of fairness and equity in employment practices. By properly classifying workers, companies demonstrate a commitment to upholding labor standards and fostering an environment of trust and transparency. 

Navigating compliance challenges with integrity not only safeguards the company's reputation but also strengthens its bonds with the local community. Prioritizing compliance signals a dedication to ethical conduct, laying the groundwork for long-term success and positive impact in the Philippines.

Key Aspects of Philippines Labor Law

Employment Contract:

In the Philippines, employment contracts are typically written in English or Filipino, depending on the agreement between the employer and the employee. For short-term roles lasting less than three months, a written contract is not obligatory.

These contracts must include essential details such as job responsibilities, working hours, salary, workplace location, duration of employment, safety regulations, insurance coverage, and employee benefits, ensuring compliance with legal requirements.

While certain changes initiated by the employer, such as salary raises or promotions, do not necessitate employee consent, a one-year notice period is mandatory for implementing such modifications. All payments to local employees must be made in Philippine Peso to adhere to currency regulations.

Working Hours:

Under normal circumstances, it is typically anticipated that employees should not surpass an eight-hour workday and should not exceed a total of 40 hours per week. However, in certain sectors that adhere to a six-day workweek, the maximum limit may extend to 48 hours.

Employers are obligated to grant their employees a minimum of 60 minutes for meal breaks. Alternatively, there exists the possibility of reducing daily breaks to 20 minutes by providing additional compensation to employees in lieu of the full hour.

Overtime: 

Employees who work overtime are entitled to receive compensation of at least 125% of their normal wages for the extra hours worked. However, managerial staff are typically exempt from overtime pay. 

In cases where employees are required to work on holidays or rest days, they must be compensated for the first 8 hours of work at their regular rate, along with a supplement of no less than 30% of their regular pay.

Minimum Wage:

Minimum wage rates in the Philippines vary depending on the region, with amounts ranging from PHP 282 per day to PHP 537 per day.

Payroll laws in Philippines

Philippine payroll operates on a monthly basis, varying according to the employer and industry. Employee salaries must be disbursed once every two weeks, within intervals not exceeding 16 days. 

Additionally, the country mandates a 13th-month pay, equivalent to one month of the regular salary, to be issued by or before December 24th.

Employment benefits in Philippines

Leave Policies in Philippines

1. Paid Time Off:

Upon completing one year of service with the employer, employees are entitled to five days of paid vacation leave.

2. Public Holidays:

The Philippines recognizes a total of 18 national holidays annually.

3. Sick Days:

In the Philippines, although there are no explicit regulations governing paid sick leave, numerous companies typically institute internal guidelines concerning sick leave. Additionally, depending on the sector, collective agreements might incorporate stipulations regarding sick leave benefits.

4. Maternity Leave:

In the Philippines, maternity leave is not just a statutory benefit; it's a crucial time for mothers to bond with their newborns.

• Female employees with one year of service are entitled to 105 calendar days of paid maternity leave.
• Single mothers receive an extended leave period of up to 120 days.
• This provision reflects a compassionate workplace culture valuing the needs of new mothers.

5. Paternity Leave:

Paternity leave in the Philippines is a valuable opportunity for fathers to support their partners during the early stages of parenthood.

• Married fathers are entitled to 7 days of paid paternity leave from the child's birth date, demonstrating a commitment to family values in the workplace.
• Additionally, mothers have the option to extend support to the child's father by allocating up to 7 days of their own paid maternity leave.
• This provision fosters a supportive environment for new parents, emphasizing the importance of shared responsibility and bonding time with the newborn.

Public Health Insurance 

Public health insurance in the Philippines is facilitated by the Philippine Health Insurance Corporation (PhilHealth), a government agency dedicated to ensuring access to healthcare services for all citizens. 

PhilHealth offers a range of benefit packages covering hospitalization, outpatient services, and preventive healthcare measures, promoting comprehensive healthcare coverage. Mandatory enrollment in PhilHealth is required for all employees, self-employed individuals, and voluntary members, reflecting the government's commitment to achieving universal healthcare nationwide.

 By providing affordable healthcare options, PhilHealth plays a vital role in enhancing the well-being and productivity of the Filipino workforce, underscoring the importance of public health initiatives.

Filing tax in Philippines

Income Tax:

In the Philippines, income tax rates are structured progressively. For instance, earnings up to PHP 250,000 incur a 0% tax rate, while rates increase for higher income brackets. This ensures a fair taxation system where those with higher incomes contribute proportionally more. For a detailed understanding of tax policies and other contributions in the Philippines, please refer to our comprehensive guide.

Other Tax and Social Security Contributions:

In the Philippines, employer payroll contributions signify more than financial obligations—they embody a commitment to employees' well-being. From Social Security System (SSS) to Health Insurance, these contributions reflect an investment in a secure future. For employees, deductions like SSS and Health Insurance offer vital support during challenging times. Understanding these contributions fosters trust and transparency, strengthening the bond between employers and employees. Explore our comprehensive guide for deeper insights.

Business culture in the Philippines

Understanding the landscape of business culture in the Philippines is critical for international firms considering this dynamic market. The business norms in the Philippines encompass:

• Personal Relationships: Essential in the Filipino business culture; investing time in building "kapwa" or interpersonal connections is crucial.
• Respect for Hierarchy: The business environment values seniority; understanding this can aid in smoother interactions and decision-making.
• Family-Oriented Business: Many businesses have a strong family influence, important to consider in partnership negotiations.
• Indirect Communication: Being attuned to non-verbal cues and fostering respectful communication is key to building strong business relationships.
• Formal Attire and Gift-Giving: Reflects professionalism and respect; modest gifts are appreciated.
• Flexible Time Management: Punctuality is balanced with a degree of flexibility, typical in local scheduling.
• Work-Life Balance: Highly valued, offering policies that support this can enhance employee retention.

For companies exploring how to navigate hiring in the Philippines, understanding these cultural nuances is essential. Partnering with an Employer of Record (EOR) like Gloroots simplifies navigating these complexities, ensuring compliance and cultural fit.

Top sectors to hire from in Philippines

Business Services:

With a 10% increase in job postings, the sector encompasses Technology, Sales, Marketing, Finance, and Procurement.

Skills like Digital Marketing and Business Partnering are in high demand, along with proficiency in languages like Mandarin for future leadership roles.

Fast Moving Consumer Goods (FMCG) and Retail:

Accounting for 23% of the services industry, FMCG and Retail continue to drive economic growth.

Skills in data analysis and overseas experience are sought after, with roles like Marketing Head and Country Sales Director in demand.

Industrial and Manufacturing:

Contributing nearly 25% of the GDP, the sector offers employment, output, and income.Professionals with multilingual capabilities, especially in Mandarin, are valued, with roles such as Procurement Director and Plant Manager in high demand.

Technology and Telecommunications:

With a growing ICT industry and an increase in start-ups, opportunities abound.

Candidates with expertise in Software Engineering, Digital Marketing, and People Management are highly sought after, amidst a competitive job market.

Top cities to hire from Philippines

Manila:

The capital city and economic hub of the Philippines, Manila offers a diverse pool of talent across various industries. With its central location and numerous universities, Manila attracts skilled professionals from all over the country.

Quezon City:

As one of the most populous cities in Metro Manila, Quezon City boasts a vibrant workforce. It is home to several business districts, educational institutions, and residential areas, making it a prime location for hiring talent.

Cebu City:

Known as the "Queen City of the South," Cebu City is a major economic center in the Visayas region. It has a thriving BPO industry, a strong manufacturing sector, and a growing IT and tourism industry, offering a diverse talent pool for employers.

Makati City:

Considered the financial center of the Philippines, Makati City is home to numerous multinational corporations and business process outsourcing firms. It offers a highly skilled workforce, excellent infrastructure, and a conducive business environment for employers.

Davao City:

Located in Mindanao, Davao City is a rapidly growing urban center with a burgeoning economy. It is known for its strategic location, skilled workforce, and government support for business development, making it an attractive destination for hiring talent.

Hire in Philippines compliantly with Gloroots

Gloroots, as an Employer of Record (EOR) in Philippines, expedites candidate onboarding, ensuring rapid operational commencement while maintaining compliance with local and global standards. Tailored for companies of all sizes, it streamlines payroll management, benefits administration, and tax handling, eliminating the requirement for a local entity. This enables companies to concentrate on efficiently building a remote team in Philippines.  For more details on how Gloroots can assist with your Philippines hiring requirements, please contact us.

Frequently Asked Questions 

1. What are the top industries for employment in the Philippines?

The top industries for employment in the Philippines include Business Services, Fast Moving Consumer Goods (FMCG) and Retail, Industrial and Manufacturing, Technology and Telecommunications, and Healthcare and Wellness.

2. What is the minimum wage in the Philippines?

The minimum wage in the Philippines varies across regions, ranging from PHP 282/day to 537/day.

3. What are the statutory benefits for employees in the Philippines?

Statutory benefits for employees in the Philippines include paid vacation leave, paid maternity leave, paid paternity leave, 13th-month pay, and public health insurance.

4. What are the key considerations for employers regarding payroll and taxes in the Philippines?

Employers in the Philippines need to consider payroll contributions for social security, health insurance, and housing funds, as well as income tax rates based on salary brackets.

5. What are the top cities for hiring talent in the Philippines?

The top cities for hiring talent in the Philippines include Manila, Quezon City, Cebu City, Makati City, and Davao City, each offering a diverse pool of skilled professionals and a conducive business environment.