Hire employees in the Philippines
Everything a foreign company needs to know before employing people in the Philippines: whether you need an entity, what an employee really costs once 13th-month pay and agency contributions are added, how payroll works, what leave is mandatory, and why security of tenure makes termination the part that catches people out. Written for CHROs, CFOs, General Counsel and founders.
Quick answers
The questions leadership teams ask first, answered directly. Detail follows further down the page.
Do I need a local Philippine entity to hire?
No. Foreign companies can engage talent in the Philippines through three routes:
- Employer of Record. Dryft Global employs the person through Philippine infrastructure that already holds the DOLE registrations and the SSS, PhilHealth and Pag-IBIG employer accounts. Dryft runs payroll, contributions, BIR withholding and 13th-month pay. You direct the work.
- Direct local entity. You register a subsidiary, branch or representative office with the Securities and Exchange Commission, then with the local government, the BIR, the social agencies and DOLE.
- Independent contractor. Lawful only for genuinely independent specialists with their own capital, tools and clients. See the contractor section for why this is the riskiest route.
When should I use an EOR instead of setting up a subsidiary?
An EOR makes commercial sense when you are:
- Onboarding people in days rather than the 6 to 16 weeks an SEC entity takes for incorporation, BIR, bank accounts, permits and DOLE registration.
- Building a first team of 1 to 25 in customer support, technology or finance without permanent facilities.
- Running distributed remote teams across Luzon, Visayas and Mindanao while keeping benefits, 13th-month pay and termination procedure off your own compliance desk.
A local entity becomes the right answer at roughly 30 to 50 or more staff, when you need sector licences or physical facilities, or when you are pursuing PEZA or BOI incentives. Confirm capitalisation and foreign investment thresholds with local counsel.
What does an employee actually cost beyond salary?
Start with the 13th month: a mandatory extra payment equal to one twelfth of the year's basic salary, so 8.33% before anything else. Add employer contributions to SSS, PhilHealth, Pag-IBIG and the Employees' Compensation fund, set by agency schedules that change periodically. Then add night, holiday and overtime premiums where the role needs them, and the HMO and allowances the market expects. Full breakdown below.
How difficult is termination in the Philippines?
Difficult. Security of tenure is a constitutional guarantee and there is no at-will employment. You can only dismiss for a listed just cause (the employee's fault) or authorized cause (a business reason). Just causes need the two-notice rule and a hearing. Authorized causes need 30 days' written notice to the employee and DOLE, plus separation pay. Get either wrong and the labor tribunal can order reinstatement, full back wages and damages.
Can Dryft Global legally employ my team in the Philippines?
Yes, where Dryft's Philippine legal infrastructure, partner arrangements and service scope match the role and industry. We handle the DOLE-compliant contract, semi-monthly payroll, agency remittances, BIR withholding, 13th-month pay and the annual DOLE filings, while you direct the work. Confirm role eligibility, timelines and commercial terms with your Dryft representative.
Hiring routes compared
Here is how the three routes stack up on speed, presence, compliance ownership and permanent establishment risk.
| Factor | Direct local entity | Dryft Global EOR | Independent contractor |
|---|---|---|---|
| Speed to hire | 6 to 16 weeks (SEC, BIR, bank, permits, DOLE) | Days to 2 weeks | Immediate, but high legal exposure |
| Corporate entity required | Yes, SEC-registered subsidiary, branch or representative office | No foreign entity setup | No entity |
| Compliance ownership | 100% on your local directors or resident agent | Managed by Dryft under the EOR agreement | Contractor self-reports; you carry misclassification liability |
| Permanent establishment risk | PE by definition; local corporate income tax | Significantly mitigated when structured non-agency | High if the contractor signs contracts for you |
| Termination risk | Direct NLRC litigation and separation pay | Statutory due process through the EOR framework | Vulnerable to NLRC reclassification and back pay |
| Best fit | 50+ staff, BPO facilities, PEZA incentives | 1 to 50 professionals, remote teams, pilots | Short-term deliverables, consultants with multiple clients |
What an employee costs in the Philippines
Every private-sector employer contributes to three social protection institutions and one insurance fund, and pays a mandatory 13th month. Contribution tables and ceilings change through agency circulars, so the components below show the structure; current rates must be validated before payroll runs.
| Component | Employer share | Notes |
|---|---|---|
| 13th-month pay (PD 851) | 8.33% of basic salary | One twelfth of basic salary earned in the year, paid by 24 December |
| Social Security System (SSS) | Per current schedule | Retirement, disability, sickness, maternity, unemployment; based on Monthly Salary Credit |
| PhilHealth | Per current schedule | Health insurance; premium split equally with the employee, up to an income ceiling |
| Pag-IBIG Fund (HDMF) | Per current schedule | Housing and provident savings; employer matches the employee up to a cap |
| Employees' Compensation (EC) | Per current schedule | 100% employer-funded; work-connected injury, sickness and death |
| Statutory subtotal | 8.33% plus agency contributions | Before premium pay and optional benefits |
| Market-standard benefits | Package dependent | HMO for employee and dependants, group life, allowances |
| Total employer on-cost | Ask for a costed model | Above basic salary |
For an employee on PHP 50,000 a month basic, the 13th month alone adds PHP 50,000 a year, roughly PHP 4,167 a month. Agency contributions, premium pay and HMO come on top. Ask us for a cost model with the live SSS, PhilHealth and Pag-IBIG tables applied.
Payroll and tax
Wages must be paid at least twice a month at intervals of no more than 16 days. Market practice is semi-monthly, on the 15th and the last day of the month, by direct deposit. Every pay cycle needs an itemised payslip showing basic pay, overtime, night differential and holiday premiums, non-taxable allowances, the employee's SSS, PhilHealth and Pag-IBIG deductions, BIR withholding and net pay. Remittances and reports go to the agencies and the BIR by fixed deadlines.
Income tax withholding
The employer is the withholding agent under the National Internal Revenue Code as amended by the TRAIN Law. Rates are progressive, from 0% on taxable compensation up to PHP 250,000 a year to 35% at the top. 13th-month pay and other bonuses are tax-exempt up to PHP 90,000 a year, and small de minimis benefits (rice, uniform, medical and laundry allowances) are exempt within statutory caps. In December the employer annualises each employee's tax on BIR Form 2316, refunding excess withholding or collecting any shortfall.
Statutory minimum wage
There is no single national minimum wage. Regional Tripartite Wages and Productivity Boards set daily floors for each region through periodic Wage Orders, overseen by the National Wages and Productivity Commission, with the National Capital Region at the top. Professional roles pay well above the floor, but the regional rate still anchors overtime, holiday and night differential calculations.
Leave and mandatory benefits
- Service Incentive Leave. 5 paid days a year after one year of service (Labor Code Art. 95), convertible to cash if unused. Market practice in BPO, tech and multinationals is 12 to 15 days of vacation plus 12 to 15 of sick leave.
- Public holidays. Two categories, declared each year by Presidential Proclamation. Regular holidays pay 100% if unworked and 200% if worked. Special non-working days follow no work, no pay, and 130% if worked.
- Sick pay. No statutory employer-paid sick leave beyond SIL. Sickness benefit runs through SSS; employers fill the gap with company sick leave.
- Maternity. 105 days paid under the Expanded Maternity Leave Law, plus 15 for solo mothers, funded through SSS with an employer top-up. 7 days are transferable to the father.
- Paternity and family leave. 7 days paid paternity leave for married fathers; 7 days solo parent leave; 10 days VAWC leave; up to 2 months paid special leave for women after gynaecological surgery.
- 13th-month pay. Mandatory for rank-and-file employees with at least one month of service, paid by 24 December and reported to DOLE by mid-January.
- Working time. 8 hours a day plus a 1-hour unpaid meal break, 40 to 48 hours a week, one 24-hour rest day after 6 days. Overtime pays 25% extra, rest-day work 30%, and work between 10 pm and 6 am carries a 10% night differential. Managers are exempt.
Termination and notice periods
Probation is capped at 6 months. You must hand the employee written performance standards on or before day one; if you do not, they are regular from day one. Anyone kept on past 6 months becomes regular automatically. After that, dismissal is only lawful for a just cause (serious misconduct, wilful disobedience, gross neglect, fraud or loss of trust, a crime against the employer) or an authorized cause (redundancy, retrenchment, closure, disease).
| Ground | Procedure | Separation pay |
|---|---|---|
| Just cause (Art. 297) | Notice to explain, at least 5 days to respond, hearing, notice of decision | None required |
| Redundancy (Art. 298) | 30 days' written notice to employee and DOLE | 1 month's pay per year of service, minimum 1 month |
| Retrenchment or closure (Art. 298) | 30 days' written notice to employee and DOLE | Half a month's pay per year of service, minimum 1 month |
| Disease (Art. 299) | 30 days' notice plus public health authority certificate | Half a month's pay per year of service, minimum 1 month |
- Two-notice rule. For just causes, the first notice sets out the specific acts, the ground and the policy breached, and gives at least 5 calendar days for a written explanation. A hearing follows, then a second notice with the decision. Skip a step and the dismissal is defective.
- DOLE gets notified too. For authorized causes, notice goes to the DOLE Regional Office as well as the employee, 30 calendar days ahead.
- Severance math. A fraction of at least 6 months counts as a whole year. Redundancy is the most expensive ground; retrenchment, closure and disease pay half the rate.
- Reinstatement risk. An illegal dismissal finding brings reinstatement without loss of seniority, full back wages from dismissal to reinstatement, and damages plus attorney's fees.
Can I use independent contractors?
Only for genuinely independent specialists, and Philippine law leans heavily toward finding employment. The Supreme Court applies the four-fold test: who selects and hires, who pays, who can dismiss, and, decisively, who controls the manner and means of the work. DOLE Department Order 174 adds a second screen: a legitimate contractor has substantial capital, its own tools and premises, multiple clients and DO 174 registration. A contractor who lacks those, works under your direction and does work integral to your business is in labor-only contracting, which is illegal. The worker is then your regular employee from day one, you are jointly and severally liable for retroactive SSS, PhilHealth and Pag-IBIG contributions, 13th-month pay, overtime, holiday premiums and back taxes, you cannot end the relationship without cause and due process, and DOLE and the BIR can add fines. Where a contractor's role is ongoing and integrated, converting them to EOR employment removes the exposure.
The legal framework in brief
Philippine employment law is anchored in a single codified statute, layered with DOLE department orders, regional wage orders, agency circulars and a constitutional guarantee of security of tenure. The instruments you will hear referenced most:
- Labor Code of the Philippines (PD 442, as amended). Labor standards (wages, hours, holidays, leave) and labor relations (unions, bargaining, strikes).
- DOLE Department Order 174 (2017). Contracting and subcontracting rules; defines labor-only contracting.
- PD 851. Mandatory 13th-month pay.
- RA 11210, RA 8187, RA 8972 and RA 11861, RA 9262, RA 9710. Maternity, paternity, solo parent, VAWC and Magna Carta special leave.
- RA 11165. Telecommuting Act: written agreement, parity with on-site staff, DOLE notification.
- RA 10173. Data Privacy Act, enforced by the National Privacy Commission; monitoring must be disclosed and proportionate.
- RA 11058. Occupational Safety and Health Standards: safety officers, first aiders, written health policies.
- NIRC as amended by RA 10963 (TRAIN). Personal income tax and employer withholding.
- NLRC and SEnA. Labor claims, after mandatory conciliation-mediation.
Where the talent is
The Philippines is one of the world's leading business process outsourcing and global capability destinations. The labor force exceeds 49 million with a median age under 26, English is an official language and the medium of business, law and higher education, and teams routinely run 24/7 schedules for North American, European and APAC clients. Core sectors: customer operations, tech support, software engineering, finance and accounting, medical coding, legal support and creative digital services.
| Region | Talent and industry concentration |
|---|---|
| Metro Manila (Makati, BGC, Pasig, Quezon City) | Largest hub: customer operations, finance and accounting, software, legal support, regional headquarters |
| Metro Cebu (Cebu City, Mandaue) | Second hub: customer operations, tech support, software engineering |
| Metro Clark and Pampanga | BPO and shared services delivery north of Manila |
| Davao City | Mindanao's BPO and customer operations centre |
| Iloilo City and Cagayan de Oro | Emerging regional BPO and back-office hubs |
Philippines Implementation Kit
This page tells you the rules. The kit tells you what to do, in what order, and what goes wrong when you skip a step. Built from Dryft's own Philippines onboarding checklist.
- Step-by-step implementation checklist, from hiring route selection to first payroll
- Probationary clauses and the written performance standards you must issue on day one
- Shift design: night differential, overtime and weekly rest days
- Compensation structuring: basic pay, 13th-month accrual, de minimis allowances, HMO
- SSS, PhilHealth and Pag-IBIG enrollment and BIR Form 1902 / 2316 setup
- Telecommuting Agreement under RA 11165 and data privacy consents under RA 10173
- Contractor audit against the four-fold test and DO 174, with EOR conversion
- Every official Philippine authority with direct links
This guide is general information, not legal, tax or immigration advice. Philippine labor law, regional wage orders, agency contribution schedules and BIR rules change regularly through DOLE issuances and agency circulars. Confirm current figures with a qualified adviser or with Dryft before acting. Last reviewed September 2026.
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