Hiring Employees in the Philippines

Employment Contracts

• Contracts must be in English, in written form, and signed by both parties.
• Contracts must include: names (both parties), addresses (both parties), start date, end date (if applicable), work location, job description, salary (including all allowances), payment date, working hours, annual leave length, and notice period.
• Note: Open – ended contracts or fixed – term contracts for 1 year can be signed.

Part – time Employees: IC Contracts

• Similar to employment contracts, the differences are (1) working hours and (2) whether social insurance needs to be paid.
• Two types of part – time work:
  • Part – time employees – Work a few hours a day (e.g., specific schedules or a fixed 4 hours per day), and enjoy all statutory contributions and benefits.
  • IC independent contractors – Paid according to milestones/output/fixed monthly working hours, and do not enjoy all statutory contributions and benefits.

Salary Payment

Pay once a month or once every two weeks; when paying every two weeks, the interval cannot exceed 15 days.

Minimum Wage

645 PHP/Day

Probation Period

0 – 6 months. In practice, it is generally 3 months and can be extended to 5 months; if the probation period exceeds 6 months, the employee will automatically become a permanent employee.

Employer Costs

• SSS social security: Approximately 10%, capped at 3520 PHP.
• PHIC medical insurance: 2.5%, capped at 2500 PHP.
• Pag Ibig provident fund: 1%, capped at 200.
• Note: It changes every year.

Personal Income Tax

The personal income tax rate ranges from 15% to 35%, and the professional income tax rate ranges from 5% to 20% (only applicable to independent contractors). Income tax is calculated on a progressive basis.

Overtime Pay and Maximum Working Hours

• Overtime on normal days: 125%.
• Overtime on rest days: 130%.
• Overtime on special non – working days (Special Non Working Day): 150%.
• Overtime on regular holidays (Regular Holiday): 200%.
• Night shift on normal days (10 PM – 6 AM): 110% per hour.
• Normal working hours: 8 hours a day.

Annual Leave

• 5 SIL (Service incentive leaves) per year, distributed on a pro – rate basis.
• In practice, companies usually offer 10 days of SIL and 5 days of sick leave.

Handling or Conversion Logic for Unused Annual Leave at the End of the Year

A maximum of 5 SIL can be cashed out at the end of the year, and 1 day of SIL = 1 day’s daily salary.

Statutory Holidays

• 18 days.
• Image link: https://www.officialgazette.gov.ph/nationwide-holidays/2025/

Other Leave

Sick Leave

It is not mandatory. Generally, companies offer 5 days.

Maternity Leave

• Mandatory: Pregnant employees who have worked continuously for 90 days can enjoy 105 days of paid leave with 100% salary.
• Note: Paid by the social security bureau.

Paternity Leave

• Mandatory: Employees are entitled to 7 days of paid leave with 100% salary.
• Note: Paid by the social security bureau.

Leave for Female Victims of Violence

• Mandatory: Employees are entitled to 10 days of paid leave with 100% salary and need to present evidence from the court and Barangay.
• Note: Paid by the social security bureau.

Leave for Female Gynecological Surgery

• Mandatory: Female employees who undergo gynecological surgery due to gynecological diseases can get 2 months of paid leave with 100% salary. They need to have been employed for 6 months in advance.
• Note: Paid by the social security bureau.

Calculation Logic for Incomplete Attendance Salary (including absenteeism or unpaid leave)

Monthly salary – Total salary for absenteeism days – Deductions for being late or leaving early.

Expatriate Employees

Salary

Minimum salary: 645 PHP/Day.

Statutory Benefits

SSS social security and PHIC medical insurance are the same as local employees, and HDMF provident fund is not paid.

Termination (Legal Requirements and Best Practices)

Notice Period

• During probation: At least 1 week.
• After probation: At least 30 calendar days.

Voluntary Resignation

Whether signing a fixed – term or open – ended contract, when employees resign voluntarily, no separation pay is required, but the 13th – month salary must be provided. If an employee has worked for less than 1 year, it will be calculated on a pro – rate basis.

Termination with Just Cause during Probation

• No compensation for termination: Failure to comply with work arrangements, dereliction of duty, deception/abuse of superiors’ trust, slander, or illegal acts against the employer (including immediate family members).
• Termination for other reasons:
  • 《Calculation of Termination Compensation》: Employees who have served for half a year can get compensation equivalent to 0.5 months’ salary, for one year equivalent to 1 month’s salary, for one and a half years equivalent to 1.5 months’ salary, and so on. Note: A 6 – month service period is equivalent to 1 year in the calculation.
  • 《Calculation Standard for the 13th – Month Salary》: Calculated by dividing the actual cumulative basic salary of the year by 12 months.

Termination without Just Cause by the Employer

• If the fixed – term contract has not ended or an open – ended contract is signed: A 30 – day notice period plus 1 – 2 months of compensation as severance pay to the employee, subject to negotiation between the company and the employee.
• If the fixed – term contract expires: The employer does not need to pay compensation but must notify the employee 30 days in advance, and the 13th – month salary must be provided.

Conversion of Annual Leave for Departing Employees

Annual leave must be converted. 1 day of annual leave = 1 day’s daily salary, with a maximum conversion of 5 days.

Official Website of Labor Laws

Image link: https://ils.dole.gov.ph/

Incentive Policies

Local Employees

Ratio of local to foreign employees: Regulations state that the ratio should be in favor of local employees, with no specific requirements. It is recommended to be 4:1 (commonly implemented by foreign companies).

Employment Figures

• 96%, 7.286 billion people are employed.
• Image link: https://psa.gov.ph/statistics/labor-force-survey/index#:~:text=Unemployment%20Rate%20in%20December%202024%20was%20Estimated%20at%203.1%20Percent&text=The%20country’s%20unemployment%20rate%20in%20December%202024%20was%20recorded%20at,rate%20recorded%20in%20December%202023.

Unemployment Rate

• National parameters:
  • At the end of 2024: 3.1%.
  • In January 2025: 4.3%.

Average Salary Trends

Actual recruitment parameters in 2024:

• Non – technical specialists: Over 25k – 40k Peso per month.
• Management positions: Over 40k.
• Technical positions: Over 50k.

Employment Recommendations

Prefer Filipino – Chinese or foreign nationals who can speak Chinese, followed by local employees; for field sales and management positions that require thinking and attention to detail, prefer foreign nationals. For positions that require bilingual skills (Filipino and English), prefer local employees.

Languages

English, Tagalog (Filipino)

Religious Customs

(1) Catholicism, (2) Buddhism, (3) Islam

Business Culture

The work pace is slow, with a focus on high profits. Employees who have attended university are usually fluent in English, which can be used as the working language.