Expanding your business internationally offers immense opportunities, and the Philippines, with its dynamic economy and skilled workforce, is often a prime target. However, navigating the intricate landscape of the Philippines labour laws is crucial for a successful and compliant operation. This guide provides foreign employers with a broad overview of employee rights, benefits, and compliance obligations, framing how an Employer of Record (EOR) can seamlessly manage these complexities on your behalf.
The cornerstone of Philippine labour relations is the Labour Code of the Philippines (Presidential Decree No. 442, as amended). This comprehensive legislation, along with various Republic Acts and Department of Labour and Employment (DOLE) issuances, sets the standards for employment in the private sector. Unlike some Western countries, the Philippines does not operate on an “at-will” employment principle; termination requires just or authorised causes and adherence to strict due process.
Understanding Employment Relationships and Types
Before diving into specific regulations, it’s important to grasp the different employment classifications in the Philippines. Misclassification can lead to significant legal and financial repercussions.
- Regular Employees: These are individuals hired for an indefinite period and perform tasks essential to the employer’s business. An employee generally attains regular status after completing a probationary period, typically not exceeding six months.
- Probationary Employees: Hired on a trial basis, usually for up to six months, during which their suitability for regular employment is assessed. Employers must provide clear performance standards and follow due process if terminating a probationary employee.
- Fixed-Term Employees: Engaged for a specific duration with a defined end date in their contract. The legitimacy of such contracts must be justified.
- Project-Based Employees: Hired for a specific project, with their employment concluding upon the project’s completion.
- Seasonal Employees: A type of fixed-term employee who works during a particular season and can expect reinstatement when their services are needed again (e.g., agricultural workers).
- Casual Employees: Perform tasks not considered essential to the employer’s core business. However, if a casual employee works for a full year, they may acquire regular employee status.
Foreign employers often consider independent contractors to avoid labour law obligations. However, the risk of misclassification is high. If a “contractor” performs core functions, works exclusively for one client, or follows strict company instructions, they may be reclassified as an employee, entitling them to full labour benefits. Defining clear scopes of work and ensuring true independence are vital.
Read more: Hiring in the Philippines: Effective Recruitment Strategies
The Philippines Labour Laws: Wages, Hours, and Compensation
The Philippines labour laws establish clear guidelines for compensation and working hours.
Minimum Wage
The minimum wage in the Philippines is not uniform; it is determined by the Regional Tripartite Wages and Productivity Boards (RTWPBs), taking into account factors like industry, location, and cost of living. As of June 2025, the daily minimum wage in the National Capital Region (Metro Manila) for the non-agriculture sector is ₱645. For agriculture, service/retail, and cottage industries in Metro Manila, it’s ₱608/day. It’s crucial for foreign employers to stay updated on these regional variations, as they are subject to review and adjustment.
Standard Working Hours and Overtime
The standard workweek in the Philippines is 40 hours, typically eight hours a day, five days a week. Employees are entitled to at least one rest day after every six consecutive normal workdays (Article 91 of the Labour Code).
Work performed beyond eight hours in a day is considered overtime and must be compensated. Overtime pay rates vary based on the day:
- Regular Workday Overtime: An additional 25% of the hourly rate.
- Rest Day or Holiday Overtime: An additional 30% of the hourly rate on top of the already increased holiday/rest day rate.
Night Shift Differential
Employees who work between 10:00 PM and 6:00 AM are entitled to a night shift differential of not less than 10% of their regular hourly wage for each hour worked during this period (Article 86 of the Labour Code).
13th Month Pay
A mandatory benefit under Presidential Decree No. 851, the 13th-month pay is equivalent to one-twelfth (1/12) of an employee’s basic annual salary. All rank-and-file employees in the private sector who have worked for at least one month during the calendar year are entitled to this, regardless of their position or payment status. It must be paid no later than December 24th of each year. This benefit is distinct from a discretionary “Christmas bonus.” As of January 2018, under the TRAIN Law (Republic Act No. 10963), the 13th-month pay and other equivalent benefits are exempt from tax up to ₱90,000.
The Philippines labour laws: Mandatory Employee Benefits and Leave
Beyond basic wages, the Philippines labour laws mandate various benefits and types of leave to ensure employee well-being and social protection.
Social Security System (SSS) Contributions
All private sector employees in the Philippines are required to be members of the Social Security System (SSS). Both employees and employers contribute to this fund, which provides benefits for sickness, maternity, disability, retirement, death, and funeral. As per Republic Act No. 11199, also known as the Social Security Act of 2018, the contribution rate increased to 15% effective January 2025. The minimum monthly salary credit (MSC) is now ₱5,000, and the maximum MSC is ₱35,000. Employers are responsible for remitting both their share and the employee’s share of contributions.
PhilHealth Contributions
PhilHealth is the national health insurance program providing universal health care coverage. Contributions are shared between employees and employers, and rates are periodically adjusted.
Pag-IBIG Fund (Home Development Mutual Fund) Contributions
The Pag-IBIG Fund is a national savings program that also offers housing loans to its members. Contributions are mandatory for all employees who are SSS members, with both employer and employee contributing.
Service Incentive Leave (SIL)
After one year of service, employees are entitled to five days of Service Incentive Leave with pay (Article 95 of the Labour Code). This leave can be used for vacation, sick leave, or any other personal reason. While many companies offer more generous leave packages, SIL is a minimum baseline. Unused SIL can typically be converted to cash at the end of the year.
Maternity Leave
The 105-Day Expanded Maternity Leave Law (Republic Act No. 11210) significantly enhanced maternity benefits. Female employees are entitled to 105 days of paid maternity leave for live childbirth, regardless of the mode of delivery, with an option to extend for an additional 30 days without pay. For solo mothers, an additional 15 days of paid leave are granted, totalling 120 days. In cases of miscarriage or emergency termination of pregnancy, 60 days of paid leave are provided.
To be entitled, the female employee must be an SSS member who has paid at least three monthly contributions in the 12-month period immediately preceding the semester of childbirth, miscarriage, or emergency termination of pregnancy, and has notified her employer and the SSS of her pregnancy. Employers are initially responsible for advancing the full payment of maternity benefits, which the SSS then reimburses.
Paternity Leave
Under Republic Act No. 8187, or the Paternity Leave Act of 1996, married male employees are granted seven days of paid paternity leave for the first four deliveries of their legitimate spouse. Additionally, a mother can transfer up to seven days of her 105-day maternity leave benefit to the child’s father, effectively allowing him up to 14 days of parental leave.
Holiday Pay
Employees are entitled to holiday pay for regular holidays, even if they do not work.
- Regular Holidays (No Work): Employees receive 100% of their daily wage.
- Regular Holidays (With Work): Employees who work on a regular holiday are entitled to 200% of their daily wage for the first eight hours. If the regular holiday falls on the employee’s scheduled rest day and they work, they receive an additional 30% of their 200% rate.
- Special Non-Working Holidays: Generally, the “no work, no pay” rule applies unless there is a company policy or collective bargaining agreement stating otherwise. If an employee works on a special non-working holiday, they are entitled to an additional 30% of their daily rate. If it falls on their rest day and they work, they receive an additional 50%.
The Philippines labour laws: Termination of Employment
The principle of security of tenure is deeply embedded in the Philippines labour law. An employee can only be lawfully terminated for just causes or authorised causes, and the employer must strictly follow due process.
Just Causes for Termination (Employee Fault)
These relate to the employee’s conduct or performance:
- Serious misconduct
- Willful disobedience or insubordination
- Gross and habitual neglect of duties
- Fraud or willful breach of trust
- Loss of confidence (for positions of trust and confidence)
- Commission of a crime or offence against the employer, his family, or representatives
- Other analogous causes
For just causes, the employer must observe the “two-notice rule”:
- First Written Notice (Notice to Explain): Informs the employee of the specific charges and provides a reasonable opportunity (at least five calendar days) to explain their side and present evidence.
- Hearing or Conference: Conducted if requested by the employee or deemed necessary to clarify issues.
- Second Written Notice (Notice of Termination): Issued after due consideration of the employee’s explanation, informing them of the decision to terminate and the grounds for termination.
Read more: Firing in the Philippines: Understanding the Legal Landscape
Authorised Causes for Termination (Employer’s Business Needs)
These are due to legitimate business reasons and are not attributable to the employee’s fault:
- Installation of labour-saving devices
- Redundancy
- Retrenchment to prevent losses
- Closure or cessation of operation of the establishment not due to serious business losses
- Disease (when the employee’s disease is prejudicial to his/her health or to the health of his/her co-employees, and is certified as incurable by a competent public health authority)
For authorised causes, the employer must provide written notice to both the employee and the DOLE at least 30 days before the effective date of termination. Severance pay is also generally required:
- One-half (1/2) month pay for every year of service for authorised causes like retrenchment, cessation of business (not due to losses), or disease.
- One (1) month pay for every year of service for authorised causes like redundancy or installation of labour-saving devices.
Failure to follow the strict due process requirements can lead to claims of illegal dismissal, potentially resulting in reinstatement orders, payment of back wages, and damages.
Occupational Safety and Health (OSH) Standards
The Philippines is committed to ensuring safe and healthy workplaces. The Occupational Safety and Health Standards (OSH Standards), updated by Republic Act No. 11058 (An Act Strengthening Compliance with Occupational Safety and Health Standards), mandate employers to:
- Provide a workplace free from hazards.
- Educate workers on job safety and health risks.
- Use only approved workplace equipment.
- Train employees on emergency procedures.
- Comply with OSH standards, including providing personal protective equipment (PPE) free of charge.
- Formulate and implement a comprehensive OSH program.
Non-compliance can result in significant fines, ranging from ₱10,000 to ₱20,000 per violation.
Data Privacy in Employment
The Data Privacy Act of 2012 (Republic Act No. 10173), enforced by the National Privacy Commission (NPC), governs the collection, processing, storage, and transmission of personal information, including employee data. Employers are considered “Personal Information Controllers (PICs)” and must adhere to principles of transparency, legitimate purpose, and proportionality.
Key considerations for employers include:
- Consent: Generally, employee consent is required for processing personal data, unless covered by a legal obligation or contract.
- Purpose Limitation: Data should only be collected for legitimate purposes related to the employment relationship.
- Security Measures: Implementing organisational, physical, and technical security measures to protect employee data from unauthorised access or breaches.
- Data Subject Rights: Employees have rights to access, rectify, and in some cases, delete their personal data.
Violations of the Data Privacy Act can lead to substantial fines (up to ₱5,000,000) and even imprisonment for responsible company officers.
The Employer of Record (EOR) Advantage
Navigating these multifaceted the Philippines labour laws, particularly for foreign entities without a local presence, can be complex and time-consuming. This is where an Employer of Record (EOR) like Eos Global Expansion becomes invaluable.
An EOR acts as the legal employer of your workforce in the Philippines, taking on all the responsibilities and liabilities associated with local labour law compliance. While you retain full control over day-to-day management and operational duties, the EOR handles:
- Payroll Processing and Tax Remittance: Ensuring accurate calculation and timely payment of salaries, 13th-month pay, and withholding taxes.
- Benefits Administration: Registering employees with SSS, PhilHealth, and Pag-IBIG, and managing contributions and claims.
- Compliance with Employment Contracts: Drafting and maintaining legally compliant employment contracts, reflecting local classifications and provisions.
- Leave Management: Tracking and administering all mandatory leave types (SIL, maternity, paternity, holidays).
- Termination Management: Ensuring all procedures for both just and authorised causes are meticulously followed to mitigate legal risks.
- Adherence to OSH Standards: Advising on and assisting with compliance with occupational safety and health regulations.
- Data Privacy Compliance: Implementing best practices to safeguard employee data in accordance with the Data Privacy Act.
- Staying Updated on Regulatory Changes: Labour laws are dynamic; an EOR continuously monitors changes and ensures your operations remain compliant.
By partnering with an EOR, foreign employers can expand into the Philippines with confidence, focusing on their core business objectives while mitigating the legal and administrative burdens of local employment compliance. It simplifies global expansion, allowing you to quickly onboard talent and tap into the rich talent pool of the Philippines without establishing a costly and time-consuming local entity.
Contact Eos Global Expansion to discover how we can help you build your world-class tech team in the Philippines. Check our full-range of EOR services here or book a free consultation now.
