There are many benefits for employers choosing to recruit remote workers from the Philippines. It does, however, come with added costs and other challenges that you may not be used to when hiring domestically.
You’re probably wondering, how much exactly does it cost to hire an employee based in the Philippines? If you are an employer looking to hire talent from the Philippines, you’re probably looking for a simple answer to this question.
However, hiring and managing international employees is not black and white, and requires a thorough understanding of complex labor and tax laws — and the Philippines is no different.
In this article, we help answer this question by going over what hiring an employee from the Philippines entails and what you can expect from a financial perspective.
How Much Do Employers Need to Pay Workers from the Philippines?
As previously mentioned, the Philippines’ labor laws are complex and have many requirements for employers. Determining how much to pay Filipino employees is far more than looking at wages; overtime, bonuses, benefits, and more need to be taken into consideration.
Wages in the Philippines
The Philippines has a two-tier wage system that employers need to factor in:
- Tier 1: In the Philippines, the minimum wage is different in each region and industry, and is determined by several factors such as cost of living, standard of living improvements, employer’s ability to pay workers a living wage, and more. However, the national minimum wage across all sectors and regions in 2022 was 570 PHP per day or 10,458 PHP per month. This is approximately 189.20 USD per month or 10.31 USD per day.
- Tier 2: Anything above the minimum wage is voluntary and determined by employee productivity, with pay supplemented based on performance.
Overtime
In the Philippines, the average work day is eight hours long with one 60-minute break. However, workers are entitled to work more than eight hours in a single day if they are properly compensated. If an employee works overtime, Filipino law states that all employees must be paid 125%.
Mandatory Rest Days
In the Philippines, all employees are entitled to one full day of rest without pay for every six-day working period. If an employee chooses to work on their day of rest, they must be paid 130% of their regular rate.
Mandatory Bonuses
There are two bonuses that employees in the Philippines are entitled to receive each year:
- 13th Month Bonus: All employees in the Philippines are entitled to a year-end bonus that amounts to at least one month of pay, no matter how long they have been working for their employer. The latest this bonus can be given to staff is December 24th. All employers must submit a compliance report to the Philippines government by January 15 of the following year that confirms all staff were paid their 13th month bonus.
- Mid-Year Bonus: While not required by law, it is commonplace in the Philippines for employers to pay their staff a mid-year bonus as an incentive to attract and retain talent.
What About Taxes and Benefits?
In the Philippines, the payroll tax is between 1.16% - 1.19% per employee salary per month.
Vacation Pay
All Philippines workers are entitled to 13 paid vacation days. After three years of working for an employer, an employee will get an additional paid vacation day every year.
Holidays
There are ten official holidays in the Philippines, in which employees are not entitled to work.
- January 1: New Year’s Day
- April 6: Maundy Thursday
- April 7: Good Friday
- April 10: Araw ng Kagitingan
- May 1: Labor Day
- June 12: Independence Day
- August 28: National Heroes Day
- November 27: Bonifacio Day
- December 25: Christmas Day
- December 30: Rizal Day
If an employee does work on a holiday, they are entitled to 200% of their daily salary.
Other Financial Factors to Consider
Along with the many factors that go into paying employees in the Philippines that have been listed above, there are also many other financial considerations.
You Must Have an Office in the Philippines or Work With an Employer of Record
If your business is looking to hire employees in the Philippines, you must either set up an office there or work with an Employer of Record (EOR). An EOR acts as a proxy for your business and will act as the official employer of your staff in the Philippines. Many organizations lean towards working with an EOR rather than establishing a place of business in the Philippines. Setting up and running an office in the Philippines can be incredibly costly and stressful due to the complex labor laws that are in place.
Strict Misclassification Laws
In the Philippines, it's often more desirable for employers to hire contractors instead of full-time employees. However, it’s important to keep in mind that the Philippines has strict laws when it comes to classifying workers. If you classify a worker as a contractor but they are doing the work of an employee, you are at risk of severe financial penalties.
How Borderless Can Help You Manage and Pay Your Employees in the Philippines Stress-Free
Looking to hire employees in the Philippines but have concerns about the complexities of paying and managing your team? Borderless can help. Borderless is an online platform and Employer of Record designed to help employers hire, manage, and pay contractors anywhere in the world with ease, including in the Philippines.
We help facilitate payments, draw up employment contracts, provide compliant tax documents, and ensure your business complies with all of the complicated labor and tax laws in the Philippines.
Our platform is set up to handle anything and everything you may need when managing a team of staff in the Philippines, so you can focus on running your company and managing more important areas of the business.
Contact us today to learn more about Borderless or to book a demo.
Disclaimer
Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
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