The Philippines is making waves as a popular spot for digital nomads to set up shop thanks to its low cost of living and the warmth and friendliness of its people.
It's also a popular choice for companies seeking remote employees skilled in roles such as customer support, software development, and virtual assistance.
However, before hiring a remote Filipino employee, employers must ensure that they're in full compliance with Filipino labor laws.
Key takeaways:
- Employees in the Philippines generally fall into one of six employment categories.
- Filipino employees are entitled to several benefits, including paid leave and 13th-month pay.
- There is no at-will employment in the Philippines. All terminations must be for just or authorized cause.
The Labor Code of the Philippines: What You Need to Know
The Labor Code of the Philippines contains a framework of employee rights designed to ensure fair treatment for workers in the private sector.
This includes setting standards for pay rates, working hours, and entitlements like health insurance for businesses that employ talent in the Philippines.
Failure to comply with Filipino employment laws can result in severe consequences, such as hefty fines and even imprisonment.
Employment in the Philippines
There are six main employment categories in the Philippines:
- Regular employees are employed indefinitely and perform tasks essential to the employer's business.
- Probationary employees are hired on a trial period, usually six months. During this time, employers assess their suitability for regular employment.
- Fixed-term employees are brought on board for a specific duration with a precise end date.
- Seasonal employees are fixed-term employees who work during a particular time or season. Examples include agricultural work or holiday retail positions.
- Project-based employees are hired for a specific project, and their employment concludes once the assigned work is completed.
- Casual employees perform tasks deemed not essential to the employer's core business needs.
For a more comprehensive overview of each employment type, be sure to consult the labor code.
Working Hours & Wages
Under Filipino law, the standard workweek is 40 hours.
The minimum wage is determined by the Regional Tripartite Wages and Productivity Boards (RTWPBs), which sets wage rates based on factors such as industry, location, and cost of living.
The labor code also mandates:
- Overtime pay: Employees are entitled to overtime pay of at least 25% above their regular wage for any hours worked beyond the standard 40-hour workweek.
- Night shift differential: Employees working between 10 p.m. and 6 a.m. are entitled to a night shift differential of at least 10% of their regular hourly wage.
- Rest days: Employees are entitled to a weekly rest period of at least 24 consecutive hours.
- 13th-month pay: Employers must pay a 13th-month salary, equivalent to at least 1/12 of an employee's basic salary earned within a calendar year. This payment must be made by December 24th each year.
Service Incentive Leave
Philippine labor law stipulates several paid leave benefits for employees, including Service Incentive Leave (SIL).
After one year of service, Filipino employees earn five days of SIL, which can be used for vacation, sick leave, or any other reason.
While many employers offer more generous leave packages, SIL is a baseline to ensure all employees have access to at least a minimum amount of paid time off.
Holiday Leave
The Philippines has two classes of holidays: regular and special non-working holidays.
Employees enjoy a paid day off for regular holidays. If they do work, they get paid twice their regular pay rate.
The government declares special non-working holidays to commemorate significant events, and they can vary by region. It's up to employers if employees receive a paid day off for these holidays.
Parental Leave
In the Philippines, expectant mothers are entitled to 105 days of paid maternity leave with the option to request an additional 30 days of unpaid leave.
Under the Solo Parents Welfare Act, eligible single mothers receive 15 additional paid days of maternity leave.
To qualify for paid maternity leave, female employees must have worked for their employer for at least a year, including six months continuously before the due date.
Male employees receive seven days of paid paternity leave. Mothers also have the option to transfer seven days of their maternity leave to the father, for a total of 14 paid days off. Paternity leave is only available for married employees.
Solo parents with at least one year of service can take seven days of paid leave annually to manage parental obligations.
Health Insurance
All Filipino citizens can access free healthcare through the Philippine Health Insurance Corporation, commonly known as PhilHealth. This government-run program is funded through both local and national subsidies.
PhilHealth offers a wide range of healthcare services, from coverage for major medical expenses and surgeries to maternity benefits and beyond.
As of 2024, contributing members pay 3.5% of their annual income in Philippine Pesos (PHP) to PhilHealth, with the cost split equally between the employee and employer. This contribution rate will increase to 5% in 2025.
Termination
At-will employment doesn't exist in the Philippines. This means employers cannot terminate an employee without a valid and legal reason.
Known as just cause, these reasons include:
- Serious misconduct, such as theft, fraud, or violence in the workplace
- Willful disobedience by repeatedly refusing to follow reasonable and lawful orders from the employer
- Fraud or breach of trust that damage the employer's interests
- Gross and habitual neglect by consistently failing to perform job responsibilities and duties
In addition to just cause, there are also authorized causes for termination, such as redundancy due to business restructuring or closure.
Employees terminated for authorized cause are entitled to separation pay equivalent to half a month's salary for each year of service.
Hire in the Philippines with RemoFirst
The Philippines boasts a highly skilled workforce, but navigating the complexities of local labor regulations can be daunting for global employers that wish to hire remote Filipino talent.
Partnering with an Employer of Record (EOR) like RemoFirst simplifies the process. We take care of all legal employment requirements, including employment contracts, payroll management, taxes, employee benefits, and compliance with Filipino labor laws, such as paid leave.
Schedule a demo to see how we can streamline your hiring process and ensure compliance across 180+ countries.
