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How to Hire Employees in the Philippines | Guide | Payment Methods

Mike Renaldi

15.10.25

Read time 9 minutes

Businesses across the globe are turning their attention to the Philippines when expanding their teams. The country is known for its labor force of 52.42 million, which provides ample opportunities for hiring the best talent for the job.¹

The Philippines also ranks high on the English Proficiency Index, standing 22^nd out of 116 countries, which makes it an ideal hiring location for employers in English-speaking countries.² Besides, the strong work ethic and cultural compatibility with Western markets further support hiring staff in the Philippines.

However, many employers don’t know how to hire employees in the Philippines. You need knowledge of the labor laws, employment structures and cultural dynamics to build these workplace relationships. In this guide, we cover the hiring process in the country. We'll also discuss BatchTransfer, which can help your team send international business payments at low cost.

Can Foreign Employers Hire Staff in the Philippines?

Yes, foreign employers can hire staff in the Philippines, but they must follow the country’s labor regulations. The Philippines welcomes international companies, provided employment arrangements comply with the labor laws and are processed through legitimate channels.

Foreign businesses usually engage with a local entity, a branch office or a registered employer of record (EOR) to make hiring legal and compliant. The approach simplifies payroll and government contributions.

How to Hire Employees in the Philippines: A Step-by-Step Guide

Foreign companies have two main routes when hiring in the Philippines. You can work with an Employer of Record (EOR) or establish a direct employment structure.

Hire Employees in the Philippines With an EOR

An EOR in the Philippines serves as the legal employer on behalf of the foreign company. It means that the EOR manages compliance with the Philippines’ labor laws and handles payroll for the employer.

They also process mandatory government contributions and oversee employment contracts. The foreign company retains full control of daily operations and task management, while the EOR manages the legal and administrative side.

Businesses that want to scale quickly without setting up a local entity can take this route. It reduces legal risks and cuts down on setup time. The familiarity of the EOR with local hiring culture further streamlines the staff onboarding process.

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Hire Employees in the Philippines Directly

If you want long-term growth in Southeast Asia, it’s better to set up a direct employment structure in the Philippines. While it’s more complex, the process gives you full control over employment policies.

Here’s a step-by-step guide on how to hire Filipino workers directly:

Step 1: Establish a Legal Entity in the Philippines

The first step is to legally register your presence in the country. Without this, you cannot hire staff in the Philippines directly. The process involves:

Registering with the Securities and Exchange Commission (SEC) or the Department of Trade and Industry (DTI), depending on your company’s structure
Opening a local bank account to handle payroll
Securing the necessary business permits from the local government unit where you operate
Registering with the Bureau of Internal Revenue (BIR) for tax purposes

You’ll likely need guidance from local legal and tax professionals at this stage. It’s typically the most time-consuming step of the whole process, and may take months.

Step 2: Classify Workers Correctly

The Labor Code of the Philippines spells out employment relationships. A major difference from many countries is that at-will employment does not exist.³ Filipino employees have the right to security of tenure, which means you cannot terminate them without just or authorized cause.

Similarly, misclassification of workers can also result in fines and jail time for company officers. So, make sure you classify workers properly in the hiring process. Here are some distinctions between full-time employees and independent contractors:

Employees: They are entitled to benefits such as paid leave, 13th month pay and contributions to the social security system, which is the Philippine Health Insurance Corporation (PhilHealth), and the Pagtutulungan sa Kinabukasan: Ikas, Bangko, Industriya at Gobyerno (Pag-IBIG Fund).
Independent Contractors: They operate independently and are not entitled to employment benefits. Contractors typically work on defined projects for a set period.

Get this basic classification right to avoid compliance risks. It also clarifies the employment relationship between both parties.

Step 3: Check Work Authorization and Visas

If you are hiring a foreign national in the Philippines, work authorization must be verified before employment begins. The main requirement is an Alien Employment Permit (AEP), which the Department of Labor and Employment (DOLE) issues.

Once approved, the worker typically applies for a 9(g) visa, which allows them to legally work for your company.⁴ There are also special visas for investors and executives.

For example, a Special Investor’s Resident Visa (SIRV) requires at least USD $75,000 in investments and grants indefinite residency.⁵ The International Treaty Trader Visa lasts for up to two years for investors from countries like the U.S. and Japan.

It’s important to confirm visa status before onboarding an employee. Someone without proper documentation can expose your business to fines.

Step 4: Run Background Checks

Background checks are a standard part of the hiring process, regardless of the country. They verify a candidate’s qualifications and protect your business from future risks.

Some checks to consider are criminal record search, employment verification, identity confirmation, reference verification, educational history, work authorization status, financial and credit checks and review of social media presence. Make sure you carry out these checks with respect for privacy laws, including the Philippines’ Data Privacy Act.

Step 5: Draft Employment Contracts

Employment contracts are legally required in the Philippines. They must clearly state the job title, responsibilities, start date, working hours, probationary period and compensation structure.

You should also specify leave policies, benefits, termination policies and confidentiality or non-compete clauses. A detailed contract saves you and your employee from any ambiguity about obligations or entitlements.

Step 6: Register Employees for Mandatory Benefits

When you hire staff in the Philippines, you must enroll them in three government programs:

Social Security System (SSS): It provides retirement, disability, maternity, sickness, unemployment and funeral benefits. Both the employer and the employee have to contribute.
PhilHealth: It’s a government health insurance program in which contributions are split 50-50 between employer and employee, set at 5% of base salary.⁶
Pag-IBIG Fund: It’s a housing development program in which employers contribute 2% of an employee’s salary, while employees contribute 1% or 2%, depending on their income.⁷

If you do not register your employees in these programs, you could face fines and legal penalties.

Step 7: Set Up Payroll and Tax Compliance

Payroll in the Philippines must be paid in Philippine pesos (PHP). Employers need to collect each worker’s Tax Identification Number (TIN), SSS number, PhilHealth number and Pag-IBIG membership information.

First, you need to calculate and withhold income tax. Then, remit employee and employer contributions to SSS, PhilHealth and Pag-IBIG. File the tax returns with the BIR and issue payslips to your employees.

Step 8: Provide Statutory Benefits

Besides contributions to SSS, PhilHealth and Pag-IBIG, direct employers must comply with statutory entitlements. Some of these benefits are as follows:

13th Month Pay: It is mandatory for all non-management employees. The pay is equivalent to one month’s salary and must be paid no later than December 24.⁸ Employers must file a compliance report by mid-January.
Service Incentive Leave: The Philippines offers five days of paid leave for every year of service to employees.⁹ Unused leave can be converted to cash.
Holiday Pay: It’s double the pay for regular holidays if employees work. A 30% premium applies on special non-working holidays.¹⁰
Overtime Pay: Employees are entitled to additional pay for work beyond regular hours.
Severance Pay: If an employee is terminated due to authorized causes (such as redundancy, retrenchment or company closure not due to serious misconduct), employers must provide severance pay. It is usually equivalent to one-half to one month of pay per year of service.¹¹
Maternity Leave: Female employees in the Philippines get 105 days of fully paid maternity leave for live births, with an optional 30-day extension without pay.¹²

You can also offer additional benefits to make your company more appealing to prospective employees. These may include transport, food, educational opportunities, mentorship, career progression programs and so on.

Step 9: Onboard New Hires

A strong onboarding process helps employees integrate quickly. Before the first day, employers should provide contracts, file government registrations, set up payroll and prepare work tools.

On the first day, introduce the employee to the team and explain company policies. Over the next three months, schedule training sessions and create opportunities for feedback.

Step 10: Protect Company Information

New hires gain access to sensitive data, so protecting intellectual property is a must. Non-disclosure agreements (NDAs) are legally binding under Philippine law, provided they align with the Intellectual Property Code and the Electronic Commerce Act.

NDAs can cover trade secrets, proprietary technology, business strategies and sensitive personal information. You can also create contracts covering non-compete and non-solicitation obligations.

Step 11: Follow Proper Termination Procedures

When it’s time to terminate an employee in the Philippines, you must follow due process. Employees cannot be dismissed without just or authorized cause.

Employers need to give two written notices explaining the grounds for dismissal. The employee should be given an opportunity to respond, and there should be a hearing to present both sides.

For just causes (such as serious misconduct), no severance pay is required. In contrast, authorized causes like company closure require employers to pay severance pay to the staff.

How to Pay Employees in the Philippines?

If you’re working with an EOR, they will handle payroll for your Filipino employees. Otherwise, you have to manage payroll internally.

Let’s take a look at the key considerations when it comes to paying staff in the Philippines.

Payroll Frequency

The Philippines’ labor law mandates that wages must be paid at least twice a month.¹³ Payments are typically scheduled every 5th and 20th of the month, though some employers opt for weekly pay cycles in industries like retail or manufacturing.

Salary Structure and Deductions

Employers must outline gross salary, allowances and performance bonuses in the payslips. From this, statutory deductions must be applied, including the income tax, SSS, PhilHealth and Pag-IBIG Fund. It’s important to calculate these amounts accurately and remit them on time to avoid noncompliance penalties.

Payment Methods

Most companies use bank transfers for payroll with major Philippine banks. If you’re operating in rural areas, payroll cards and cash payments are also common. Digital wallets, such as GCash and Maya, are also popular in the country, particularly among younger employees and remote workers.

How Much Does It Cost to Hire Filipino Workers Directly?

When hiring employees in the Philippines, you shouldn’t just account for the salaries. The Philippines has a comprehensive labor code that requires companies to provide statutory benefits, contributions and protections, all of which add to the total cost of employment.

First, salaries depend on industry and skill level. Entry-level roles may align with the regional minimum wage, which is around PHP 645 per day.¹⁴

Meanwhile, professionals in IT, engineering or healthcare command higher monthly pay. Beyond base salaries, employers are legally required to pay 13th-month pay, overtime, holiday premiums and night differential when applicable.

Administrative costs also come into play. You’ll need internal resources and HR capacity to run payroll, handle compliance filings and conduct background checks.

Foreign companies that are not ready to manage these responsibilities directly can use an EOR for higher cost-efficiency. These providers typically charge by per employee or a flat service fee that covers all aspects of employee payroll and benefits administration.

Frequently Asked Questions

Can foreign companies pay Filipino employees in foreign currency?

While it’s possible, Filipino law generally requires salaries to be paid in Philippine pesos. Some exceptions apply for overseas employers or special contracts, but compliance with Bangko Sentral ng Pilipinas (BSP) rules is necessary.

Do Filipino employees receive mandatory bonuses besides the 13th-month pay?

The 13th-month salary is the legally required bonus. Other incentives, like performance bonuses or allowances, depend on company policy or industry standards rather than statutory rules.

What role does the Department of Labor and Employment (DOLE) play in the Philippines?

DOLE enforces labor standards, oversees compliance and protects employee rights. Employers working directly in the Philippines often interact with DOLE for permits and regulatory guidance.

What happens if an employer misses payroll deadlines in the Philippines?

Delays or non-payments of wages can trigger complaints to the Department of Labor and Employment (DOLE). Employers risk fines and penalties, as labor authorities take payroll compliance seriously.

Can independent contractors in the Philippines get the same benefits as employees?

Independent contractors are not entitled to statutory benefits like SSS, PhilHealth or paid leave. However, companies can offer them in-house perks like food or transportation.

Are there probationary periods for employees in the Philippines?

Probationary employment generally lasts up to six months. During this period, employers evaluate performance, and employees may not yet qualify for all regular benefits. Once confirmed, they transition to regular employment status with full rights.

Can foreign employers offer equity or stock options to Filipino employees?

Foreign employers can extend equity or stock options to Filipino workers, though the process requires clear structuring for taxation and companies. Many companies handle this through local entities or global equity management platforms.

Sources:

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This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.

We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.

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