One of the benefits of hiring a remote team is the access to global talent. Gone are the days where your staffing options were limited to your physical location. Technology has enabled us to keep in touch with the entire world, therefore giving us the ability to access a global talent pool. One of the popular countries for hiring a remote employee is the Philippines.
If you’ve been looking at the Philippines as your next source of talent but are unfamiliar about the hiring process, local labor law requirements, and more, we’ve got you covered. We listed down some FAQs that cover almost everything you need to know about the topic.
Being one of the biggest economies in Southeast Asia, the Philippines, with its large population, suffers no shortage of skilled talent for potential employers. The Philippines also has a relatively young workforce, with the median age of an employee at 23 years old.
It is common for most Filipinos to obtain a college degree, with the top 5 most popular degrees being Business, Education, Engineering, IT, and Agriculture.
Besides this, two other factors also come into play making the Philippines a top choice for hiring remote talent. The first is low wages and cost of living. The average daily minimum wage in the Philippines ranges from PHP 290 (USD 5.70) to PHP 537 (USD 10.61), depending on the employee’s location. The second factor that many employers take into consideration is language. After Spain ceded the Philippines to the US in 1898, the Philippines became an American colony for 48 years before gaining independence in 1946. During the period of colonization, the Americans had a large influence over the country and its language.
Today, English remains the second official language of the Philippines, with approximately 90% of the population being able to understand and speak English. The lack of a language barrier coupled with the other factors mentioned previously are all reasons why people choose to hire remote talent from the Philippines.
Typically one of the best ways to look for a remote talent from the Philippines is through referral. If you know someone in the Philippines who can refer somebody to you, that would be ideal. However, if you have no contacts in the Philippines, you can check out this article for more insights into hiring talent from the Philippines.
If you want to hire skilled talent in Philippines, the following cities are considered to be preferred places to hire from in the Philippines:
Most of the country’s top universities are also located within these cities. Generally speaking, you can expect the English proficiency and education level to be higher for talents coming from these areas.
While the average daily minimum wage in the Philippines ranges from PHP 290 (USD 5.70) to PHP 537 (USD 10.61), depending on the employee’s location, the average salary will depend on the nature of the job.
Here’s an approximation of the average yearly salary for six different positions:
But let’s put some more context into the average salary figures. The Philippine Institute for Development classifies families in various income groups based on their monthly income:
For more information about income tax, you can visit the local government website here.
The Philippines is one of the Southeast Asian countries with the highest corporate (currently at 30%) and personal income tax (currently at 32%). Because of such high tax rates, many Filipions indulge in finding ways to avoid paying their taxes completely. Many of them justify not paying taxes by questioning the local’s government’s accountability and financial prudence in spending the taxpayer’s money.
Due to COVID-19, the Philippine freelance market has exploded. Back in 2018, approximately 2% of the Philippine population worked as freelancers – that’s roughly 1.5 million Filipinos – and the numbers have grown exponentially after that. However, one big issue with Filipino freelancers is payment of taxes. Without a local registered company withholding income tax for them, freelancers can fail to pay their income tax or simply state that their income is below taxable income.
Filipino employees usually work an average of 8 hours a day, across 5 days a week. Filipinos are also required to have at least a 1 hour break each day by law. Should you require your employee to do overtime, this will cost you an additional 25% of the employee’s hourly pay rate. There are no maximum hours for overtime, and will be up to your discretion.
13th month pay: In the Philippines, 13th month pay – payment that is 1/12 of an employee’s annual pay – is mandatory. If the person is not a full-time employee, the payment is usually prorated. This is usually paid on or before December 24 or in conjunction with the first December salary payment, usually on the 15th of December.
Annual/Sick Leaves: The Philippines Labour Code states that an employer must allow employees a minimum of 5 days of annual leaves. Take note that these 5 days also include sick leaves. If your employee takes less than 5 days of leave in one year, then by law, the unused leaves shall be paid by the employer at the end of the year.
In 2019, President Rodrigo Duterte signed into law Republic Act No. 11210, or the “105-Day Expanded Maternity Leave Law,” which extended paid maternity leave from 60 days to 105 days. Prior to this, paid maternity leave was only granted for the first four pregnancies and paternity leave was only granted to married men. The new law seeks to remove discriminatory measures, aiming to be inclusive for all women regardless of their mode of delivery, civil status, legitimacy of child, and employment status.
Insurance and social security: Other benefits, which are already included in the tax deductions, include monthly contributions to the Social Security System (SSS), PhilHealth (PHIC), and the Home Mutual Development Fund (HMDF) otherwise known as ‘Pag-Ibig’.
Social Security System (SSS): The purpose of the SSS is to help private employees and their dependents avail of maternity, sickness, disability, retirement, funeral, and death benefits. It is mandatory for all employees under the age of 60 (who earn more than PHP 1,000 per month) to make regular contributions to the SSS. To compute the contributions necessary for SSS, refer to this table.
Philippine Health Insurance Corporation (PhilHealth): While most employers will seek more reliable health insurance for their employees, it is still mandatory to make contributions to PhilHealth. Contributions to PhilHealth are currently at 3% of the employees’ monthly basic salary. Take note that this increases by 0.5% every year. Click here for the circular on contributions to PhilHealth.
Home Mutual Development Fund (HMDF/Pag-Ibig): The HMDF or Pag-Ibig as it is more commonly known, was established to provide a national savings program and affordable house financing for Filipinos. Like SSS and PhilHealth, this contribution is also mandatory. If the employee’s monthly salary is below PHP 1,500, the Pag-Ibig contribution is 1% of the monthly basic salary. If the employee’s monthly salary is above PHP 1,500, the Pag-Ibig contribution is 2% of the monthly basic salary.
While not mandated by law, it is quite common to provide non-taxable allowances for your remote employees, and it's expected by the employees. These can include stipends for business and equipment expenses, internet and telecom allowances, and even transportation allowance – if your remote employee works from a co-working space.
Philippine law also allows de minimis benefits which are facilities or privileges given as a means of promoting the health, goodwill, contentment, or efficiency of your employees. De minimis benefits are also not subject to income or withholding tax.
Here are the allowable de minimis benefits for Filipino employees:
In the Philippines, holidays are generally divided into two categories: Regular Holidays and Special Non-Working Days. Regular Holidays are usually those scheduled on a fixed date such as New Year’s Day, Christmas, Independence Day, National Heroes Day, Labor Day, etc., while Special Non-Working Days are more flexible, and sometimes only apply to certain areas. The difference between the two is also reflected in their respective pay rates.
If you require your Filipino employee to work on a Regular Holiday, you must pay them 200% of their daily rate for the first 8 hours. On the other hand, if you’re requiring your employee to work on a Special Non-Working Day, you will be required to pay them 130% of their daily rate for the first 8 hours.
For 2021, the Philippines has a total of 19 holidays. For an updated list of Philippine holidays, click here.
If your business is registered in another country, the easiest way to hire a Filipino remote talent would be through a Professional Employer Organization. PEOs like Multiplier make it easy for you to hire remote talent, comply with local labor laws, and pay your employees in time. Instead of having to jump through the legal and financial hoops of setting up a business entity in another country, Multiplier will act as your representative and abide by all the necessary laws for you.
No, probation periods are not necessary when hiring Filipinos. However, if you do decide to include a probation period, by Philippine law the probation period cannot exceed 6 months.
The easiest way to pay your Filipino remote talent would be through PEOs like Multiplier. You won’t have to worry about payroll or compliance with local taxes and labor laws as they will be taking care of everything for you. If you’re working with freelancers or independent contractors, you can also use platforms such as PayPal, Transferwise, Payoneer, Western Union, or bank transfer.
Typically, Filipinos get paid bi-monthly (every 15th and 30th of the month); however, it is not uncommon for employers to request monthly payments instead. Just be sure to notify your potential employee beforehand.
While it is common for employers to base Filipino remote employees' salary off of the U.S. dollar, it is highly recommended that they get paid in their local currency (Philippine Pesos). This makes it easier to compute things such as withheld taxes, contributions to social security, healthcare, and more.
Agreeing on a flat rate in Philippine Pesos is also beneficial in that it helps to avoid fluctuations in conversion rates. If you use PEOs like Multiplier, they will provide your Filipino employee with a fixed rate, make sure your employee is paid in their local currency, and take care of the employee’s taxes as well.
Termination and severance pay in the Philippines is dependent on the cause of termination.
Due to the onerous termination process in the Philippines, most employers choose to have a lengthy probation period (maximum of 6 months) at the beginning of employment. Though not mandatory, this gives employers the flexibility to terminate an employee without having to adhere to the termination procedures mentioned above.