The Philippines’ ongoing upward trajectory in their economic performance reflects the quality of talents residing there. With this, companies worldwide are employing strategies to retain and attract Filipino workers into joining their businesses.
Hiring in the Philippines is made easy with technologies and online job portals. But since the country places high regard on providing benefits and compensation for their employees, it is essential then for your company to have a competitive offer in place. Aside from its legal implications, offering the rightful benefits and compensation becomes the deciding factor for Filipino job seekers.
What Are Employee Benefits?
Employee Benefits in the Philippines are perks that are given to employees on top of their basic salary. It is an indirect payment for employees for their services rendered. Examples of employee benefits are leave credits, medical and dental insurance, meal allowances, etc.
Most employee benefits are made mandatory by the law. However, companies in the Philippines have the free range to have supplemental benefits if they deem it necessary. They can use this as leverage to attract and retain talent in their company.
Employee benefits may vary based on the nature of their work, employee demographic, and size of their organization. It is important to strategically offer an employee benefits package to ensure your workers’ best interest.
This document will give you the details about the Philippines employee benefits policy when taking in employees from the country to join your organization.
Philippines Compensation Laws
The Department of Labor and Employment (DOLE) regulates the benefits and compensation policy in the Philippines. This government agency follows the rules stated in the Labor Code of the Philippines – an all-encompassing legal code intended to protect the workers in the country.
Parts of the labor code are the benefits and compensation rules that employers ought to follow when employing Filipino workers. It includes:
- Working hours in the country must not be over 8 hours/day. Employers must designate a 1-hour lunch break in the middle of the day for employees to rest and take their meals. Although, employers may provide a break that is not less than 20 minutes in the following instances:
- For Non-manual work
- The establishment that the employee works for 16 hours a day
- An urgent work involving machinery and equipment may result in business losses when left unattended.
- Work involves handling perishable goods.
A 5 to 20 minutes additional coffee break may also be provided to employees. These shorter breaks will be considered a part of the employee’s working time. Regular working hours are between 8 AM to 5 PM.
- Employees may be required to work a night shift, for which employees will be receiving additional pay. Night shift employees will be receiving an extra 10% from their basic pay if they are to work around 10 PM to 6 AM.
- Employers must have special pay on holidays and overtime based on the hours rendered by the employees. The payment will depend on when the overtime took place. For regular work days, the overtime pay will be 25% additional to the worker’s hourly rate. If the overtime falls on a rest day of a special non-working holiday, there will be a 30% addition to the employee’s hourly rate.
- In cases of undertime, employees will not be allowed to have overtime the day after to make up for the hours they have missed previously. This is because the overtime rate is much higher than the regular hourly rate they missed.
Additionally, The Republic Act of the Philippines has enacted laws on Social coverage for Filipino citizens, especially the working population. Below are the social acts for Filipino employees:
- Republic Act 9679 or the “ Home Development Mutual Fund Law of 2009, also known as Pag-IBIG (Pagtutulungan sa Kinabukasan: Ikaw, Bangko, Industriya at Gobyerno) Fund.”
- Republic Act No. 10606 or the “National Health Insurance Act of 2013”
- Republic Act No. 11199 or the “Social Security Act of 1997”
These basic regulations ensure the employees’ welfare while giving the employers the authority to plan their constituents’ schedules and reasonable compensation for them.
How to Design Your Employee Benefits Program
An imperative for any company in the Philippines is a substantial benefit and compensation package for each employee. It is one way of ensuring the growth of their workers and guarantees the company’s compliance with the employee policies of the country.
But more importantly, DOLE monitors companies to ensure that their workers receive the ample benefits required by law. Failure to comply will result in legal actions that may be detrimental to the business’ operations.
The employee benefits package should have a detailed account of the employees’ salary, overtime pay, allowable vacation, sick leaves, severance pay, social security, etc.
Review your business structure
Before deciding on a benefits package, companies should identify their key focus when hiring and taking in talent for their organization. Employers should look into their resources, business philosophy, and the culture they want to cultivate in their day-to-day operations. In this way, companies will better understand what type of talent fits into their team and what type of benefits suit their needs based on the nature of the business and as mandated by law.
Be aware of hiring trends and industry developments
After having an introspective look at your organizational structure, employers should look into how other companies create their compensation and benefits programs. Checking the competition is one way to know the best benefits to offer new employees and existing ones. Companies may conduct talent market research regularly to be ahead of the trends. Additionally, creating healthy connections with government agencies is another way to be in the loop of any policy changes and remain compliant.
Personalize your package for each employee
Companies should consider that their employees’ needs vary from their role, age, gender, and preferences. Personalizing employee benefits is one way to show employees that the business is sensitive to their needs and that their contributions matter to the company. This can also be a way to plan an effective benefits package that may be used to incentivize employees for their performance in the company.
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Guaranteed Benefits in the Philippines
Knowing the statutory benefits for employees in the Philippines is the first and necessary step to ensuring that your employees remain compliant with the country’s policies. Below are some noteworthy items to look into.
Leave Benefits
Employees in the Philippines are given five days of service incentive leave every year with pay that they can use for their vacation and sick leave. Moreover, employers grant the following leave benefits for their workers in the Philippines.
- Vacation Leave – 15 days
- Sick Leave – 15 days
- Regular Holidays – 12 days
- Special Non-working days – 6 days
- Maternity leave – 105 days of paid leave. Additional full pay 15 days of leave for single mothers. In cases of miscarriage, women employees are entitled to 60 days of paid leave.
- Paternity Leave – 7 days of paid leave for the first four deliveries of his legitimate spouse.
- Parent Leave for Solo Parent – 7 days for any solo parent who has worked with the company for at least one year
- Special Leave Benefits for Women under The Magna Carta Of Women Act (Republic Act No. 9710) – 2 months of full pay based on her gross monthly compensation following a surgery caused by a gynecological disorder, provided that the following requirements have been met:
- Has worked for an aggregate of six months in the last 12 months before the operation
- Has filed a leave of absence from the employer within a required period stated in the company regulations or collective agreement.
- Has undergone a physician-certified surgery for a gynecological disorder.
- Leave for Victims of Violence Against Women and Their Children (Republic Act No. 9262) – employees who are victims can have a leave of up to 10 days with full pay. It shall cover the days that the employee has to attend to medical and legal concerns.
Social Security Contributions
The Social Security in the Philippines covers a wide range of financial aid, from maternity, sickness, and disability to retirement, funeral and death benefits. The system also offers qualified members salaries, housing, business, and educational loans.
- Employee and Employer contributions vary based on the income tax slabs the Social Security Services indicated. Employee contribution ranges from PHP 135 – PHP 1,125, while Employer contributions are from PHP 265 – PHP 2,155.
- Insured members will receive a pension from the system once they’ve retired.
- Allowances will also be given to people with disabilities, either monthly or in a lump sum amount.
- A maternity cash benefit will also be granted to new mothers for every day that they are unable to work after childbirth or miscarriage.
- Cash benefits will be given to the declared beneficiaries of the deceased member.
- A funeral grant of Php 20,000 will be given to whoever paid the insured members’ burial arrangements.
Pag-IBIG Loans and Contribution
The Home Development Mutual Fund (HDMF), commonly known in the Philippines as PAG-IBIG, is a national savings program that aids its citizens with affordable shelter and financing. Insured members are to pay contributions to the program and will be used to fund their savings. Their payments are tax-exempted annual dividends which they can refund in full should they terminate their membership in the program. The same funds may also be used for loans of any purpose should the insured members apply for it.
- The contribution rate will be 1 % for employees earning PHP 1,500 per month and below and 2% for those earning above PHP 1,500 per month. Employers are expected to contribute a 2% rate, regardless of salary.
- The program offers reasonable interest rates for housing loans. Members can choose a fixed rate based on the years they want the property to be repriced. Rates range from 5.75% at a one-year fixing to 10% at a 30-year fixing.
- A calamity loan will be granted for members who have been struck by natural calamities. Members may loan up to 80% of their Total Accumulated Value (TAV), with an interest of 5.95% per annum.
- Members may also avail of a short-term Multi-purpose loan. Like the calamity loan, they can loan up to 80% of their TAV. The interest rate, however, will be at 10.5% per annum.
Philhealth Coverage
The Philippine Health Insurance Corporation (Philhealth) is the country’s government-controlled, tax-exempt medical insurance covering a range of packaged services for its citizens. Employers and employees contribute to the program to fund their accounts which they may use in cases of medical emergencies. Below are some of the benefits that the program offers:
- Subsidizes hospitalization based on the amount incurred
- Inpatient benefits (provided that the hospital employee admitted is a Philhealth partner)
- Outpatient benefits (day surgeries, hemodialysis, radiotherapy, etc.)
- Z benefits (treatment for cancer)
- SDG (Sustainable Development Goals)- related benefits (Malaria package, HIV-AIDS package, etc.)
13th Month Pay
The 13th-month pay is an additional pay benefit given to all employees in the Philippines. It is equivalent to 1/12 of an employee’s basic annual salary, which is usually given in the last month of the year.
- According to Presidential Decree No. 851, this bonus must be given on or before December 24 of every year. Though, many employers are dividing the 13th-month pay into two and giving each half during the middle of the year and at the end of the year.
- The formula for calculating the 13th-month pay is as follows:
Total basic salary earned during the year / 12 months = 13th-month pay
- The 13th-month pay may be taxable if it exceeds the PHP 90,000 threshold, as indicated by the Tax Reform for Acceleration and Inclusion (TRAIN) law. For employees earning less than that, they shall receive their salary amount in full.
- It should not be confused with a Christmas bonus. The 13th-month pay is mandatory to pay for employees, whereas a Christmas bonus is only an optional incentive for employers to offer in their employee contracts.
- It should not be considered a regular wage. Payroll deductions, premiums, and overtime payments should not be a part of this incentive.
- For employees working less than a year, their bonus will be prorated, based on the number of months they have already rendered with the company.
Supplemental Benefits for Employees in the Philippines
Employers in the Philippines may also offer additional benefits for their employees based on their company roles. Though the law does not require these benefits, employers may include these in their employee’s compensation and benefits packages.
1. Group Life Insurance
Group Life Insurance in the Philippines is an added coverage for employees to secure funds for them in cases of accidents, life-threatening ailments, and disabilities. Employers usually seek private insurance companies to pick the best coverage for their employees based on the roles of their employees and the nature of their business. While these insurance plans vary from every provider, here are the basic coverage and policies regulating this benefit.
- Usually covers death, hospitalization, permanent and total disability, critical illness, and work accidents.
- Employees and Employers pay a portion of the monthly salary to fund the insurance
2. Health and Dental Coverage
This benefit is usually an added coverage and serves as the employees’ medical insurance. Like group life insurance, companies sought private providers to ensure that their employees remain in optimal health, helping them perform at their best.
- Private medical insurance companies partner with hospitals, clinics, and doctors to provide options for their insured members to seek the best care in the country.
- Contributions will also be made monthly, and employees may have the option to nominate dependents to be members of the program for an additional fee.
- Insurance companies offer free consultations with accredited doctors, discounted hospital fees, and financial aid during medical emergencies.
3. Christmas Bonus
In the Philippines, December is a month-long celebration to commemorate the year soon to close and greet the new year ahead. And with the country predominantly occupied by Christians, the same month is usually associated with the Christmas holiday and the spirit of giving. Employers, in turn, use such occasions to incentivize their employees for a job further well done.
Christmas bonuses are a monetary benefit given to employees, usually at the end of the year. It is generally worth 1/12 of the employee’s annual salary or a prorated amount for employees working less than a year with the company. To avoid confusion with the 13th-month pay, employers sometimes give this bonus at a different date or in the middle of the year.
4. Allowances
As an added incentive for employees, most employers also offer allowances for specific purposes as an additional reward. These allowances may be for their meals, clothing, medical, etc. The most popular allowance companies in the Philippines offer is a quarterly rice subsidy. This incentive is rooted in the Philippine culture since its citizens consider rice a staple necessity for every family unit.
Employee Benefits for Expatriates
The Philippines is a popular destination for ex-pats due to its warm tropical climate. Hence, the government has set perks for foreigners choosing to live and work in the country to enjoy their stay. It is also a way to promote and attract foreign investors to venture some opportunities in the country and provide more jobs for its citizens.
Expatriates are entitled to the same benefits that resident workers receive. However, employers can provide other benefits that will help their foreign employees easily transition into the company. Examples of these include:
- Private health care
- Life insurance (employee and spouse or children)
- Bonuses such as performance bonuses, loyalty bonuses, etc.
- Allowances for meals, clothing, etc.
- Retirement benefits
How Are Employee Benefits Taxed in the Philippines?
Employee benefits mentioned above are subject to income and withholding tax since they are part of what the employees receive monthly. However, additional benefits, known as De minimis benefits, are exempted from this ruling. These benefits are usually given as additional compensation for employees. It is a small amount added to the employees’ mandatory pay. These benefits include gift rewards, meal allowances, rice subsidies, unused leave credits converted to cash, medical allowance, and uniform allowance.
Restrictions for Benefits and Compensation
The benefits and compensation rules that were set about in the labor code should be a framework for any employers looking into hiring workers in the Philippines. But the foremost requirement for planning suitable benefits and compensation packages is to have a registered entity within the country. For foreign companies, though, this can easily be remedied by partnering with the right PEO and EOR solution to ensure compliance with the local regulations.
How Multiplier Can Help with Benefits Management in the Philippines
When establishing a global presence, any business is bound to face legal challenges when hiring local talents. Planning benefits and compensation packages for one may be very tedious and difficult. But with the right resources, these complications can be easily overcome.
Luckily, technological solutions are available to help with HR functions, so your company can focus on more pressing tasks when building a global team. Multiplier is one platform that helps your business with global employment while ensuring that your employees are well taken care of in the process. Our team of experts is here to ensure that your company compliantly onboard talents from anywhere in the world and allow them to have the right benefits during their employment.
Multiplier understands the legal complexities that come from expanding operations overseas. Our all-inclusive platform helps your business plan a competitive benefits and compensation package for your employees, wherever they may be.
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