Everything You Need to Know About Hiring in the Philippines

The minimum wage in the Philippines depends on the region. For Metro Manila, the minimum wage is PHP 537.00 ($10.24) per day. The average minimum wage for the whole country is PHP 343.63 ($6.22) per day.

Salaries are one of the key things to keep in mind when you hire Filipino workers. The average salary will depend on the nature and the location 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 into various income groups based on their monthly income:

1. Poor Income Group:

Number of Households: 2.9m ; Number of Persons: 17.7m

Range of Monthly Family Incomes for a family of 5 (PHP)

Less than 11,690 per month

2. Low Income Group:

Number of Households: 8.4m ; Number of Persons: 40.7m

Range of Monthly Family Incomes for a family of 5 (PHP)

Between 11,690-23,381 per month

3. Lower Middle Class Income Group:

Number of Households: 7.6m ; Number of Persons: 31m

Range of Monthly Family Incomes for a family of 5 (PHP)

Between 11,690-46,761 per month

4. Middle Class Income Group:

Number of Households: 3.1m ; Number of Persons: 11.2m

Range of Monthly Family Incomes for a family of 5 (PHP)

Between 46,761-81,832 per month

5. Upper Middle Class Income Group:

Number of Households: 1.2m ; Number of Persons: 3.8m

Range of Monthly Family Incomes for a family of 5 (PHP)

Between 81,832-140,284 per month

6. Upper Income Group:

Number of Households: 358k ; Number of Persons: 1m

Range of Monthly Family Incomes for a family of 5 (PHP)

Between 140,284-233,806 per month

7. Rich Income Group:

Number of Households: 143k ; Number of Persons: 360km

Range of Monthly Family Incomes for a family of 5 (PHP)

At least 233,807

Check out all the details of benefits and compensations you need to know when hiring workers in the Philippines.

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.

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 Filipinos indulge in finding ways to avoid paying their taxes completely. Many justify not paying taxes by questioning the local government’s accountability and financial prudence in spending the taxpayer’s money.

Due to COVID-19, the Philippine freelance market has exploded. In 2018, approximately 2% of the Philippine population worked as freelancers – roughly 1.5 million Filipinos – and the numbers have grown exponentially. However, one big issue with Filipino freelancers is the payment of taxes. Without a locally 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.

After hiring in the Philippines, you can help your employees comply with local taxation laws by using Professional Employer Organizations (PEOs) like Multiplier, who will take care of payroll and taxes for you.

An important thing to consider when hiring in the Philippines is the local working hours. Filipino employees usually work an average of 8 hours a day, across 5 days a week. They must also 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 it will be up to your discretion.

Statutory benefits are one of the most important things to consider when hiring in the Philippines. These benefits directly impact the cost of hiring Filipino workers. Employee benefits mandated by the Philippine law include

13th-month pay: In the Philippines, 13th-month pay – a payment that is 1/12 of an employee’s annual pay – is mandatory. The payment is usually prorated if the person is not a full-time employee. This is paid on or before December 24 or with the first December salary.

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.

Parental Leaves:

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. Before 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 a 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.

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 to promote your employees’ health, goodwill, contentment, or efficiency. De minimis benefits are also not subject to income or withholding tax.

Here are the allowable de minimis benefits for Filipino employees:

• Monetized unused vacation leave credits of private employees not exceeding 10 days during the year
• Medical cash allowance to dependents of employees, not exceeding PHP 1,500 per employee per semester or PHP 250 per month
• Rice subsidy of PHP 2,000 or one 50-kg sack of rice per month worth not more than PHP 2,000
• Uniforms and clothing allowance not exceeding PHP 6,000 per year
• Actual medical assistance not exceeding PHP 10,000 per year
• Laundry allowance not exceeding PHP 300 per month
• Employees’ achievement awards, which must be in the form of tangible personal property other than cash or gift certificates, with an annual monetary value not exceeding PHP 10,000 received by the employee under an established written plan which does not discriminate in favor of highly paid employees
• Gifts given during Christmas and major anniversary celebrations not exceeding PHP 5,000 per employee per annum
• Daily meal allowance for overtime work and night/graveyard shift not exceeding 25% of the basic minimum wage
• Benefits received by an employee by virtue of a Collective Bargaining Agreement (CBA) and productivity incentive schemes, provided the total annual monetary value received from both CBA and productivity incentive schemes combined do not exceed PHP 10,000 per employee per taxable year.

In the Philippines, holidays are generally divided into two categories: Regular Holidays and Special Non-Working Days. Regular Holidays are 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.

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 require 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 will have 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 of hiring from the Philippines 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 jumping 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.

If you want more details on how to hire a remote team legally, you can check out our article here.

Hiring in the Philippines brings along the general expenses spent while hiring any candidate. The cost of hiring Filippino workers may vary depending on the industry and the level at which you are looking to employ. Some of the costs that contribute to hiring in the Philippines are

• Job Posts (sponsored advertisements)
• Time and resources spent on scrutinizing
• Employer Taxes
• Statutory Benefits
• Additional fringe benefits
• Payroll costs
• Salaries

No, probation periods are not necessary when hiring in the Philippines. However, if you do decide to include one, by Philippine law, it cannot exceed 6 months.

After hiring Filipino workers, the easiest way to pay your 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 take care of everything for you.

Typically, Filipinos get paid bi-monthly (every 15th and 30th of the month); however, it is not uncommon for employers to request monthly payments when hiring in the Philippines. Just be sure to notify your potential employee beforehand.

When you hire Filipino workers, it is common for you to base your remote employees’ salaries on the U.S. dollar. However, it is recommended that they get paid in their local currency. This makes it easier to compute things such as withheld taxes, contributions to social security, healthcare, and more.

While hiring in the Philippines, agreeing on a flat rate in the local currency is beneficial as it helps avoid any effects of the fluctuating exchange rate. If you use PEOs like Multiplier, they will provide your employee with a fixed rate, make sure your employee is paid in their local currency, and take care of the taxes.

Termination and severance pay in the Philippines depends on the cause of termination.

Due to the onerous termination process in the, most employers choose to have a lengthy probation period (maximum of 6 months) when they hire Filipino workers.

Learn more about how you can easily hire Filipino workers with the help of Multiplier. You can visit our website or contact us today.