How to hire employees in the Philippines through an employer of record (EOR) [2024]

Hiring in the Philippines? Foreign employers keen on tapping into the country’s skilled workforce can start by hiring Filipino contractors and sending international payments. But if you want to expand and hire full-time employees, you’ll need to establish a legal entity or hire through an EOR.

Registering a legal entity can take months. Once established, it requires knowledge of complex Philippine employment laws. Any misstep can incur fines and legal action from the Bureau of Internal Revenue (BIR) and other regulatory authorities.

Alternatively, you can use an “employer of record” (EOR), which handles Philippine payroll, tax, and compliance considerations.

Learn more about What is an Employer of Record (EOR)?

Here’s a step-by-step guide for hiring through an EOR in the Philippines.

Step by step: How to hire through an employer of record in the Philippines

Step #1: Decide between a Philippine EOR and a legal entity

Should you hire Filipino employees through an EOR or set up your own entity? This depends on your company’s resources, size, and plans to scale.

• Legal entity in the Philippines. Setting up a legal entity from scratch usually requires registration with local authorities, opening a local bank account, and consulting with local experts to ensure compliance with tax and labor laws.
• Philippine EOR. An EOR is a third-party service that operates as an employer on a company’s behalf—meaning you don’t need to set up your own entity. As well as allowing you to hire full-time Filipino employees, EORs handle all the legal requirements for complying with local employment laws for payroll, contracts, and benefits. EOR services also include calculating and withholding taxes, onboarding and managing employees, and running payroll.

Step #2: How to choose the best EOR for your business

Before you choose a platform, you should consider the services you will need, and how much you plan to grow your global hiring presence.

• Is the EOR active in the countries in which you need to hire? The first, and perhaps most obvious consideration when choosing an EOR for global expansion.
• Does the EOR own its own entities in the countries it services? If the EOR does not own the entities, it means they are partnering with a local or third-party provider.
• How does the EOR protect your sensitive and confidential information? It is vital that your EOR has the appropriate data protections in place, as well as secure technology that eliminates potential disclosures of private information.
• Does the EOR offer automated solutions? You may want to look for an EOR that automates the busy work like onboarding and benefits enrollment and other common HR and IT tasks.
• What is the EOR’s support model? It’s essential that your EOR has support staff that is both easy to contact and experts in the regulations of the countries in which you are hiring.

Get the full checklist in our guide: What is an EOR?

Rippling has everything you need to run a global workforce

With Rippling, you can manage your global team in one system, easily localize onboarding flows, and manage compliance policies for your international employees.

Step #3: How to hire and onboard your Filipino employees

Once you’ve picked an EOR that works in the Philippines, you can begin the onboarding process by collecting the following information from your new employees:

• Name (matching the account where you’ll deposit their pay)
• Date of birth and date of hire
• Contact information, including their mailing address in the Philippines
• Bank account information
• Amount to be paid in PHP (including any bonuses)
• Tax Identification Number (TIN)
• Social Security System (SSS) number
• PhilHealth number
• Home Development Mutual Fund (HDF) registration (available online)

Next, you need to send out an employment agreement that outlines key working conditions. An EOR can automatically localize and distribute employment agreements. Every Filipino hire will have a legally compliant contract offering statutory requirements for probationary periods, working hours, minimum wage, benefits, and termination policies like severance pay and notice periods.

Example: An EOR can account for the different minimum wage requirements for agricultural and non-agricultural employees across the Philippines’ 16 regions. For instance, while the wage is PHP 533-570 for employees in Metro Manila, it’s 316-341 in Bangsamoro.

Step #4: Run payroll

For the A-to-Z on global payroll, read our comprehensive guide to running international payroll for employees in the Philippines.

Once you’ve collected a new hire’s information and both parties have signed employment agreements, an EOR will pay your Filipino employees in Philippine pesos, while withholding legally required income taxes from salaries. This includes contributions to:

• The Social Security System (SSS)
• Philippine Health Insurance Corporation (PhilHealth)
• The Home Development Mutual Fund (HDMF), also known as the Pag-IBIG Fund

What are the benefits of hiring through an employer of record in the Philippines?

An employer of record service can help you overcome many of the hiring challenges employers face when expanding internationally—and may even help you cut costs. Let’s explore the key benefits of using an EOR in the Philippines:

• Streamline the hiring process: Tap into top talent quickly without the hassle of establishing an entity. An EOR helps you hire employees in days instead of months.
• Get expert compliance support: Worried about complying with local labor laws in the Philippines? Lean on an EOR’s legal and HR experts. They’ll ensure you’re compliant with tax codes, benefits requirements, and other employment regulations.
• Offload admin work: An EOR absorbs time-consuming administrative work, like benefits administration, payroll processing, termination procedures, and more.
• Minimize upfront costs: If you’re expanding in the Philippines and beyond, an EOR can make global employment more cost-effective. Since you don’t need to invest in opening new entities, you can put those funds toward crucial business needs.

Frequently asked questions about hiring through an EOR in the Philippines

How much does an EOR cost?

EORs typically use one of two pricing structures:

• Fixed monthly fee per employee
• Percentage of payroll plus applicable taxes

Both methods can also come with various administrative fees, onboarding charges, and other costs for supplemental features.

Keep in mind that you don’t need to use an EOR for your entire workforce. If you want to segment its use, you’ll only be charged for the employees you employ through the EOR.

What is the difference between an EOR and PEO?

A professional employer organization (PEO) co-employs a company’s workforce and provides administrative services like paying employees, handling compliance, and filing payroll taxes. The company and PEO are jointly responsible for the workforce. A PEO does not, however, allow you to hire in other countries where you haven’t set up a local entity.

An EOR, on the other hand, is the sole employer of the portion of your workforce you use it for, assuming all the associated liabilities. An EOR allows companies to work with employees in other countries without setting up a legal entity.

Can an employer of record help with employee immigration processes in the Philippines?

Yes, an EOR can assist with employee immigration if you hire a foreign national in the Philippines. Since an EOR acts as the legal employer of your workforce, they can handle everything from acquiring work permits to ensuring all documents and procedures comply with Philippine labor laws and immigration requirements.

Does an EOR protect your sensitive and confidential information?

While outsourcing your payroll management to an EOR can spare you time and compliance risk, sharing your data with companies who use third-party vendors leaves you exposed to data breaches from manual uploads.

You should seek out EORs that prioritize data protection, including:

• Compliance with industry-standard privacy regulations in different countries
• Secure infrastructure with around-the-clock maintenance
• Carefully vetted personnel

You can also establish a data processing agreement (DPA) with a payroll service that mandates sound privacy practices and provides legal protection.

Does an EOR help with Philippine tax filings?

An EOR can automatically calculate and file your taxes in the Philippines. Rippling, for instance, is an authorized payroll provider by the CRA. On your company’s behalf, it can distribute and submit forms that outline:

• Income taxes
• Social security (which covers retirement, unemployment, and paid leave entitlements)
• Health insurance
• Affordable housing development funds

What are the mandatory benefits for Filipino employees?

The Labor Code of the Philippines, overseen by the Department of Labor and Employment, sets minimum labor standards for the country’s workforce. Statutory employee benefits include:

• Retirement payments (via monthly pension or a lump sum)
• Healthcare
• Sick leave
• Disability
• Maternity leave
• Vacation entitlements
• Unemployment insurance
• Public holidays (like New Year’s Day and National Heroes Day)
• 13th month pay

The Philippines also has the Pag-IBIG Fund, a government program that provides housing loans and financial assistance to Filipino citizens in search of affordable housing.

For more information on mandatory benefits in the Philippines, read our complete guide.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.