What You Need to Know Before Hiring in the Philippines: A Guide to Terminations

Published

May 11, 2023

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It may seem counterintuitive to think about termination proceedings before ever onboarding any employees in a new market. But if you’re hiring in the Philippines, it’s important to know about the country’s employee protections and due process regulations for involuntary dismissals.

If employers don’t cite allowable reasons for termination, or if they don’t take the necessary steps before letting an employee go, they open themselves up to court-ordered penalties and indemnity paid to unjustly dismissed Filipino employees.

Read on to learn everything you need to know before hiring Filipino employees—and how hiring through an Employer of Record (EOR) can spare you from bungling any local dismissal requirements.

5 things to know about employee terminations before hiring in the Philippines

You must establish terms of dismissal in your employment agreement. The offer letter to your Filipino employee must include a termination clause that spells out the notice periods for termination without cause. Make sure you’re complying with minimum statutory requirements.
At-will employment doesn’t exist in the Philippines. Philippine law is largely pro-worker. Employees have a “right to security of tenure” and can only be dismissed for “just” or “authorized” causes as defined in the Labor Code of the Philippines.
Separation pay is only entitled to employees dismissed for reasons beyond their control. Filipino employees dismissed for misconduct, negligent behavior, or any other proven just causes, aren’t entitled to severance.
Courts can impose penalties for employers who violate due process in termination proceedings. Companies can face fines of PHP 30,000 for not following protocol when terminating employees for just cause, and PHP 50,000 for violating proceedings for authorized cause.
Employees can challenge their dismissal. Employees who think they’ve been wrongfully terminated can bring claims to the National Labor Relations Commission or seek remedies through their collective bargaining agreement.

Termination of employment rules in the Philippines: What are acceptable grounds for firing an employee?

Filipino employees can leave their job voluntarily for any reason, so long as they write a resignation letter giving at least one month’s advance notice prior to their departure (the notice period doesn’t apply if an employee leaves due to breaches of conduct from the employer).

Here are the reasons an employee can be terminated involuntarily in the Philippines:

Termination for just cause. The Labor Code lists serious misconduct, habitual neglect of duties, fraud, and criminal offenses as just causes for terminating a Filipino employee.
Termination for authorized cause. Employees can be dismissed for business-related reasons outside their control like redundancy, retrenchment, or the company ceasing operations. Employers need to provide proof of financial losses to justify termination because of retrenchment.
Termination based on serious diseases or health conditions. Employers can terminate employees with debilitating health conditions whose wellbeing (or the wellbeing of co-workers) is put at further risk on the job. Employers need a note from a doctor or other health authority indicating that the disease is incurable and too severe for the employee to continue working. Employees who are terminated for health reasons are entitled to separation pay. That said, it’s a crime for employers to discriminate against employees with HIV in the workplace.

The Philippines’ termination requirements might differ from those in other countries where you hire, and it’s crucial to keep your global hiring compliant with local laws.

What are the mandatory notice periods for Filipino employees?

Notice periods vary according to the procedural due process rules for the different types of termination.

For an employee to be terminated for just cause, an employer must:

Provide a notice of intent to terminate that explains the reason for dismissal, with evidence to support it.
Give the employee at least five days to respond to the notice in writing.
Conduct a hearing where the employee gets an opportunity to challenge the dismissal.
Submit a second, final notice of termination if the employer still thinks it’s justified.

For an employee to be terminated for an authorized cause, employers need to send a notice of dismissal at least 30 days before the date of termination, explaining their reasoning. They need to submit a copy of it to the employee’s regional office of the Department of Labor and Employment (DOLE).

What are the severance pay requirements for Filipino employees?

Filipino employees who’ve been terminated for authorized causes (i.e business-related reasons outside their control) are entitled to separation pay.

The amount of separation pay varies depending on the type of authorized cause for termination:

If an employee is fired because of redundancy (like being replaced by technology), they’re entitled to one month of their salary or one month for every year they served—whichever is higher.
If an employee is fired because of retrenchment, business closure, or diagnosis of an incurable disease, they get one month’s pay or two weeks’ pay for every year they served (rounded to the next year after six months)—whichever is higher.

Employees involved in an illegal dismissal are entitled to separation pay in lieu of reinstatement equal to one month’s salary for every year of service.

Employees terminated for just causes aren’t entitled to separation pay.

The easiest way to comply with Philippine termination requirements

If you employ a global workforce, keeping track of termination requirements gets complicated. Without any assistance, employers need to master conflicting just-cause considerations, probationary and notice periods, and severance pay laws that vary both within and among countries.

An alternative is to hire through an EOR, which can monitor termination requirements for you.

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Frequently asked questions about terminating employees in the Philippines

Do you need a reason to terminate an employee in the Philippines?

Yes, employees can only be involuntarily dismissed for just or authorized causes as defined in the Labor Code of the Philippines. Generally speaking, just causes are reasons related to an employee’s conduct and authorized causes are bigger picture, business-related reasons outside of the individual employee’s control. In either instance, employers need to ensure they have solid evidence proving grounds for termination that they communicate to the employee. Employers also need to make sure they follow due process rules before terminating an employee outright.

What is considered just cause for terminating an employee in the Philippines?

One just cause for terminating a Filipino employee is “serious misconduct,” which, according to Philippine labor law, includes:

Sexual harassment
Alcohol or drug use in the workplace
Theft
Assault
Forgery
Incendiary language
Coercion that morally or physically damages a colleague
Habitual absences or tardiness

Other just causes include:

Willful disobedience
Repeated neglect of duties
Fraud
Commission of a crime against the employer or an immediate family member
Repeatedly violating company policies.

Poor performance or incompetence can be just cause for termination, but since Philippine authorities are pro-labor, employers should consider other disciplinary proceedings, like issuing warnings, before firing an employee outright.

In general, just cause is tricky to prove in the Philippines. Employers should ensure they have strong evidence of any serious and willful breach of conduct before terminating an employee and adhere to all due process requirements.

What is considered an authorized cause for terminating an employee in the Philippines?

Filipino employees can also be terminated for authorized causes, which are for business exigencies or economic factors outside of their control. This includes:

Retrenchment
Redundancy
Installation of labor-saving devices
Businesses closing or their cessation of operations

Employers can also cite an employee’s incurable disease, in which more work poses more of a health risk, as an authorized cause.

Employees need 30 days advance written notice before being terminated because of one of these authorized causes. They’re also entitled to separation pay.

What is an illegal dismissal in the Philippines?

Employers need to make sure they follow the Philippines’ due process requirements before terminating an employee.

For an employee to be terminated for just cause, an employer must:

Provide a notice of intent to terminate with a written explanation of the reason for dismissal, with evidence to support it.
Give the employee at least five days to respond to the notice in writing.
Conduct a hearing where the employee gets ample opportunity to challenge the dismissal.
Submit a second, final notice of termination if the employer still thinks it’s justified.

For an employee to be terminated for an authorized cause, employers need to send a notice of dismissal at least 30 days before the termination date, explaining their reasoning. They need to submit a copy of it to the employee’s regional office of the Department of Labor and Employment.

What is the law for dismissing a contractor in the Philippines?

The termination process for independent contractors in the Philippines can vary depending on the terms of the contract.

Typically, either party may terminate by providing notice as specified in the contract. If the contract does not specify a notice period, a reasonable notice period depends on the length of the contract and the nature of the work performed.

If an independent contractor is found to be misclassified, they may be entitled to back pay.

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If you’re a foreign company hiring employees and contractors overseas, then Rippling will help you manage your entire employee lifecycle—from onboarding to offboarding your workers. See Rippling today.

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