How to hire employees in the Philippines through an Employer of Record (EOR) [2023 Guide]
Apr 27, 2023
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. 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 Philippine laws for payroll, contracts, and benefits. EOR services also include calculating and withholding taxes, onboarding and managing employees, and running payroll.
Pros and cons of EORs vs. setting up a legal entity
Cost & Implementation
✔ Less time-consuming to set up.
✔ You can start hiring within days instead of months.
✘ Becomes costlier as your headcount increases.
✘ Takes up to six months to set up—and requires registration fees.
✔ More cost-effective once you’ve hired enough employees in a foreign country.
✔ Quickly set up new hires, often within 1-14 days, depending on the provider.
✔ Supports large-scale expansion in a new market.
✔ Manages all of your compliance work for you, takes on liability, and provides localized employment contracts.
✘ Can’t tailor certain policies, and other HR/legal processes, to the needs of your business.
✘ Requires expert knowledge of local laws and tax regulations and internal legal resources, as your company is liable for all legal and compliance infractions.
✔ Can tailor certain policies, and other HR/legal processes, to the needs of your business.
Payroll & Benefits
✔ Quickly pay and insure employees around the world.
✔ Taxes are filed for you.
✘ Must manually keep track of statutory deductions and employee entitlements for every hire.
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?
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With Rippling, you can manage your global team in one system, easily localize onboarding flows, and manage compliance policies for your international employees. See Rippling.
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.
You can onboard new hires anywhere, end to end, with Rippling. Request a demo today.
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.
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.
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)
- Health Insurance
- Sick leave
- 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.
What are the employer costs for full-time employees in the Philippines?
Employers are responsible for deducting the following from their full-time employees’ paychecks. Along with social security and health insurance contributions, employers must also help subsidize a government program that provides housing loans and financial assistance to Filipino citizens in search of affordable housing, known as the Pag-IBIG Fund. Find the details for employer costs below:
Employer share of employee’s monthly salary
Social Security System
Philippine Health Insurance
Home Development Mutual Fund
PHP 42.50-PHP 425, depending on salary