7 things employers need to know about Philippine labor and employment laws

The Philippines has unique labor laws that differ from any other country when it comes to leave benefits, social security, and overtime pay requirements. Unlawful hiring practices can lead to fines of PHP 10,000, or even up to three years’ imprisonment. So, compliance is crucial.

But how do you keep track of the most important parts of Philippine employment law? Consider this your starter guide, giving you a bird’s eye view of the most important mandates to keep in mind.

1. The Philippines recognizes 6 different types of employment

The Labor Code of the Philippines, managed by the Department of Labor and Employment (DOLE), lists the different employment types:

• Regular employment: Workers who perform necessary, full-time labor important for a business over the course of an indefinite time period.
• Probationary employment: Refers to the trial period after an employee is hired, when an employer can judge fit in the hopes of bringing the worker on full time barring any setbacks. Probationary periods generally last about six months.
• Fixed-term employment: When workers contractually agree to finish a task within a finite time period.
• Seasonal employment: Applies to agricultural workers and others who are temporarily laid off in the off-season, but can expect reinstatement when their services are needed again in the next cycle.
• Project employment: Workers who work on a one-off task. Their contract ends as soon as the specific project is completed.
• Casual employment: When an employee engages in a task not considered crucial to the main tenets of the business. Once a casual employee works for a year, they can transition into a regular employee.

2. At-will employment doesn’t exist

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 (we’ll spell out each cause later on).

In either case, the employer has to follow due process before officially dismissing an employee. For just cause, that means providing at least two notices, giving the employee a chance to respond to the notice in writing, and conducting a hearing where they can challenge the dismissal. In authorized causes, employers need to follow a 30-day advance written notice period.

3. Philippine courts fine companies up to PHP 500,000 for misclassifying employees

Employees work exclusively under the direct supervision of an employer for an indefinite time period and are entitled to benefits. Contractors are self-employed, work autonomously for a fixed time-period, and are generally not entitled to benefits. Conflating these worker categories can result in misclassification penalties.

If you’ve misclassified the employment relationship, penalties can include back pay, benefits reimbursement (with interest), court-ordered damages of up to PHP 500,000, and possible jail time for companies who don’t make the necessary contributions to the Philippines’ social security programs.

4. Non-disclosure agreements (NDAs) are legally binding in the Philippines—with restrictions

NDAs can protect a company’s proprietary information such as trade secrets, personal information of clients, and business plans. By law, an NDA is considered a legally binding contract in the Philippines. Courts have historically upheld them as enforceable legal documents so long as they comply with other laws of the Philippines and aren’t used to cover up criminal behavior.

NDAs should clearly indicate what the confidential information is, who can and can’t share it, and establish terms for how long it lasts. It can be included as a confidentiality clause in an employment contract.

5. Filipino employees are entitled to 13th month pay

Employers are required to provide non-management employees in the Philippines with an extra month salary by Christmas Eve, with some employees choosing to receive it in biannual installments. Employers need to file a compliance report by mid-January to confirm they’ve made the mandatory extra payment.

This extra pay is pro-rated for employees who’ve resigned, retired, were recently hired, or female employees who were on maternity leave over the course of the year.

6. Employers are responsible for workplace health and safety standards

The DOLE established mandatory Occupational Safety and Health Standards that protect Filipino employees from injury, sickness, and other safety hazards on the job. It gives workers the right to know of workplace hazards, refuse unsafe work, report accidents, and wear protective equipment. Employers have to register their business with the DOLE and provide necessary training to deal with emergencies and other dangerous situations. Penalties for violating any of the government standards range from PHP 20,000 to PHP 50,000 per violation.

7. Filipino employees have the right to join trade unions

The Labor Code gives Filipino employees a say in their conditions of employment through collective bargaining agreements. These agreements span five years, and have a two-month “freedom period”after they expire where they can’t be upended. The agreements can have both economic provisions—like information on wages, night shift differential pay, and service incentive leave—and non-economic provisions about terminations, working conditions, and disciplinary action.

Frequently asked questions about Philippine labor laws

What is the minimum wage in the Philippines?

There is no nationally set minimum wage requirement in the Philippines. Different rates are instead set by wage boards and vary across regions. In June 2022, daily minimum wages increased to between PHP 533 and PHP 570 in Metro Manila (the country’s capital region), and between PHP 306 and PHP 470 in more rural areas across other regions.

Here are the currency daily minimum wage rates as of 2023, per the Department of Labor and Employment.

What are the overtime laws in the Philippines?

The standard Philippine work week is 40 hours. Each year, employees have 12 regular holidays, six additional non-working holidays, and 52 rest days. They’re also entitled to 24 consecutive hours of an unpaid rest period for every six consecutive working days.

Employees are entitled to extra compensation of at least 25% of their normal wage for additional working hours. If the employee works overtime during a holiday, they get an additional 30% of their regular wage. Filipino employees get time-and-a-half for working on a scheduled rest day, twice their normal wage for working on a public holiday. If they perform overtime work during those days off, they get an additional pay hike.

Employees are also entitled to a 10% additional compensation—known as the night shift differential—for each hour worked between 10 p.m. and 6 a.m.

What are the required employee benefits in the Philippines?

The Philippines has a Social Security System (SSS) that funds most of its benefits, which all employees are entitled to. This includes:

• Retirement pay
• Sick leave
• Disability
• Maternity leave (solo parents get an extra 15 days’ full pay)
• A “death benefit” given to beneficiaries of a deceased employee
• Unemployment insurance

The Philippines also has a public health insurance program, known as PhilHealth, that covers all full-time employees.

Employees also get five days’ service incentive leave for every year they’ve worked. New fathers get seven days’ paternity leave. And female employees can get up to two months’ special leave for gynecological surgery. The country has 12 regular holidays where employees get a paid day off and non-working holidays where employees get a day off without pay.

Lastly, Filipino employees are entitled to an extra month of paid salary (known as 13th month pay).

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

How do I terminate employees in the Philippines?

While terminating employees might be far from your mind, it’s important to be aware of Philippine termination laws before building out your team. See the breakdown of mandatory notice periods and termination pay for Filipino employees in our guide.

At-will employment isn’t recognized in the Philippines, and there are three ways an employee can be involuntarily terminated:

• Termination of employment 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 of employment 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. Employees terminated for authorized causes are eligible for separation pay.
• Termination of employment 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.

For the brass tacks on Philippine termination requirements—including notice periods and wrongful dismissal claims—consult our guide.

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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, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any related activities or transactions.