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Before hiring employees in The Philippines, there are a few important things you’ll need to know. Firstly, in The Philippines, employers are not legally required to grant employees paid sick leave. Instead, employees can use "service incentive leaves" as sick leaves.
It’s also important for employers to know that in The Philippines, employees are entitled to severance pay only if they were terminated by the employer for authorized causes. Depending on the basis for termination, severance may be up to one month’s salary multiplied by their length of service in years.
We know this might sound overwhelming—but it doesn’t have to be. A solution like Oyster eliminates the barriers for you. With Oyster, you can automate compliance across 180+ countries, easily managing HR and payroll—all in one, easy-to-use platform.
Get an overview of what you need to know when hiring in The Philippines below.
At a Glance
13th / 14th SALARY
Employers pay 1/12 of employees' annual salary as 13th salary
Good to know
- Employees in The Philippines get a 13th month salary, which is 1/12th of their annual salary. This can either be paid in full around the 24th of December, or can be split into two, half of which is paid at the beginning of the school year in June. The 13th month salary is not to be confused with an optional Christmas bonus that some employers can choose to offer.
- Employees in supervisory or managerial positions are excluded from overtime pay.
- Employees get five days of paid vacation leave after every 12 months of service. This is called the "service incentive leave" and can be taken as holiday or sick leave.
Employees in The Philippines work eight hours per day and six days a week (totalling 48 hours per week).
Overtime work beyond eight hours a day is compensated with an additional 25% of the regular basic rate (30% on special holidays).
Employees in supervisory or managerial positions are excluded from overtime pay.
In The Philippines, the probationary period is six months.
For resignations, employees must provide a minimum of 30 days notice.
The notice period for dismissals over an authorized cause (business or health reasons) is 30 days.
Dismissals over just cause (employee misconduct or neglect) do not require a notice period.
The legal validity of non-compete agreements is decided on a per-case basis. To be legally enforceable, they must be limited and reasonable in time, place and scope. Employers are not obligated to pay the employee during the non-competition period.
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Paid time off
Employees are entitled to 12 paid holidays each year. If they are required to work on these holidays, they are entitled to be paid at twice the rate of their regular wage. In addition to this, they also get three special, non-working unpaid holidays.
Employees also receive five days of paid vacation leave after every 12 months of service. This is called the "service incentive leave" and can be taken as holiday or sick leave.
Employers in The Philippines are not legally required to grant employees paid sick leave. Employees can use "service incentive leaves" as sick leaves.
Employees who have made at least three monthly Social Security System contributions in the last 12-month period can claim a sickness benefit (of 90% their salary). However, this allowance will only begin to be paid after all other sick leave has been exhausted.
Eligible employees are entitled to at least 105 days of paid maternity leave, with an option to extend for an additional 30 days of unpaid leave. Employees who qualify as solo parents are granted an additional 15 paid days.
In case of a miscarriage or an emergency termination of pregnancy, employees are entitled to 60 days of paid maternity leave.
To be eligible for this, the employee must have made at least three monthly contributions in the 12-month period immediately preceding the delivery. The benefit is not based on actual salary but on a Social Security graduated scale, with a maximum monthly salary credit of PHP15,000.
Employees are also entitled to seven days of paid paternity leave.
An employer’s social contributions in The Philippines includes:
- Health Insurance (PHIC): 5%
- Home Development Mutual Fund (HDMF): 2.0%
Employers are also required to make social security contributions of 73.70 PHP - 1,178.70 PHP depending on the employee’s salary.
In The Philippines, employees pay between 0% and 35% in taxes depending on their income bracket. They also pay into social security, Home Development Mutual Fund (HDMF), and Health Insurance (PHIC).
Termination of employment
Employees are entitled to severance pay only if they were terminated by the employer for authorised causes. Depending on the basis for termination, severance may be up to one month’s salary multiplied by their length of service in years.
Start hiring employees in
Setting up a business entity everywhere you want to hire a new employee isn’t scalable—it takes too long and the legal fees are high. At the same time, understanding and adhering to the local labor laws and employee expectations can be complex and time consuming. And it’s hard to find reliable information on up-to-date employment information for all the countries where you’re considering hiring. Not to mention tracking down invoices and managing employee contracts over email and spreadsheets—that gets messy fast.
We can’t afford to take risks when it comes to compliance—we need to make sure we follow the local guidelines, especially when it comes to taxes and legalities.
With Oyster, you can manage HR and payroll, and automate compliance across 180+ countries—all in one, easy-to-use platform.
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