Looking for a PEO in the Philippines? Here’s what you need to know

If you're looking to expand your business with international talent, the Philippines is a top destination to consider. From its large population to its strong economy, the country is among the best options for hiring in Southeast Asia. Many Filipinos hold college degrees, and with a high concentration of young professionals, there are plenty of people eager to enter the workforce; in fact, as of 2020, nearly half (47.3%) of the population aged 20-24 had reached or completed college.

The Philippines also has a lower cost of living than many other countries, so businesses located elsewhere are often able to offer competitive pay without facing budget constraints. A majority of the population is also fluent in English, the second official language of the country, and the nation boasts a high literacy rate—as of 2020, 97.0% were literate among the population five years and older.

But while these benefits are compelling, many companies face complex challenges when it comes to onboarding international hires. To address the intricacies of sourcing and hiring talent abroad, some organizations turn to a professional employer organization (PEO). Here, we break down what PEO services entail, along with alternatives for your business to consider.

Wondering how Oyster fits into your big picture? Book a customized demo to see what your day-to-day could look like with our global employment platform.

What Is a Professional Employer Organization (PEO)?

A Professional Employer Organization (PEO) becomes your co-employer, sharing legal responsibility for your Filipino employees while you retain control over their day-to-day work. This partnership lets you access local HR expertise without setting up your own entity in the Philippines.

A PEO partner can take on a number of responsibilities to help manage your employees in the Philippines, including complete HR services. For example, they could handle:

• Payroll: Your company can outsource payroll to a PEO, allowing them to track attendance and hours worked for your remote employees. They may also handle other responsibilities related to payroll, such as workers' compensation coverage.
• Benefits: If you hire full-time employees who are eligible for benefits, a PEO can streamline benefits administration—a key service in a country where, as of 2022, only 34.9% of the population was covered by at least one social protection benefit. They can oversee both mandatory benefits in the Philippines as well as optional packages such as retirement plans.
• Compliance: Working with a PEO allows your company to simplify compliance matters. These organizations are familiar with local labor laws and requirements, and can ensure you remain in compliance with applicable regulations.
• Taxes: PEOs can file and pay taxes for your company in the country in which you're hiring. They can handle employment taxes on a local, state, and federal level.
• Human resources: Many PEOs provide comprehensive human resources services, including sourcing talent, onboarding, and offboarding.

Because a Filipino PEO will be well versed in the nuances of the Philippines labor market, they can help your business make competitive offers tailored to the needs and expectations of local hires. They may also oversee screening and interview processes, employee contracts, and leave administration. In other words, a PEO can take on the role of an outsourced HR team, acting under your company's guidance.

Pros and Cons of PEO Services

So, is a PEO right for your business? The answer depends on your expansion plans and resources.

• Good fit: You're expanding only to the Philippines and need help with local HR complexity
• Potential challenge: Multi-country expansion requires separate PEO relationships in each location
• Resource consideration: Small and midsize companies often lack the bandwidth for complex international hiring

Here's what makes PEO selection challenging:

• Time-intensive research: Finding the right fit requires vetting multiple providers for service alignment
• Inconsistent offerings: No two PEOs provide identical services—some focus on payroll, others on full HR support
• Scaling complexity: Multi-country expansion means repeating this entire process for each location

PEO vs EOR vs HR Outsourcing: Key Differences

When you're looking to hire in the Philippines, you'll encounter different employment models. Here's how they compare:

What Services Does a Philippines PEO Include?

While services can vary between providers, a PEO in the Philippines typically bundles several core HR functions. Your agreement will specify the exact scope, but you can generally expect a PEO to manage:

• Payroll and Tax Administration: Calculating salaries, withholding appropriate taxes, and ensuring timely payments, including the mandatory 13th-month pay.
• Benefits Management: Administering statutory benefits like SSS, PhilHealth, and Pag-IBIG, and often providing access to competitive private health insurance plans.
• HR Compliance and Support: Helping you navigate local labor laws, drafting compliant employment contracts, and managing employee records.
• Onboarding and Offboarding: Assisting with the administrative side of bringing on new hires and managing termination procedures in accordance with local law.

PEO Costs and Pricing in the Philippines

So, what will a PEO actually cost you? Most providers use one of two pricing approaches:

• Flat fee per employee: Predictable monthly cost regardless of salary fluctuations
• Percentage of payroll: Variable cost that scales with your total compensation expenses

Pro tip: Always request an all-inclusive fee breakdown to avoid hidden charges for onboarding, terminations, or compliance support.

Things to Know About Hiring in the Philippines

What makes hiring in the Philippines unique? Here are the key compliance requirements you'll need to navigate:

• Employers are not required to grant paid sick leave in the Philippines. Instead, employees may use "service incentive leaves" for sick days. This paid leave may also be taken as a holiday. Employees are eligible for five days of leave for every 12 months of service.
• Filipino employees receive a 13th-month salary. This pay amounts to one-twelfth of their annual pay, and can either be distributed in full on December 24 or split into two. If split, the other payment must be made at the beginning of the school year in June. (The 13th-month pay is not to be confused with a Christmas bonus, which is optional.)
• Employees in the Philippines work eight hours a day, five days a week. Hours worked beyond that are considered overtime, which qualifies for an additional 25% of the basic pay rate, or an additional 30% on holidays. Employees in managerial or supervisory positions are not eligible for overtime pay, and it's noteworthy that the share of women in management positions in the Philippines was 45.7% in 2023.

These are just some of the considerations for hiring in the Philippines. To learn more, check out our comprehensive guide to hiring employees in the Philippines. You can also use Oyster's cost calculator to get a full breakdown of the cost of hiring in the Philippines.

How to Choose the Right PEO Provider in the Philippines

Selecting the right partner is crucial for a smooth experience. As you evaluate PEOs, consider asking about the following:

• Local Expertise: Do they have a deep understanding of Philippine labor law and common employment practices?
• Service Scope: Do their service offerings match your company's specific needs for payroll, benefits, and HR support?
• Technology Platform: Is their platform easy for both your administrators and your employees to use?
• Pricing Transparency: Are their costs clear and all-inclusive, or are there potential hidden fees for things like onboarding or terminations?
• Support Model: What kind of support can you expect when you have questions or face a complex issue?

A PEO Alternative: Hire in the Philippines With Oyster

If you're looking beyond PEO services to meet your company's international hiring needs, you might also consider working with an EOR in the Philippines to act as the legal employer of your Filipino staff. One major advantage of EORs is that you don't need an entity in the Philippines, which you would if co-employing staff with a PEO. However, if you're hiring in multiple countries, you would still need multiple local EORs.

If you're looking to onboard talent across several locations, a better option is to work with a global employment platform like Oyster. Our automated platform allows you to hire, pay, reward, and manage employees in more than 180 countries (including the Philippines), without having to establish legal entities. Whether you're seeking to hire Filipino contractors, part-time workers, or full-time employees, our platform can support all of your hiring needs by streamlining contracts, onboarding, payroll, benefits, and more. With Oyster's deep local knowledge and insights, you'll be able to navigate local labor laws and hiring practices compliantly and confidently.

Learn more about how Oyster makes it easy to scale your team with international talent.

About Oyster

Oyster is a global employment platform designed to enable visionary HR leaders to find, engage, pay, manage, develop, and take care of a thriving distributed workforce. We let growing companies give valued international team members the experience they deserve, without the usual headaches and expense of hiring abroad.

Oyster enables hiring anywhere in the world—with reliable, compliant payroll and great local benefits and perks.