Hiring in the Philippines: costs, rules and the best EOR providers

Department Order 174 prohibits labour-only contracting and sets conditions for legitimate contracting, including an independent business, sufficient capital or investment, and control over the work.

Registration is not a complete defence if the actual arrangement fails those tests. The rules have activity-specific scope: DOLE’s 2017 clarification treats certain complete IT-enabled outsourcing services differently. A staff-supply arrangement does not gain that treatment merely because the employee works in IT.

The Philippine employing company registers eligible staff, deducts employee contributions and remits both shares. SSS uses a 15% contribution on monthly salary credit, split 10% employer and 5% employee, up to PHP 35,000.

PhilHealth is 5% of the applicable basic salary, split equally, with PHP 10,000 and PHP 100,000 bounds. Pag-IBIG generally costs the employer 2% up to PHP 10,000 pay. Employees’ Compensation is additional and employer-funded.

Yes, covered rank-and-file employees who work at least one month in the calendar year receive 13th-month pay. The minimum is one-twelfth of basic salary earned during that year, payable by 24 December.

Managerial status and any statutory exemption must be assessed properly. Treat it as an annual employment cost; do not add another full month if the quoted annual package already includes it.

For five Manila support staff on an assumed PHP 35,000 basic monthly salary each, this daytime model totals PHP 2,851,300 annually, including an assumed PHP 5,000 monthly EOR fee per person.

It includes 13th-month pay and employer SSS, EC, PhilHealth and Pag-IBIG. Salary and service fee are planning inputs, not market quotes. Night shifts, overtime, holiday work, HMO cover, equipment and provider taxes or extras increase the total.

For staff working under your daily direction, a lawful employment arrangement is safer than labelling them independent contractors. But an EOR label alone does not make the arrangement lawful: prohibited labour-only contracting can still expose the principal as employer.

Genuine contractors should operate an independent business and control how they deliver the agreed result. Choose the model to match the actual relationship, not the invoice or the client’s UK address.

Ordinary probation may not exceed six months, subject to limited lawful exceptions. An employee allowed to work beyond the agreed probationary period becomes regular.

The employer must explain reasonable regularisation standards when employment begins; failure to do so can mean regular status from the start. Ending the EOR client contract does not restart probation or remove security of tenure.

The Philippine employer withholds compensation tax through payroll, remits it to BIR and provides Form 2316 showing pay and tax withheld. It reconciles annual tax against withholding.

Substituted filing is conditional, including qualifying compensation-only income from one employer and correct withholding; multiple employers or other income may require the employee’s own return. The overseas client’s payment to the EOR is not the employee’s tax filing.

Use Philippine local time. Covered employees receive at least a 10% night differential for hours worked from 10pm to 6am. Ordinary-day work beyond eight hours attracts at least a 25% overtime premium; rest-day and holiday rates differ.

A UK schedule may overlap only part of the night window, and the overlap changes with UK daylight saving. Record actual hours and apply the appropriate combined premiums.

For a just-cause dismissal, the employer must establish the ground and follow due process: a detailed first notice, a real chance to respond, then a written decision.

Supreme Court guidance generally allows at least five calendar days to prepare the response. Redundancy and other authorised causes follow a different notice and separation-pay route. The EOR should run the applicable process before implementing the client’s request to end employment.

Yes, private HMO cover can form part of an EOR benefits package, alongside mandatory PhilHealth. Coverage depends on the actual group policy: hospitals, benefit limits, dependants and pre-existing conditions can differ.

Remote advertises private health benefits for Philippine hires, and local HMO providers offer employer plans. Obtain the named plan and benefit schedule before promising cover to an employee.