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Hiring in the Philippines

Background check in the Philippines

Types of workers in the Philippines

Language requirements in the Philippines

Payroll system in the Philippines

Simplify international expansion with CXC

Employer of Record in the Philippines

The Philippines presents unique opportunities as a market for businesses looking to expand their workforce. With a young and increasingly skilled workforce, the country has become an attractive location for companies around the world.

However, understanding the employment laws and regulations, as well as the hiring process in the Philippines, can be complex, posing potential challenges for employers. As a solution, modern companies are turning to the Employer of Record (EoR) service to bypass all these hurdles. With an EoR solution, you can hire talent anywhere in the world without the hassle of setting up a legal entity. If you are looking to hire talent in the Philippines, for instance, you can simplify and streamline the entire process by leveraging employer of record services. To ensure seamless market entry in the Philippines and maintain compliance with local labour laws, partnering with a reliable EoR service provider like CXC is essential.

In this guide, we will provide the necessary information for you to compliantly hire, manage, and pay talent in the Philippines, covering topics such as hiring, employee background checks, payroll set up and how to leverage employer of record services for your international recruitment efforts.

Hiring in the Philippines

Here are key factors you need to know when hiring employees in the Philippines:

Obtaining necessary employee documents and permits
As a company hiring in the Philippines, you are required to obtain a local business registration with the government and acquire other necessary documents and permits, such as government-approved employment contracts and clearances. For example, for a corporation, you need to register with the Security Exchange Commission (SEC), while a sole proprietorship should be registered with the Department of Trade and Industry (DTI).
Adherence to the Philippine Labour Code
You must comply with the Philippine Labour Code, which protects employees’ rights and welfare in the country. Familiarize yourself with relevant labour laws, such as mandatory employee benefits and social security contributions.
Offering competitive compensation and benefits
To attract highly skilled talent in the Philippines, you must provide competitive compensation packages, including mandatory benefits such as 13-month pay and health insurance. It is also common in the Philippines for employers to offer retirement savings plans, performance-based bonuses, and opportunities for career advancement.
Establishing an employment contract
To formalize the employment relationship, you must establish a written employment contract that should outline the duration of employment, compensation, benefits, job description, and other relevant employment terms.
Maintaining accurate records for compliance
Securely store employee information, including social security numbers, income tax returns, and other government forms to avoid potential legal risk.
Engaging independent contractors
Depending on your business needs, engaging with independent contractors can be a flexible and cost-effective solution for hiring highly skilled talent in the Philippines.

Hiring foreign workers in the Philippines

Understanding the complexities of hiring foreign workers in the Philippines requires careful consideration. Here are some factors you need to keep in mind:

Understanding the legal requirements
For companies hiring foreign workers in the Philippines, you must secure appropriate visas and work permits for foreign nationals, which are facilitated through the Department of Labour and Employment (DOLE) and the Philippine Bureau of Immigration.
Complying with local labour laws
You must ensure that the employment of foreign workers is compliant with the local labour laws and regulations to avoid any legal repercussions. This includes adhering to working hour limitations and benefits mandated by the law.
Leveraging Employer of Record (EoR) service
To simplify the process of hiring and managing foreign workers in the Philippines, you can consider partnering with a reliable EoR service provider like CXC to help you with legal and administrative tasks, ensuring compliance with the Philippines’ employment laws and regulations.
Providing cultural orientation and support
You should also consider providing cultural orientation and support for foreign workers to help them adapt to the Philippines and integrate smoothly into the workplace. This may include familiarizing them with local customs, laws, and business practices.
Fostering an inclusive work environment
Creating an inclusive work environment is essential for the well-being and productivity of all employees, including foreign workers. Employers can foster inclusivity by promoting diversity, equity, and inclusion initiatives that ensure all employees feel equally valued and respected.

Employers should also ensure that foreign workers receive the same level of care and attention as local employees, with equal access to benefits, professional development opportunities, and a safe working environment.

Conducting recruitment and screening in the Philippines

Recruitment and screening of applicants must comply with the Philippine labour laws, such as fairness in hiring practices, anti-discrimination, and equal opportunity. The recruitment process in the Philippines may involve sourcing from various channels, such as job boards, referrals, and social media.

Employers may also utilise popular job hiring sites in the Philippines, such as JobStreet, LinkedIn, Online Jobs PH, and Kalibrr. You can post your job openings on these job hiring sites and receive applications from candidates. While these job hiring sites can help you in your recruitment efforts in the Philippines, referrals from trusted sources can also be a valuable way to find highly skilled workers in the Philippines.

Background check in the Philippines

While conducting employee background checks is not mandatory in the Philippines, it is a common practice, particularly in industries such as banking, finance, and business process outsourcing. Most companies opt to entrust background check services to a third-party. These services typically include criminal record verification, education verification, and employment history checks.

Philippines’ law on background checks

The Data Privacy Act of 2012 is the Philippine law governing employee background checks. This law provides guidelines for the processing of personal information, including that of job applicants and employees. When conducting background checks, employers need to be cautious to avoid discriminatory practices and ensure that the information gathered is relevant to the job requirements.

Consent and disclosure

Before conducting a background check in the Philippines, you must obtain the applicant’s consent and provide a clear disclosure of the nature and scope of the checks to ensure compliance with the data privacy laws.

Types of background checks in the Philippines

The common types of background checks in the Philippines include criminal records verification, employment history verification, character reference checks, and education verification. Each type of background check provides insights into the candidate’s qualifications and integrity. It is crucial to verify educational and professional qualifications to ensure that applicants possess the necessary skills and expertise for the role and prevent misrepresentation of credentials.

Criminal background check in the Philippines

Employers have the right to request job-relevant information from applicants, which may include conducting criminal record checks.

It is a common practice for employers in the Philippines to ask job candidates for a copy of their clearance from the National Bureau of Investigation (NBI). The NBI provides information regarding any criminal cases tried in municipal or regional trial courts.

Permissible requirements for pre-hire checks in the Philippines

While not mandated by the law, some employers request that candidates provide a transcript of their records for educational verification, a certificate of employment from their previous employer, and a birth certificate issued by the National Statistics Office (NSO).

Pre-hire requirements for foreign workers in the Philippines

While there are no regulatory pre-hire requirements for foreign workers, employers must secure an employment permit from the Department of Labour and Employment (DOLE). The permit is granted if no suitable local candidate is available for the position. In addition, foreign workers must also obtain a working visa from the Bureau of Immigration.

Types of workers in the Philippines

Regular employee in the Philippines

In the Philippines, “regular employment” refers to an employment relationship where the employer engages the employee to perform tasks that are typically necessary and desirable for the employer’s business. It entails a non-fixed-term employment agreement with certain rights and benefits. Regular employees are entitled to receive a 13th-month pay, which is an additional month’s salary provided by the employer. This benefit is mandated by law and must be paid no later than December 24th each year.

Benefits: A regular employee in the Philippines is also entitled to various benefits, including social security and healthcare under the Philippine Social Security System (SSS), health insurance through the Philippine Health Insurance Corporation (PhilHealth), and contributions to the Home Development Mutual Fund (Pag-IBIG). Employers must adhere to these requirements to ensure compliance with labor laws and regulations.
Employee protection: A regular employee in the Philippines enjoys more extensive legal protections, such as security of tenure, compared to contractual or probationary employees.
Termination: When terminating a regular employee in the Philippines, employers must adhere to labor laws and regulations. Termination must be for valid reasons and should undergo due process. In cases of authorized terminations, employers may need to provide separation pay or other benefits as required by law.

Casual employee in the Philippines

Casual employment in the Philippines typically refers to a temporary and non-fixed-term employment arrangement where employees are hired on an irregular or seasonal basis. Employers often engage casual employees to meet short-term business needs or to handle temporary fluctuations in workload.

Work hours and compensation: A casual employee in the Philippines is usually paid on an hourly or daily basis, depending on the hours worked. Unlike regular employees who have fixed working hours, casual employees work as needed and are compensated accordingly. Overtime pay rates apply when casual employees work beyond the standard hours.
Benefits and entitlements: A casual employee in the Philippines is also entitled to certain benefits such as holiday pay, overtime pay, and night differential pay as prescribed by labor regulations in the Philippines. They may not receive the same benefits as regular employees, but they are entitled to certain statutory benefits based on the hours worked.
Termination of engagement: As long as it complies with labor laws, employers can terminate casual employment without the need for lengthy notice periods or severance pay. Employers should follow the appropriate procedures and communicate clearly with casual employees regarding the end of their engagement.

Independent contractors in the Philippines

Independent contractors in the Philippines refer to individuals or entities contracted to perform specific tasks or projects for a company or client. They are not considered employees and are responsible for their own taxes, insurance, and other business expenses.

Classification of independent contractors: It is important for businesses to classify independent contractors correctly according to their contract terms, scope of work, and overall relationship with the company. Misclassification can lead to legal issues and labor disputes. Independent contractors should not be given employee benefits and should not be required to comply with company policies.
Contractual agreements: Independent contractors in the Philippines should have written contracts that specify the nature and scope of the work, payment terms, duration of the engagement, and other relevant details. This helps avoid misunderstandings, delays, and disputes. Contracts should be carefully crafted to protect both the company and the independent contractor.
Tax and insurance obligations: As independent contractors are not considered employees, they are responsible for managing their own taxes and other business requirements, including social security and health insurance payments, tax compliance, and record-keeping. Companies should not handle tax or insurance obligations on behalf of independent contractors.
Intellectual property rights and confidentiality: Companies engaging independent contractors in the Philippines should define intellectual property rights to ensure that they own any copyrighted, patented, or trademarked work produced by the independent contractor. Confidentiality agreements also help protect the company’s trade secrets, proprietary information, and business processes.
Termination and renewal of contracts: Contracts with independent contractors in the Philippines should outline termination clauses, renewal options, and other relevant terms for flexibility and protection. Terminating independent contractors should follow legal processes and be carried out in compliance with local laws and regulations.

Agency workers in the Philippines

Agency workers, also known as manpower or staffing agency employees, are individuals who are employed by a third-party agency but work under the supervision and direction of a client or host company. These workers provide additional manpower to client companies to meet specific short-term or project-based needs.

The law prohibits labour-only arrangements, in which the agency merely refers employees, and the principal only pays the agency or contractor the employees’ salaries. In such cases, the principal and the agency are jointly liable for any labour-related claims. However, an outsourcing arrangement, where the agency directs and controls the employees, is permissible. In fact, such agencies have the option to register as independent contractors under DOLE’s Department Order No. 174 Series of 2017.

Seek legal advice when hiring in the Philippines

Given the complexities of employment regulations in the Philippines, it is advisable for employers to seek legal counsel or consult with HR professionals to ensure compliance with labour laws and regulations. Companies can also partner with a reliable employer of record (EoR) provider like CXC to bypass all these challenges while maintaining compliance with labour laws and regulations.

Language requirements in the Philippines

Language requirements in the Philippines may vary depending on the nature of the job, the industry, and the employer. There are no statutory conditions regarding language requirements when working in the Philippines.

However, since English is widely spoken and used as a medium of instruction in schools and universities, it is often a requirement for many jobs, particularly those that involve communication and customer service.

English language proficiency in the Philippines

English language proficiency is an important skill for employees in the Philippines, given its widespread use in business settings. Employees with good English language skills are more competitive in the job market and can potentially earn higher salaries.

Employers who hire employees with excellent English language proficiency can benefit from improved communication, higher productivity, better customer service, and the ability to work with international partners and clients.

Employers should consider their business needs and industry requirements when establishing language requirements. For example, certain industries may require specialised language skills, or employers may need to consider multilingualism to cater to a diverse customer base.

Payroll system in the Philippines

Payroll processing in the Philippines

To start processing payroll in the Philippines, you must register your business to specific government agencies depending on your business structure. For example, corporate employers need to register with the Securities and Exchange Commission, while sole proprietorships must register with the Department of Trade and Industry.

Companies hiring in the Philippines must also meet social security system (SSS), Home Development Fund (PagIBIG), health insurance (PhilHealth), labour and tax obligations. Aside from that, you need to obtain business permit from the relevant city or municipality regulatory body where your business operations are based.

How to do payroll in the Philippines

Determine compensation and benefits: Define salary structures, allowances, bonuses, and benefits in adherence to labor laws and company policies. Understanding minimum wage requirements, overtime rates, and benefits such as 13th-month pay is essential for accurate payroll calculations.
Collect employee information: Gather accurate information for each employee, including tax identification numbers, SSS and PhilHealth numbers, and other relevant details. Keep records updated to facilitate payroll processing and comply with statutory requirements.
Calculate wages and deductions: Compute gross wages based on regular pay, overtime, allowances, and bonuses. Deduct statutory contributions for taxes, SSS, PhilHealth, and Pag-IBIG fund, as well as any voluntary deductions.
Process payroll timely: Establish a clear payroll schedule and ensure timely processing to maintain employee satisfaction and compliance with labor laws. Set deadlines for submission of timesheets, review payroll reports thoroughly, and provide pay slips to employees for transparency.
Stay updated on tax laws: Stay informed about changes in tax laws and regulatory requirements that may impact payroll processing. Regularly review tax rates, thresholds, and compliance obligations to avoid errors and maintain legal compliance.
Reconcile and review: Conduct regular audits and reconciliations to ensure payroll accuracy and address any discrepancies promptly. Verify payroll data against timesheets, attendance records, and employee contracts to identify errors and ensure compliance.

Options for managing payroll in the Philippines

Employers in the Philippines have several options for managing payroll. They can handle it in-house, outsource to a local payroll provider, or use payroll software. Each option has its advantages and considerations, such as cost, expertise, and data security.

Given the complexities of managing payroll, companies looking to hire employees in the Philippines can partner with a reliable employer of record (EoR) provider to ensure compliance. An EOR solution enables companies to quickly and compliantly hire talent in the Philippines and anywhere in the world, managing time-consuming administrative and HR tasks so you can focus on your core operations.

Simplify international expansion with CXC

As you expand into new markets, we understand that navigating country-specific labour laws and regulations can be overwhelming — requiring careful attention to maintain compliance and mitigate risks.

That is where CXC excels. With CXC, you can confidently find, hire, manage, and pay workers anywhere in the world, all while remaining fully compliant. By leveraging our Employer of Record (EoR) solution, you can bypass the complexities and expenses of setting up a legal entity, allowing you to focus on what truly matters: growing your business.

Speak to our team today and learn how we can support your global expansion efforts in more than 100 countries worldwide.

Read about EoR services

FAQ's

How do companies hire employees in the Philippines?

Companies can hire employees in the Philippines through three main routes: setting up their own local legal entity, engaging an employer of record (EOR) in the Philippines, or working with contractors. Each option comes with different levels of cost, time, and compliance responsibility.

Setting up a local entity gives you full control but takes months and requires ongoing administrative overhead. Using an EOR in the Philippines a locally registered entity employs your workers on your behalf in compliance with applicable Philippine employment and tax laws, handling payroll, statutory benefits, and compliance while you direct the day-to-day work. Hiring contractors, on the other hand, is faster but carries misclassification risk if the working relationship resembles employment.

For most companies hiring employees in the Philippines for the first time, an EOR one of the fastest and lowest-administration hiring options.. You can have workers on payroll in days rather than months, without needing to register a company locally.

The key steps when hiring through an EOR provider in the Philippines are:

Agree on the role, salary, and employment terms with your candidate.

Share the details with your EOR provider.

The EOR issues a locally compliant employment contract.

The employee is onboarded, with all statutory registrations handled by the EOR.
The client directs the employee’s day-to-day business activities, while the EOR manages local employment administration, payroll processing, and statutory compliance obligations.

Do companies need a legal entity in the Philippines to hire employees?

Not necessarily. Companies can hire employees in the Philippines without setting up their own legal entity by using an Employer of Record (EOR). The EOR acts as the legal employer on the company’s behalf, allowing businesses to hire local talent compliantly without establishing a local company.

This is important to understand because setting up a Philippine entity, whether a subsidiary, branch office, or representative office, involves registration with the Securities and Exchange Commission (SEC), the Bureau of Internal Revenue (BIR), and local government units. That process typically takes three to six months and requires ongoing local accounting and HR infrastructure.

An EOR generally removes the need to establish a local employing entity for employment purposes, although companies should separately assess any corporate tax, permanent establishment, or regulatory obligations arising from their activities in the Philippines.

Workers are employed under the EOR’s existing Philippine entity, which already holds the necessary registrations and licences. You get compliant employment from day one.

With that, if you plan to hire a large team in the Philippines over the long term, or if your business model requires a local presence for client-facing reasons, setting up your own entity may make sense at some point. An EOR is particularly well-suited for:

Companies testing the Philippine market before committing to a full entity.

Businesses that need to hire quickly without a multi-month setup process.

Teams that want to keep their Philippine headcount lean and flexible.

How long does it take to hire employees in the Philippines?

The time it takes to hire employees in the Philippines depends heavily on which route you choose. Using an EOR in the Philippines is significantly faster than setting up your own entity.

Here is a concrete comparison of the three main hiring routes:

Hiring Route	Typical Timeline	What Drives the Timeline
EOR in the Philippines	3 to 7 business days	Contract drafting, employee onboarding, statutory enrolment
Hiring a contractor	1 to 3 business days	Contract only, no statutory registration required
Setting up a local entity	3 to 6 months	SEC registration, BIR enrolment, local government permits, bank account setup

When you use an EOR, the provider already has an established legal entity in the Philippines with active registrations for SSS (Social Security System), PhilHealth, Pag-IBIG (HDMF), and the BIR. Your new hire is enrolled under that existing structure rather than a newly created one.

The main variables that affect the EOR timeline in the Philippines are:

Contract review time: If your employee or legal team wants to review the employment contract, add two to three days.

Candidate document readiness: Government ID, TIN (Tax Identification Number), and bank account details are needed for onboarding.

Role complexity: Senior or executive hires sometimes require additional contract negotiation.

Timelines may vary depending on document availability, background checks, registration processing times, immigration requirements, and role-specific onboarding considerations.

With a reliable EOR services provider like CXC, most companies can have an employee fully onboarded and on payroll within one working week.

What are the differences between hiring contractors and employees in the Philippines?

Hiring a contractor and hiring an employee in the Philippines are two very different arrangements, with different obligations, protections, and risks on both sides.

Employment relationship vs service arrangement

An employee in the Philippines has full statutory protections under the Philippine Labour Codeand related employment legislation. They are entitled to mandatory benefits, security of tenure, and termination protections. A contractor, by contrast, is engaged for a specific scope of work and does not receive statutory employment benefits.

Here is how the two arrangements compare across the key areas:

Factor	Employee	Contractor
Mandatory benefits	SSS, PhilHealth, Pag-IBIG, 13th-month pay, paid leave	No statutory employment benefits mandated
Tax withholding	Employer withholds and remits income tax	Contractor files and pays own taxes
Termination	Requires just or authorised cause under the Labour Code	Governed by the service contract terms
Security of tenure	Yes, after regularisation period	No
Control over work	Employer directs how and when work is done	Contractor determines how to deliver the output
Misclassification risk	Low	High if the working arrangement resembles employment

The misclassification risk is real

The Philippine Department of Labor and Employment (DOLE) looks at the actual nature of the working relationship, not just what the contract says. If a contractor is working fixed hours, using company equipment, following internal processes, and has only one client, DOLE or the courts may determine that an employer-employee relationship exists regardless of the contractual wording used by the parties.

Misclassification can result in back payment of all statutory benefits, penalties, and forced regularisation of the worker. This is one of the main reasons companies choose EOR services in the Philippines: it can significantly reduce worker-classification risk when engagements are properly structured and managed.

When should companies use EOR services in the Philippines?

EOR services in the Philippines are the right fit when you need to hire employees compliantly but are not ready, or do not need, to set up your own local entity. There are a few specific situations where this makes the most sense, such as:

You are entering the Philippines for the first time. Setting up a Philippine subsidiary before you have confirmed your market, your team, or your revenue model is a significant upfront commitment. An EOR lets you hire your first one to five employees without that commitment, so you can validate the market first.

You need to hire quickly. If a candidate is available now and you cannot afford a three-to-six-month entity setup process, an EOR provider in the Philippines can often facilitate onboarding within days, subject to documentation and onboarding requirements.

You have a small or distributed team. For smaller teams, maintaining a local entity may involve additional accounting, audit, payroll, and compliance costs that companies may prefer to avoid.

You are running a project with a defined end date. EOR services give you the flexibility to scale up for a project and scale back down without the overhead of maintaining a permanent local structure.

You want to convert contractors to employees. If you have been working with contractors in the Philippines and want to transition independent contractor engagements into formal employment arrangements, an EOR handles the transition compliantly without you needing a local entity.

The signal that it is time to consider moving away from an EOR is usually when your Philippine headcount grows beyond 20 to 30 employees and the cost of EOR services starts to exceed the cost of running your own entity. At that point, a hybrid approach (own entity for core staff, EOR for flexible roles) often makes sense.

How much does an employer of record cost in the Philippines?

EOR costs in the Philippines are typically structured as either a flat monthly fee per employee or a percentage of the employee’s gross salary. Pricing structures vary significantly between providers depending on the scope of services, workforce size, and support requirements.

What the fee usually covers?

A standard EOR services fee in the Philippines typically includes:

Employment contract drafting and management.

Monthly payroll processing in Philippine Pesos (PHP).

Statutory contributions: SSS, PhilHealth, and Pag-IBIG.

Tax withholding and BIR remittance.

13th-month pay calculation and disbursement.

Leave tracking and management.

Offboarding and separation pay calculations.

What is not included?

The EOR fee covers the service. It does not cover the employee’s salary or their statutory benefits, which are additional costs on top of the fee. When budgeting for a Philippine hire, you should account for:

Gross salary: The agreed employee compensation.

Employer-side statutory contributions: Contribution rates vary and are subject to periodic legislative and regulatory updates.

13th-month pay: An additional one-twelfth of annual basic salary, which must generally be paid on or before 24 December each year in accordance with Philippine law.

EOR service fee: The provider’s management fee.

For example, if you hire an employee at PHP 60,000 per month gross, your total monthly cost including employer contributions and prorated 13th-month pay will be closer to PHP 70,000 to PHP 73,000, plus the EOR fee.

Providers that charge a percentage of salary can become expensive as employee salaries increase, so a flat fee structure is often better value for higher-paid roles. It is worth comparing both models before choosing an EOR provider in the Philippines.

What are the limitations of EOR in the Philippines?

An employer of record in the Philippines solves a lot of problems, but it is not the right answer for every situation. Here are the genuine limitations you should know before deciding.

You are not the legal employer. The EOR is the employer of record on paper. This means the employment contract is between your employee and the EOR, not your company. For most operational purposes this does not matter, but it can affect things like equity grants, non-compete agreements, and how you handle certain IP assignments. These matters should be reviewed and structured carefully to ensure enforceability under applicable Philippine laws.

Less control over HR processes. Some EOR providers have fixed payroll cycles, standard contract templates, and set processes for offboarding. If you need highly customised HR workflows, you may find that working within an EOR’s system requires some compromise.

Cost at scale. EOR services in the Philippines are cost-effective for smaller teams. As headcount increases, companies may wish to evaluate whether establishing a local entity becomes operationally or financially preferable depending on workforce size, operational complexity, and provider pricing structures.

Not suitable for all role types. Some roles require the employee to hold specific local licences or professional registrations in their own name (certain finance, healthcare, or legal roles, for example). An EOR arrangement does not change those individual licensing requirements.

EOR does not handle recruitment. An EOR manages employment, not hiring. Finding and selecting your candidates is still your responsibility unless your provider like CXC also offers recruitment services alongside their EOR offering.

None of these limitations are deal-breakers for most companies. They are simply factors to account for when structuring your Philippine hiring strategy.

How does an employer of record handle the 13th-month pay in the Philippines?

Your EOR provider calculates, accrues, and pays the 13th-month pay on your behalf, so you do not need to manage this separately.

The 13th-month pay is a mandatory benefit under Presidential Decree No. 851. Every rank-and-file employee who has worked for at least 30 calendar days in a year is entitled to it.

How is it calculated?

The formula is simple:

13th-month pay = Total basic salary earned during the calendar year ÷ 12

So, if an employee earns PHP 60,000 per month and works the full year, their 13th-month pay is PHP 60,000. If they joined mid-year and earned a total of PHP 360,000 in basic salary, their entitlement is PHP 30,000.

Allowances, overtime pay, and benefits that are not part of basic salary are excluded from the calculation.

How your EOR manages it?

A reliable EOR provider in the Philippines will:

Accrue the cost monthly so it is reflected in your regular cost reports, not as a surprise lump sum in December.

Calculate the correct amount based on actual basic salary earned, accounting for mid-year joiners, leavers, and any periods of unpaid leave.

Pay the employee by 24 December as required by law. Some providers pay half at mid-year and the remainder in December, which is also permitted.

Handle prorated payments for employees who leave before December, since they are still legally entitled to a proportionate amount

What you need to do: Companies should budget for 13th-month pay as part of the total employment cost from the beginning of the engagement. Your EOR should include this in their cost projections when you onboard a new hire.

What are the risks of hiring in the Philippines without an EOR?

Hiring employees in the Philippines without an EOR, or through an EOR that does not meet local compliance requirements, creates several concrete risks for your business, including:

Misclassification and back-pay liability. If you engage workers as contractors when the actual working relationship is that of employment, DOLE or the Philippine courts may determine that an employer-employee relationship exists regardless of the contractual classification used by the parties.

That triggers back payment of all statutory benefits from the date the employment relationship began, including SSS, PhilHealth, Pag-IBIG contributions, 13th-month pay, and paid leave. The financial exposure compounds quickly, particularly for long-running arrangements.

Non-compliant EOR arrangements under DO 174. This is a risk that many companies overlook. The Philippines’ Department Order No. 174 (DO 174) governs contracting and subcontracting arrangements and sets clear requirements for legitimate service contractors. These include a minimum paid-up capital of PHP 5,000,000 and a valid DOLE Certificate of Registration, renewed every two years.

Companies should independently verify whether their proposed EOR structure falls within the scope of DO 174 and whether the provider satisfies applicable registration and regulatory requirements.

Companies using an EOR that does not meet DO 174 requirements risk having their workers reclassified as direct employees of the client company. This means your business, not the EOR, becomes the legal employer, with all the associated obligations and liabilities.

Payroll and tax penalties. Running payroll outside a registered Philippine entity, or failing to remit SSS, PhilHealth, Pag-IBIG, and BIR withholding taxes correctly, results in penalties and interest charges. DOLE and the BIR both conduct audits, and non-compliance is not treated leniently.

Termination disputes. The Philippine Labour Code provides strong protections for employees. Terminating an employee without just or authorised cause, or without following the correct process, exposes you to reinstatement orders or separation pay awards. Without an EOR managing this process, the risk of procedural errors is higher.

What to check before choosing an EOR provider in the Philippines?

Does the provider hold a valid DOLE Certificate of Registration under DO 174?

Do they have a registered Philippine entity with the SEC and BIR?

Can they demonstrate compliance with applicable labour, payroll, tax, and social security obligations? Can they demonstrate a track record of compliant payroll in the Philippines?

Choosing the wrong EOR provider creates as much risk as having no EOR at all.

Why choose CXC as your employer of record in the Philippines?

CXC has been managing compliant employment and contractor arrangements across more than 100 countries for over 30 years. In the Philippines, we act as a full employer of record, handling everything from employment contracts and payroll to statutory contributions and offboarding, so your team can focus on the work rather than the administration.

What sets CXC apart as an EOR provider in the Philippines?

Local compliance knowledge, not just a platform. Many EOR providers offer a technology platform with local payroll bolted on. CXC combines technology with dedicated local compliance expertise. We know the nuances of Philippine labour law, from statutory requirements to the specifics of separation pay calculations, and we apply that knowledge to every hire.

A human team, not just a portal. When something changes with your employee, your payroll, or local regulations, you speak to a person who knows your account. We do not route every query through a ticket system.

Speed without shortcuts. We can onboard employees in the Philippines in as few as three to five business days, subject to document completion, onboarding requirements, and role-specific considerations, while supporting compliant contracts, statutory registrations, and payroll administration.

Global reach for distributed teams. If you are hiring across multiple countries alongside the Philippines, CXC manages employment in 100+ countries under a single provider relationship. That means consistent processes, consolidated reporting, and one point of contact across your global workforce.

Transparent cost structure. We provide full employment cost projections upfront, including salary, employer-side contributions, 13th-month pay, and our service fee, so there are no surprises when the first payroll runs.

Employment, tax, and labour law obligations in the Philippines may change over time and can vary depending on the facts of each engagement. Companies should obtain legal and tax advice tailored to their specific circumstances before making hiring decisions.

Ready to hire employees in the Philippines? Talk to our team to get a cost estimate and timeline for your specific hiring needs.

Compliantly hire workers anywhere with CXC

With our EoR solution, you can engage workers anywhere in the world, without putting your business at risk. No more worrying about local labour laws, tax legislation or payroll customs — we’ve got you covered.

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