Starting a business in the Philippines is now more appealing than ever. The country boasts a young, skilled workforce who are fluent in English and eager to embrace new challenges.
Filipino workers are known for their excellent skills in sales and customer service, making them popular choices for call centre roles, especially in the EU market. Plus, the Philippines is nurturing a growing pool of talent in QA testing.
So, how can you tap into this talent and kickstart a business in the Philippines?
In this article, we break down the simple steps for foreigners to start a business in the Philippines. We also discuss how partnering with an Employer of Record (EOR) service like Teamed can make the process even smoother, helping you avoid the hassle of setting up a legal entity in the country.
With an EOR like Teamed, you can hire and pay your employees in the Philippines, offer local benefits, and comply with labour laws, all through a user-friendly platform with 24/5 customer support.
Getting Started with Building a Business in the Philippines
The Philippines is a friendly place for foreign entrepreneurs looking to set up businesses. However, there are a few things you need to sort out first:
Depending on the number of foreign investors and your business type, you might need to have a certain amount of capital to start. For instance, a fully foreign-owned domestic corporation requires a minimum capital of $200,000.
If you’re setting up a corporation, you’ll need a certain amount of capital first. The minimum investment you’ll need depends on two things: how many foreigners are involved and your industry.
For example, a domestic corporation can't be totally foreign-owned without a minimum paid-up capital requirement of $200,000.
To start your business, you'll need to register with several government agencies, including the Philippine Securities and Exchange Commission (SEC), the local Barangay, the mayor's office, and the Bureau of Internal Revenue (BIR).
The Philippines offers several tax benefits to encourage foreign investments. The CREATE Act of 2021 introduced several incentives for foreign companies.
Teamed keeps you updated on all these changing rules, letting you focus on building your team in the Philippines.
Hiring in the Philippines: What You Need to Know
When hiring in the Philippines, there are a few things you need to know to keep on the right side of local labour laws.
Wages and Overtime
Annual salaries in the Philippines range from ₱136,200 to around ₱2,389,200, with an average of around ₱535,800.
There is no one set minimum wage in the Philippines.
Instead, the minimum wage varies depending on the region and can be as high as ₱610 PHP and as low as ₱89 PHP a day.
As a company, you have the choice of implementing the newly approved Philippine four-day workweek or sticking with the traditional five-day week. The maximum, however, is a six-day working week.
Once your employees work for more than 40 hours, you’re required to pay an overtime differential of 25%. There are other types of overtime as well. Employees who work at night are paid a 25% differential. Those who work on holidays get a 30% differential.
There are eight public holidays in the Philippines, as well as several special non-working holidays. Employers are not required to provide paid leave on the special days.
Vacation or sick days are not required by law, and instead of this, all Filipino employers are to provide a minimum of 10 paid days off per year for employees who have worked for the company for at least one year (service incentive leave). Generally, employers provide more leave—the norm is 15 paid days of leave a year.
Parental leave is also required in the Philippines. Mothers receive 105 days of paid leave and fathers receive seven days of parental leave.
Employers contribute to three government funds on behalf of their employees (employees contribute as well):
- the Social Security System (SSS),
- the Philippine Health Insurance Programme (PhilHealth), and
- the Home Development Mutual Fund (Pag-IBIG).
The SSS provides maternity and disability benefits to private-sector employees. It also acts as a pension program.
PhilHealth is a national health insurance plan that covers all employees.
Pag-IBIG is a national affordable housing fund.
Filipinos are taxed on their global income, whereas foreigners are taxed only on the income earned within the Philippines. Companies in the country are also required to withhold the income tax of their employees.
Filipinos understand many Western references, but Filipino work culture is quite different from Western work culture. For one thing, it’s more formal, with Filipino employees dressing up for work and referring to their bosses using honorifics such as Mr, Mrs, and Miss.
For another, Filipino culture is extremely high-context. Body language and facial expressions are an important set of clues in conversation. Rather than directly saying no to a request, a Filipino employee may answer indirectly.
It’s important to recognise that communication can be nuanced rather than attempting to force a conversation.
Lastly, there is a very social aspect to office life in the Philippines. Great emphasis is placed on personal gatherings like staff birthdays, and often, Filipino colleagues may ask a lot of questions that might seem invasive, but which are meant to foster a warm and friendly relationship.
Hiring remotely in a high-context, social culture can be a challenge. However, remote work and working from home is considered a benefit in the Philippines.
An EOR like Teamed is positioned well to help you take advantage of the remote work preference. Our experts guide your remote employees through the onboarding process via a 1:1 call. After the call, we send them the localised contract for signing and they’re ready to start work!
Companies working in Information Technology and Business Process Management are required to follow a 70-30 hybrid work model or risk losing their tax incentives.
Additionally, the Philippines requires that remote employees receive the same collective rights as those who work on the premises.
With Teamed, you don’t have to worry about missing these requirements since our compliance experts take care of them.
Other Ways of Hiring in the Philippines
Doing business in the Philippines is an attractive proposition for many companies.
But you may not be willing or able to meet the requirements because you lack a presence in the Philippines, or you’re doing business in several countries as well.
In that case, there are other ways to hire in the Philippines.
By working with an outsourcing provider, you can hire talent in the Philippines without setting up a legal entity. However, to do so, you must work with an outsourced HR provider.
The downside of this is that you may lose control of your workers. They work for the outsourcer who is managing the project.
Branch offices do business on behalf of a foreign parent company, and don’t need a separate legal entity to carry out activities in the Philippines.
They do, however, require a minimum investment of $200,000.
An EOR like Teamed is a business that owns a legal entity in the country where you wish to employ a job candidate.
As we’ve mentioned previously, EORs employ workers on behalf of client companies, taking on the burden of local legal requirements to ensure the client company can employ workers in the area.
An EOR handles onboarding, payroll, tax, and benefits for their client companies, but you are the one who manages your employees in the Philippines.
Our Recommendation for Starting a Business in the Philippines is Through an EOR
The local knowledge and expertise of the EOR allows you to hire while staying compliant, which is particularly important if you’re doing business in several different countries.
Every business entity you create needs constant support, including operational, legal, and payroll issues. Trying to manage all that in several countries can be time-consuming and costly.
An EOR like Teamed handles the local red tape in the Philippines so you can focus on your business.
Choosing an EOR
When choosing an EOR to help you start a business in the Philippines, look for an entity with local experience with Philippine law, payroll, and regulatory changes.
You should also seek out an EOR that operates in all the jurisdictions in which you want to operate so that you are not working with several providers.
Lastly, look for one that provides an HR platform, so that you can easily monitor all of your team members worldwide.
Get Started in the Philippines
Teamed can help you onboard the best talent in the Philippines.
As your global workforce partner, we help you with the following:
- Compliantly hire full-time employees in 150+ countries
- Onboard employees within 24 hours
- Manage international payroll and taxes in 50+ currencies
- Offer attractive localised benefits packages
- Ensure country-specific compliance
- Provide ease of access with an automated, self-serve platform
- Assist with sourcing ideal candidates through our vetted recruitment partners.
Contact us today to get started.