What do you need to know to hire in the Philippines?
Philippine employers contribute 10.5% SSS plus PhilHealth and Pag-IBIG on top of salary. Every employee receives a mandatory 13th month pay. Maternity leave is 105 days with full pay. Probation runs up to 6 months and illegal dismissal protection starts from day one. Each guide below takes one layer.
· Philippines guide
How does Teamed handle Philippine hiring for you?
Teamed becomes your legal employer of record in the Philippines for from $599 per employee per month, with zero FX mark-up in any currency.
Payroll, contracts, and the full Philippine employment law stack run on one platform.
Real HR and legal experts manage every Philippine hire, from the first offer letter to the final clearance and certificate of employment. An actual person, not a chatbot or a pooled queue, handles your Philippine team alongside EOR, contractor onboarding, and entity payroll on one platform. There is no setup fee and no exit fee. Employer cost passes through at cost, itemised on every invoice, including SSS, PhilHealth, and Pag-IBIG.
A Philippine contractor who converts to direct employment keeps their record, and that same employee can graduate from EOR to your own Philippine entity without re-onboarding. Run the Crossover Calculator to see the month the model flips. EOR is the right model for a first Philippine hire, until it isn't.
- The 13th month pay is not a bonus. It is the law. Every employee who has worked at least one month in a calendar year is entitled to the equivalent of one month's basic salary, paid on or before 24 December. Presidential Decree No. 851 makes this mandatory. Most overseas buyers budget for it late or miss it entirely. The cost breakdown guide shows how it lands in your total employer cost.
- Illegal dismissal protection starts on day one, before probation ends. The Philippines grants security of tenure from the first day of employment under the Constitution and Article 294 of the Labor Code. There is no qualifying period. Even a probationary employee can file an illegal dismissal case. The two-notice rule for just cause applies from the first working day.
- Payroll is semi-monthly by law, not monthly. Article 103 of the Labor Code requires wages to be paid at least twice a month, at intervals of no more than 16 days. Monthly payroll is non-compliant. Teamed runs the correct semi-monthly cycle, with BIR withholding filings due by the 15th of the following month.
Hiring in the Philippines adds SSS, PhilHealth, and Pag-IBIG contributions on top of gross salary. The SSS employer rate is 10.5%. PhilHealth adds 2.5% and Pag-IBIG adds 2% more. Together these bring total employer on-costs to roughly 15 to 16 percent of salary.
A mandatory 13th month payment of one month's basic salary is due by 24 December each year under PD 851. This adds roughly 8 percent to annual payroll cost. Statutory leave is 5 days (Service Incentive Leave) after 12 months of service. There are 12 regular public holidays.
Teamed runs Philippine payroll, contracts, and compliance through an EOR entity with the required DOLE, SSS, PhilHealth, and BIR registrations. Payroll is semi-monthly. BIR withholding tax filings are due within 15 days of each month end.
This page is the map. Each guide below is the detail.
Zero FX. No setup fees. 48-hour onboarding. The price your finance team can forecast against without an asterisk.
How much does it cost to hire an employee in the Philippines in 2026?
A Philippine hire adds roughly 15 to 16 percent in employer contributions plus a mandatory 13th month payment.
SSS is 10.5%, PhilHealth is 2.5%, and Pag-IBIG is 2%. The 13th month adds one full month of basic salary each year.
Employer SSS runs at 10.5% of monthly salary credit, up to a ceiling of PHP 30,000/month. PhilHealth adds 2.5% of monthly basic salary. Pag-IBIG adds 2% for employees earning above PHP 1,500. Together these bring the statutory contribution load to around 15 to 16 percent of monthly salary.
The 13th month payment must be paid on or before 24 December. It equals one month of basic salary for a full year of service. Employees who leave part way through the year receive a pro-rated 13th month in their final pay. This is the single cost item most US buyers miss at budget time.
The full breakdown, with worked examples at current statutory rates, is in the cost guide.
Do you need a Philippine entity to hire employees in the Philippines?
No. An Employer of Record runs Philippine payroll and contracts from day one.
Your own Philippine entity becomes cheaper than EOR somewhere around 5 to 8 employees, depending on salary.
Registering a Philippine corporation requires SEC registration, BIR registration, and DOLE registration, along with local government permits. The process takes six to twelve weeks. An Employer of Record is faster and cheaper at low headcount. Teamed holds all required registrations and runs compliant Philippine payroll from day one, including semi-monthly wage payments and mandatory contributions.
Foreign equity restrictions apply in certain industries under the Foreign Investment Negative List. For most tech and services roles, a 100 percent foreign-owned corporation is permitted. The crossover point for most Philippine salary bands lands around 5 to 8 employees.
Most EOR providers will not tell you when you have crossed it. We do, and we help you move. You progress from contractor to EOR to your own Philippine entity on one platform under Teamed's Graduation Model, with tenure preserved.
What are the key employment law rules in the Philippines in 2026?
Security of tenure applies from the first day of employment. There is no qualifying period for protection against illegal dismissal.
Probation is capped at 6 months. After that, the employee becomes regular and can only be dismissed for just or authorized cause.
The Philippine Labor Code and the 1987 Constitution guarantee security of tenure without any qualifying period. An employee dismissed without just cause or due process can file an illegal dismissal claim at any time during employment. The two-notice rule applies from day one: one notice to explain and a second notice of decision must be served before any just-cause dismissal.
Probation is capped at 6 months under Article 296. Employers must communicate the standards for regularisation in writing at the start of employment. An employee who completes probation without being dismissed or informed of performance standards is automatically regularised under Philippine Supreme Court rulings. Authorized cause termination (redundancy, retrenchment, business closure) requires 30 days written notice to the employee and the DOLE regional office simultaneously. The hiring guide covers each compliance step in full.
What benefits must you provide Philippine employees in 2026?
The statutory floor is 5 days Service Incentive Leave, 105 days paid maternity leave, 7 days paid paternity leave, and a 13th month payment.
SSS sickness benefit pays 90% of average daily salary credit for up to 120 days per year.
Service Incentive Leave is 5 days with full pay per year after 12 months of service under Article 95. Leave and public holidays are counted separately in the Philippines. There are 12 regular public holidays and 8 special non-working days in 2026 under Proclamation No. 1006.
Maternity leave is 105 days with full pay for live childbirth under Republic Act 11210. Paternity leave is 7 days with full pay for the first four deliveries under RA 8187. The SSS sickness benefit pays 90% of average daily salary credit for up to 120 days per calendar year. The benefits guide covers all leave entitlements and employer obligations in full.
What are payroll taxes in the Philippines in 2026?
Employer SSS is 10.5%, PhilHealth is 2.5%, and Pag-IBIG is 2%.
Employees pay 4.5% SSS, 2.5% PhilHealth, and 2% Pag-IBIG, plus income tax under the TRAIN Law.
The Philippine payroll contribution stack has three branches. SSS (Social Security System): 10.5% employer and 4.5% employee, applied to monthly salary credit up to PHP 30,000/month. PhilHealth: 2.5% employer and 2.5% employee on monthly basic salary. Pag-IBIG: 2% employer and 2% employee for earners above PHP 1,500.
Income tax follows the TRAIN Law brackets. Annual income up to PHP 250,000/year bears no tax. The rate starts at 15% on income above that and rises to a top rate of 35%. BIR Form 1601-C withholding filings are due within 15 days of each month end for eFPS filers. Teamed handles all withholding, remittances, and year-end BIR reconciliation. The tax and payroll guide sets out every band and threshold.
How do you terminate an employee in the Philippines?
Philippine termination follows two routes. Just cause requires two notices and a hearing. Authorized cause requires 30 days advance written notice to both the employee and DOLE.
Redundancy pays 1 month of salary per year of service. There is no minimum qualifying period before separation pay is owed.
Just cause dismissal (serious misconduct, fraud, gross neglect, or similar) follows a two-notice process. The first notice must specify the charge and give the employee a chance to respond. After the employee's explanation, the employer issues a second notice with the decision. Skipping either notice exposes the employer to nominal damages even if the just cause is valid.
Authorized cause (redundancy, retrenchment, business closure, or incurable disease) requires simultaneous 30 days written notice to the employee and to the DOLE regional office before the effective date. Redundancy entitles the employee to separation pay of 1 month of salary per year of service, or one month's salary, whichever is greater. Retrenchment and business closure pay is one-half month per year of service. Final pay must be released within 30 days of separation under DOLE Labor Advisory No. 06-20. The termination guide runs the full process, including the two-notice requirements.
What should you know before hiring in the Philippines?
Two things catch US buyers out. The first is the 13th month pay. It is mandatory, not discretionary.
The second is that payroll must be semi-monthly. Monthly payroll violates the Labor Code.
The 13th month pay is not optional. Presidential Decree No. 851 requires every employer to pay the equivalent of one month's basic salary by 24 December each year. This applies to all rank-and-file employees who have worked at least one month in the year. US buyers who budget monthly costs without this line will face a surprise payment at year end.
Semi-monthly payroll is a legal requirement. Article 103 of the Labor Code requires wages at least twice a month, at intervals not exceeding 16 days. Running monthly payroll is a Labor Code violation and a DOLE inspection risk. Teamed runs the correct semi-monthly cycle from day one. The hiring guide covers everything from the employment contract to the first payslip.
Frequently asked questions
How much does it cost to hire an employee in the Philippines?
Plan on roughly 115 to 116 percent of monthly salary once SSS at 10.5%, PhilHealth at 2.5%, and Pag-IBIG at 2% are added. A mandatory 13th month payment adds roughly 8 percent to annual cost on top of that. Teamed's Philippines fee is one flat number per employee per month with zero FX mark-up. The cost breakdown guide has worked examples.
Can a US company hire in the Philippines without an entity?
Yes. An Employer of Record like Teamed runs Philippine payroll, contracts, and compliance through its own registered entity. You direct the work. Teamed becomes the legal employer of record. Teamed holds SSS, PhilHealth, Pag-IBIG, BIR, and DOLE registrations. Setup takes 48 hours once terms are confirmed.
What is the Philippines 13th month pay rule?
Presidential Decree No. 851 requires all rank-and-file employees to receive one month of basic salary as 13th month pay by 24 December each year. It applies to employees who have worked at least one month in the calendar year. Employees who leave before year end receive a pro-rated amount in their final pay. It is a statutory entitlement, not a discretionary bonus.
What are Philippine statutory notice periods for termination?
For authorized cause termination (redundancy, retrenchment, or business closure), the employer must give 30 days written notice simultaneously to the employee and the DOLE regional office before the effective date. For just cause dismissal, the employer must issue a first notice specifying the charge and a second notice with the decision after the employee's explanation. Final pay must be released within 30 days of separation.
What is the minimum annual leave for a Philippine employee?
The statutory minimum is 5 days Service Incentive Leave (SIL) with full pay per year under Article 95 of the Labor Code. SIL is earned after 12 months of continuous service. The Philippines counts leave and public holidays separately. There are 12 regular public holidays in 2026 under Proclamation No. 1006.
How does illegal dismissal work in the Philippines?
Security of tenure under the Philippine Constitution and Article 294 of the Labor Code applies from the first day of employment with no qualifying period. An employee dismissed without just cause or without following due process can file an illegal dismissal case with the National Labor Relations Commission. Remedies include reinstatement and full backwages from the time of dismissal to reinstatement, with no statutory cap on the award.
The Philippines has one of the strongest security of tenure frameworks in Southeast Asia. Illegal dismissal protection starts on day one and there is no cap on backwages. That means getting the two-notice rule right is not optional. It also means probation must be documented carefully: if you fail to set regularisation standards in writing at the start, the employee becomes regular automatically when probation ends. These guides exist so the first Philippine hire does not become the first NLRC case.
The Philippines has clear payroll rules. Semi-monthly wages. A 13th month due by 24 December. Illegal dismissal protection from day one.
Most cost surprises come from buyers who miss the 13th month or run monthly payroll and get flagged on a DOLE inspection.
Read the right Philippines guide before the first hire, not after the first Labor Arbiter filing.
