When do you graduate from an EOR to your own Philippines entity?
In the Philippines, setting up your own corporation takes 8 to 12 weeks from the Securities and Exchange Commission (SEC) application to the first payroll run. Bank account opening alone adds 3 to 6 weeks. An EOR from $599 per employee per month is cheaper than that fixed overhead until headcount reaches roughly 6 to 9 employees at Manila technology salaries. Here is the maths, and the decision factors the maths does not capture.
· Philippines guide
Illustration · Makati, Philippines
An EOR is faster and cheaper at low headcount in the Philippines. Setting up your own domestic corporation takes 8 to 12 weeks. Formation typically costs PHP 150,000 to 600,000 all-in. Running it typically costs PHP 80,000 to 150,000 per month.
Those are typical ranges, not law figures. Philippines entity costs vary with capitalisation choice, the mix of foreign versus local ownership, government processing times, and how much you outsource. The crossover point typically lands around 6 to 9 employees at Manila technology salaries.
SSS employer contributions are 10.5% of the monthly salary credit on both sides of the comparison. PhilHealth adds 2.5% and Pag-IBIG adds 2%. Those rates are the same whether you hire via EOR or your own entity. The entity side also carries formation costs and ongoing compliance overhead. Those do not appear in the statutory contribution rates.
The crossover maths
EOR cost scales with headcount. One fee per employee per month. Entity cost has a fixed overhead. That fixed overhead and the EOR line cross at roughly 6 to 9 employees for Manila technology salaries.
Teamed charges from $599 per employee per month. At a common exchange rate that is roughly PHP 33,000. Your own Philippines corporation carries a typical fixed monthly overhead of PHP 80,000 to 150,000 for payroll, bookkeeping, BIR filings, and HR admin.
The calculation below uses PHP 33,000 as the illustrative PHP equivalent of the Teamed fee. This is illustrative, not a fixed PHP price. The actual PHP amount depends on the exchange rate at the time of invoice. Teamed charges from $599 USD with zero FX mark-up.
All entity cost figures in this table are typical ranges. They cover outsourced payroll bureau, BIR compliance, statutory filings, and HR admin for a small Philippines corporation. They are illustrative, not law figures. Actual costs vary with the complexity of your setup and whether you hire in-house compliance staff.
The crossover shifts with salary levels. SSS contributions at 10.5% are capped at the monthly salary credit ceiling, which means the SSS line per employee does not grow above that cap. For higher-salary hires, the entity overhead amortises more quickly and the crossover can occur closer to 4 to 6 employees. For lower-salary hires the crossover moves out to 8 to 10.
PhilHealth at 2.5% and Pag-IBIG at 2% apply on both sides of the comparison. They do not change the crossover direction but they do raise the total cost floor on both sides. Run the Crossover Calculator with your own headcount and salary band.
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Calculate the EOR cost
Multiply the Teamed fee (from $599 USD) by your planned Philippines headcount. This is the fixed variable cost. It grows linearly as you hire.
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Estimate the entity fixed overhead
Typically PHP 80,000 to 150,000 per month for a small Philippines corporation. This covers payroll bureau, BIR filings, bookkeeping, contribution remittances, and first-point HR. This cost does not grow much until headcount exceeds 15.
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Find the crossover headcount
The crossover is where EOR monthly cost equals entity monthly overhead. For most Manila technology salary bands, this is around 6 to 9 employees. Use the Crossover Calculator for your own numbers.
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Factor in non-financial triggers
The maths gives you a headcount threshold. PEZA or BOI incentive eligibility, government contract requirements, and Foreign Investments Act capital obligations are separate questions that may override the cost crossover in either direction.
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Plan the graduation date
Allow 8 to 12 weeks for entity formation before the first payroll on your own entity. Factor in 3 to 6 weeks extra for bank account opening. Start the GEMO process while EOR continues running.
Philippines entity setup: what it actually costs
Forming a Philippines corporation typically costs between PHP 150,000 and PHP 600,000 all-in. The SEC registration fee is small. The gap is professional fees, minimum paid-up capital, bank account setup, BIR registration, and local government permits.
Allow roughly 8 to 12 weeks from the incorporation decision to your first payroll run. The bank account and BIR registration are usually the longest steps.
These are typical ranges. They are not law figures. There is no single law that sets what a Philippines corporation costs to form. The range reflects real market rates for professional services and government fees. It varies with the complexity of your ownership structure and whether you use a corporate services firm.
| Cost item | Typical range | One-off or recurring |
|---|---|---|
| SEC registration (Domestic Corporation) | PHP 2,000 to 10,000 in filing fees | One-off |
| Minimum paid-up capital | PHP 25,000 to 5,000,000 (varies by industry and foreign equity) | One-off (capital) |
| Corporate services / legal fees | PHP 50,000 to 200,000 | One-off |
| BIR registration and books | PHP 5,000 to 20,000 | One-off |
| Local government permit (Mayor's Permit) | PHP 5,000 to 30,000 depending on city | Recurring annually |
| SSS, PhilHealth, Pag-IBIG employer registration | PHP 0 direct (admin time) | One-off |
| Corporate bank account | PHP 10,000 to 50,000 minimum deposit plus admin time | One-off plus monthly fees |
| Employment contract templates and HR policies | PHP 30,000 to 100,000 | One-off |
| Realistic total setup cost (typical range) | PHP 150,000 to 600,000 | Mostly one-off |
Why paid-up capital matters for foreign-owned companies
If your parent company is foreign and wants more than 40% ownership in most industries, the corporation must meet the Foreign Investments Act minimum paid-up capital, which is typically USD 200,000 (roughly PHP 11,000,000 at current rates). This is a one-off capital requirement, not a fee, and it is held in the corporation. But it materially changes the financial model compared to a fully domestic setup. Service industries with 100% foreign ownership also typically require this capital threshold. Factor this into the build-vs-EOR decision early.
Philippines entity ongoing cost: typically PHP 80,000 to 150,000 per month
Running a small Philippines corporation typically costs PHP 80,000 to 150,000 per month. That covers outsourced payroll, BIR filings, bookkeeping, contribution remittances, and basic HR advisory.
Below 5 employees, this fixed overhead dominates the per-head cost. Above 12 employees the overhead amortises and the entity starts to look consistently cheaper.
These figures are typical market ranges for a small Philippines corporation with 1 to 15 employees. They are illustrative. They are not law figures. Actual costs depend on whether you outsource or hire in-house, the complexity of your BIR filing calendar, and the benefits programme you run.
| Monthly cost item | Typical range | What it covers |
|---|---|---|
| Outsourced bookkeeping and monthly accounts | PHP 20,000 to 50,000 | Cash reconciliation, BIR books, monthly financials |
| Payroll service (1 to 15 employees) | PHP 10,000 to 30,000 | Semi-monthly payroll, payslips, withholding tax |
| BIR filings (amortised) | PHP 5,000 to 15,000 | Monthly 1601-C, quarterly ITR, annual returns |
| Mayor's Permit and local fees (amortised) | PHP 3,000 to 10,000 | Annual city/municipality permit divided by 12 |
| SSS, PhilHealth, Pag-IBIG remittance admin | PHP 5,000 to 10,000 | Contribution submissions and records |
| HR and employment law advisory | PHP 10,000 to 30,000 | Contract reviews, DOLE compliance, policy updates |
| Philippines People Ops and first-point HR | PHP 15,000 to 40,000 | Onboarding, queries, leave admin |
| Software subscriptions (HRIS, payroll, accounting) | PHP 5,000 to 15,000 | Per-user SaaS |
| Total ongoing monthly (typical) | PHP 80,000 to 150,000 | 1 to 15 employee corporation |
Above 15 employees, dedicated Philippines HR capacity and in-house finance typically become necessary. The cost band widens at that point. Mandatory 13th month pay (Presidential Decree No. 851) adds one full month of base salary per employee per year; this is an employee cost, not the fixed overhead, but it raises the total per-employee cost on both sides of the comparison equally.
The cost nobody quotes: corporate officer liability
Philippines corporation directors and officers carry personal liability under the Revised Corporation Code (Republic Act No. 11232). BIR obligations, DOLE compliance failures, and SSS contribution shortfalls can all result in personal liability for officers.
EOR clients do not carry these duties. Teamed holds them as the legal employer and registered entity in the Philippines.
Most cost comparisons skip the officer-liability dimension because it is hard to put a number on. It is worth naming explicitly before you decide.
Personal officer duties under the Revised Corporation Code
Under Republic Act No. 11232 (Revised Corporation Code of the Philippines, 2019), directors and officers must act in good faith and in the best interest of the corporation. An officer who wilfully fails to remit SSS, PhilHealth, or Pag-IBIG contributions faces personal criminal liability under those laws, not just corporate penalties. These are personal obligations. They cannot be outsourced.
The compliance treadmill
- BIR Form 1601-C (monthly withholding): due by the 15th of the following month (eFPS filers). Late filing attracts a 25% penalty plus 12% annual interest, assessed against the company and personally against responsible officers in wilful failure cases.
- SEC annual reporting: General Information Sheet (GIS) due within 30 days of the annual meeting; Audited Financial Statements due within 120 days of year-end. Late filings carry per-day penalties.
- DOLE registration and labour standards compliance: mandatory for employers with 5 or more employees; violations expose the company and its officers to inspection and penalty orders.
- SSS, PhilHealth, and Pag-IBIG remittances: must be filed and paid on time each month. Criminal charges against officers are possible for non-remittance, not just civil penalties against the company.
- Mayor's Permit renewal: annually in January. Operating without a valid permit risks business closure orders.
Each obligation is individually manageable. Across a full year, they demand real management attention and a reliable local compliance function. An EOR carries all of these on its own entity.
When you should stay on EOR
Below 6 employees, with project-based hires, or while you are still testing the Philippines market, EOR is the right answer. The crossover is a maths threshold. It is not a strategic verdict.
Reversibility matters. Philippines entity setup is sticky. Dissolving a domestic corporation requires SEC approval, publication in a newspaper of general circulation, and can take months. EOR exit is straightforward.
- Under 6 Philippines employees at typical salaries: EOR is cheaper every month. The entity overhead has nothing to amortise against.
- Market validation phase: you are hiring 1 to 3 people to test commercial fit. Entity setup commits capital (including the paid-up capital requirement) and management attention before you know whether the Philippines market will deliver.
- Project-based hires: 6 to 12 month engagements where the formation cost will not amortise before the project ends.
- Foreign ownership concern: your parent company holds more than 40% and you are in a restricted industry. The Foreign Investments Act capital thresholds can make entity economics unfavourable at low headcount.
- No strategic depth requirement yet: senior hires are not expecting equity participation in a Philippines entity and you have no Philippines-specific tax treaty driver.
- Acquired team you may divest: post-acquisition holding patterns where adding a Philippines entity creates dissolution complexity later.
When you should switch to your own entity
Above 9 employees consistently, with a multi-year Philippines plan, or with a Foreign Investments Act-compliant structure, your own entity beats EOR on cost and unlocks capabilities the EOR structure cannot provide.
The single biggest structural pull is government-contract eligibility. Many Philippine government procurement rules require a locally registered corporation with Filipino majority ownership or qualifying foreign capitalisation.
- Sustained headcount above 9 Philippines employees at typical salaries: the entity overhead amortises across enough people that per-head cost falls below the EOR fee.
- Government or enterprise customer requirements: Philippine government contracts, certain BPO accreditations, and large enterprise procurement frameworks can require a locally registered entity. An EOR does not give you that.
- Tax treaty substance: some cross-border structures require actual Philippine substance (registered employees, local banking, BIR registration) in your own entity. EOR employment does not count as your substance for those purposes.
- PEZA or BOI registration: if you want the significant tax incentives available under the Philippine Economic Zone Authority (PEZA) or Board of Investments (BOI), you need a qualifying entity. EOR employment is not eligible for these incentive programmes.
- Long-term brand and employer identity: at scale, hiring in your own name in the Philippines signals commitment to the local talent market. This matters in competitive hiring for senior engineering and operations roles in Metro Manila.
How Teamed's Graduation Model handles the transition
Teamed graduates customers from EOR to their own Philippines entity on the same platform. Same Philippines specialist. Employment contracts novated to the new entity. No break in employee tenure or benefits.
Most providers treat graduation as a re-onboarding event. Employees re-sign and sometimes lose continuous service. Teamed treats it as a stage of the employment lifecycle.
The technical mechanic is contract novation: the employment contract transfers from Teamed's partner entity to your new Philippines corporation on a specified date. All terms carry across. Salary, statutory contributions, leave entitlement, and continuous service date all remain unchanged. The employee sees a different employer name on their payslip. Nothing else changes.
What we do operationally:
- Stand up your Philippines corporation through GEMO, typically 8 to 12 weeks, while EOR continues running in parallel.
- Handle SEC registration, BIR registration, and mandatory employer registrations (SSS, PhilHealth, Pag-IBIG) for the new entity.
- Novate every active employment contract on a single effective date.
- Migrate ongoing contribution obligations without any lapse in employee coverage.
- File final EOR-period contribution remittances and open new employer accounts on the new entity from the novation date.
- Provide the same People Ops specialist as the post-graduation primary contact.
The bank account is the usual bottleneck in the Philippines. Corporate account opening for a new domestic corporation typically takes 3 to 6 weeks. Plan for this before you set the first payroll date on your own entity.
The Graduation Model exists because every other EOR makes this hard. We treat the move as something we help you plan for from the day you hire your first employee through us.
How does Teamed handle Philippines employment 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, benefits, and the full Philippines employment law stack run on one platform.
Real HR and legal experts handle your Philippines hires from the first offer letter through every BIR 1601-C submission, SSS remittance, and annual 13th month pay calculation. An actual person, not a chatbot or a pooled queue. There is no setup fee and no exit fee. Every employer cost passes through at cost, itemised on every invoice. You see the SSS line at 10.5%, the PhilHealth line at 2.5%, the Pag-IBIG line at 2%, and the leave accrual for 5 days. Nothing is hidden inside the management fee.
EOR payroll, contractor onboarding, and entity setup all live on one platform. Run the Crossover Calculator to see the month the model flips. Start from the Philippines hiring overview. Key sources: Philippines Securities and Exchange Commission and Department of Labor and Employment (DOLE).
Frequently asked questions
At what headcount does an EOR stop being cheaper than a Philippines entity?
The crossover typically lands at 6 to 9 Philippines employees at Manila technology salaries. Below that, the EOR fee (from $599 per employee per month) is cheaper than the typical entity overhead of PHP 80,000 to 150,000 per month. Above it, the entity overhead amortises and per-employee cost falls below the EOR fee. Use the Crossover Calculator to run your own salary band.
How much does it cost to set up a Philippines corporation?
Typically PHP 150,000 to 600,000 all-in for a domestic corporation. The SEC registration fee is small. The range reflects paid-up capital requirements, professional fees, BIR registration, bank account setup, Mayor's Permit, and HR documentation. Foreign-majority companies typically need to meet the Foreign Investments Act minimum paid-up capital, which is materially higher and must be confirmed with a Philippines legal practitioner.
How long does it take to set up a Philippines entity and run the first payroll?
Around 8 to 12 weeks from the incorporation decision to first payroll. The bank account is typically the longest step. Corporate bank account opening for a new Philippines corporation takes approximately 3 to 6 weeks after the application is submitted. BIR registration runs concurrently but also requires in-person steps that add time.
What employer contribution rates apply on both sides of the Philippines comparison?
SSS employer contributions are 10.5% of the monthly salary credit, capped at the PHP 30,000 salary credit ceiling. PhilHealth employer premiums are 2.5% of monthly basic salary. Pag-IBIG employer contributions are 2%. These rates apply whether you employ via EOR or your own entity. They are the same on both sides.
What is Teamed's Graduation Model for Philippines entities?
Teamed graduates customers from EOR to their own Philippines corporation on the same platform. Employment contracts are novated to the new entity on a single effective date. Salary, statutory contributions, leave entitlement, and continuous service date all carry over unchanged. Teamed handles entity formation through GEMO, completes all SEC, BIR, and contribution registrations, and migrates obligations without any lapse in employee coverage.
The Philippines SEC and BIR registrations run in parallel but neither waits for the other. Companies that start the process at the crossover point often push the first payroll date out by two months waiting for the bank account to open. Begin the entity work two quarters before you expect to need it.
EOR is the right answer up to the crossover. Around 6 to 9 employees at Manila technology salaries.
Past that, your own Philippines corporation costs PHP 150,000 to 600,000 to form. Bank account opening adds 3 to 6 weeks on top.
When the maths flips, we tell you and move you across. That is the only honest version of this.
