Employee benefits in the Philippines: All you need to know

Hiring Filipino workers has so many advantages for companies looking to take advantage of a global talent marketplace. Filipinos are fast learners, adaptable, and dedicated. Most Filipinos are well-versed in English, and this Southeast Asian workforce is globally-renowned for their hard-work and loyalty.

The cost of living is significantly lower in the Philippines than in other global hubs. It's typically around half that of the US.

If you’re looking to expand your team globally, you’ll soon discover that hiring employees in other countries is not exactly simple. Understanding what statutory benefits are required in a foreign country like the Philippines (as well as the in-market expectations for compensation) can pose a serious challenge.

We want to make it easy to understand your obligations as an employer of Filipino talent. As an experienced employer of record with entities all over the world, Remote’s team can make managing a competitive and compliant benefits package across multiple countries (including the Philippines) simple, inexpensive, and scalable.

In this guide to benefits for Filipino employees, we’ll explain the mandatory benefits you must provide as well as additional perks you can offer to give your business an edge in attracting top talent. We’ll walk you through the following key elements of hiring in the Philippines:

• Who is entitled to benefits in the Philippines?

• Employee benefits you must provide by law

• Supplemental benefits to help you attract top talent in the Philippines

• How to set up and manage benefits for international employees

(All ready to start hiring in the Philippines? Visit Remote’s Guide to hiring employees and contractors in the Philippines for more detailed information that will help you get started right away.)

Who is entitled to benefits in the Philippines?

The labor laws in the Philippines are administered by the Department of Labor and Employment. The Philippines employee benefits all depend on which of the four kinds of employment arrangements is underway: regular, project-based, seasonal, and casual employment.

Laws and regulations may differ depending on the nature of the employment arrangement. However, the law recognizes the job security of any employment arrangement.

General minimum conditions of employment in respect to working hours, rest periods, overtime, age, night shift, holidays, and leave are codified in the Book 3 of the Philippines Labor Code. Exceptions can be made for managerial-ranked employees, field personnel, and some other workers.

You must minimize misclassification risk

Note that in the Philippines, independent contractors are not entitled to any specific statutory benefits. Any benefits or remuneration are determined by the contractual agreement between your business and the contractor.

It’s important to understand this delineation, and this is where global employment can start to get more complicated.

Regardless of whether you consider a worker to be an employee or a contractor, legislators will make the only determination that matters. If you’re found to have an employee relationship and you’ve neglected to provide statutory benefits, you’ll open your company up to the serious risks of misclassification and subsequent fines or penalties.

For more detailed information about understanding this concept, be sure to read our dedicated guide to employee misclassification.

Statutory and common employee benefits

Statutory benefits, also known as mandatory benefits, are entitlements that employers are obligated by law to provide to their employees. Common examples include benefits like paid annual leave, parental leave, worker's compensation insurance, and paid sick leave.

In the Philippines, employers must pay a monthly contribution to the following funds:

Social Security System (SSS)

This state-run insurance program offers benefits under the Social Security and Employees' Compensation (EC) Programs.

The Social Security Commission administers the program. It is a body made of representatives from the government, employers, and employees.

Social insurance covers private-sector employees, self-employed workers, as well as household workers. A spouse of the insured person is also entitled to receive social benefits under this scheme.

The benefits include:

• maternity pay

• sickness pay

• pensions

• disability benefits

• salary loans

• life insurance

• funeral grants

The contribution depends on the salary bracket of the employee. In general, the employer (ER) is responsible for contributing 7.37% of the total contribution, and the employee is responsible for 3.36%.

Health insurance

PhilHealth is the name of the health insurance plan in place for private employees in the Philippines. As of 2021, the monthly contribution rate for the health insurance program is 3.5% of the employee's basic salary. The monthly contribution is equally divided between employee and employer. PHP 10,000 is the salary minimum and PHP 70,000 is the salary ceiling.

PhilHealth covers inpatient benefits, outpatient benefits, Z benefits, and SDG benefits (explained below):

• Z benefits are offered to the patients who need prolonged hospitalization and more expensive treatment

• SDG benefits include treatment packages for malaria, HIV-AIDS, tuberculosis, animal bites, and others diseases

Employers are not obligated to provide any specific insurance benefits since PhilHealth offers the above entitlements.

Many global companies may opt out of offering private health insurance to Filipino employees as a result, but it’s still common for many employers to offer secondary health insurance to their employees to help them access more specialized care (and to reduce wait times for more common treatment).

Indeed, offering a health insurance benefit, or other additional insurance benefits (like dental insurance, vision insurance, and life insurance), can be such an effective way to build trust with new hires and separate your offer from that of a competitor in the Philippines.

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Home Development Mutual Fund (HDMF)

The HDMF, also known as Pag-IBIG fund, provides housing loans. It also offers financial assistance to Filipinos to enable them to afford decent housing.

Workers who earn less than PHP 1,500 a month contribute 1% of their salary to the Pag-IBIG fund. Workers who earn more contribute 2% of their monthly salary. Employers have to contribute 2% regardless of the salary bracket of the employee.

The highest contribution to HDMF fund should not exceed PHP 200 in total (PHP 100 for employees and PHP 100 for employers).

Working hours and holidays

In the Philippines, an employee's regular hours of work are a maximum of eight hours a day, excluding an hour’s lunch break. This does include short breaks for rest during the working hour.

Naturally, there are exceptions to these regular working days. It depends on the company whether to extend them, but all rules below are applied to all organizations inside the Philippines.

Weekly rest day

Every employee in the Philippines is entitled to get 24 consecutive hours of rest after six consecutive working days.

Public Holidays

The workers in the Philippines are entitled to two types of holidays: regular holidays and special holidays.

Regular holidays:

There are 12 paid public holidays.

Special (non-working) holidays: On special (non-working) holidays, a no-work no-pay policy is applied. If these days are worked, they can be paid. There are six special holidays a year.

Minimum wage

The minimum wage in the Philippines varies between regions. Each region's tripartite wage boards set the minimum wage rate, which ranges from PHP 282 and PHP 537 a day.

The minimum wage rate also depends on the industry sector. The industry sectors are broadly divided into agricultural and non-agricultural.

When an employee spends more than the required eight hours working, he or she is entitled to additional pay, as below:

Night shifts

The labor laws of the Philippines make it mandatory to pay night shift differential to the workers working between 10pm and 6am. The nightshift differential must not be less than 10% of the worker's regular salary.

Overtime

If an employee works more than eight hours on an ordinary workday, they are entitled to an extra 25% of their average hourly rate.

Premium pay

Employees are eligible to receive premium pay for working on their rest days or special holidays. If an employee needs to work on their rest day or special day, they receive an extra 30% of their daily salary. If they work on a special day that is also their rest day, they get 50% extra payment. If the work is performed on a regular holiday that is also a rest day, the employee gets a total of 260%.

13-month pay entitlement

13 month pay, or the colloquially named “13 month salary” is a statutory requirement that employers must provide to certain employees.

All non-management employees in the Philippines are entitled to receive 13th-month pay. This extra month of salary must be released by 24 December. Some employees opt to receive the payment into two installments — in May and December.

Employees who have worked for at least one month for an employer are entitled to receive the 13th-month pay. This is paid pro rata for those who work less than the year.

Employers need to file a compliance report by 15 January of the following year to confirm payment has been made.

Service incentive leave

Employers in the Philippines are obligated to grant five days of paid leave to every employee who has worked for at least one year. This can be used either as sick leave or vacation leave.

Sick leave

Insured employees are entitled to receive at least 90% of their average daily wage if they get hospitalized or incapacitated at home for at least three days. The three-day waiting period does not apply to the cases of injuries and acute diseases.

Employees who are ill are eligible to receive 90% of their average daily salary for up to 120 days in a year. However, the employee cannot claim this benefit for more than 240 days for the same illness. To be eligible, the employee must have contributed to the Social Security System for at least three months in the prior 12 months.

Employers are responsible for paying sickness benefits to their employees which can then be reimbursed from the SSS.

Maternity and paternity leave

Both married and unmarried female workers are entitled to 60 days of paid maternity leave for their first four pregnancies, including miscarriages.

This is dependent on them contributing to Social Security for at least three months during the prior 12-month period. If a C-section is needed or there is an ectopic pregnancy requiring surgery, they are eligible for 78 days of paid leave.

Married male workers can have seven days of paternity leave for the first four pregnancies of their wives. Male workers can apply for paternal leave only when they are living with their spouse at the time of delivery or miscarriage. They need to apply for leave within a reasonable period.

Solo parent leave

Solo parents can take up to seven days’ leave to fulfill their parental duties, especially where physical presence is necessary. To be eligible for solo parent leave, one must work for at least one year, including holidays and authorized absence. This one-year period of service can be continuous or broken.

Leave for victims of gender violence

In the Philippines, female workers who are the victims of violence are entitled to ten days of paid leave. The violence may include physical, sexual, psychological, or economic abuse.

Special leave for gynecological surgery

Women requiring gynecological surgery who have worked for at least six months are entitled to get up to two months of fully paid leave.

Bereavement Leave

Employees can take up to three days of unpaid leave on the occasion of a death in the family.

Retirement benefit

The pension scheme in the Philippines is regulated under Social Security System. Retired employees who have paid their contribution to SSS for at least 10 years before their retirement are eligible to receive a monthly pension.

Workers who have paid their contribution for less than 10 years get a lump sum equal to the contribution made by them and their employers, including interest earned.

Philippines —

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Supplemental benefits to attract top talent in the Philippines

Companies often offer additional benefits in addition to those that are mandatory according to local employment law.

If you develop and offer a globally competitive benefits package to Filipino talent, you’ll put your business in the right position to land a critical candidate over a competitor. Even better – an equitable compensation plan will maintain morale, harmony, and motivation for any globally distributed team (a critical factor for employee retention rates).

Job seekers are now actively searching for certain perks in a global talent market where remote work is readily available (we explain in more detail in our values-based benefits guide).

Creating a globally competitive and compliant benefits package doesn’t have to be complicated. Remote cares passionately about providing perks and benefits to enable your global team to enjoy security, stability, and work-life balance. Our team of internal HR specialists and global benefits experts are constantly working with our customers to create customized and competitive benefits packages to attract top talent.

The size of your business shouldn’t prevent you from sourcing international talent either. If you’re a smaller business looking to employ Filipino workers or other international talent, your benefits plan doesn’t have to be cost-prohibitive.

This small business guide to affordable global benefits will help you find inexpensive perks that international employees will love.

In the Philippines, if you want to attract the highest calibre of candidates, you may consider providing the following additional benefits.

Competitive salary

The average wage in the Philippines is around PHP 44,600 a month. As in any other country, salaries vary widely depending on job title, education, and other factors. Attracting the best Filipino candidates will undoubtedly be heavily influenced by salary levels.

Additional paid leave

Paid vacation in addition to national holidays and annual leave can be an attractive incentive. Many companies operating in the Philippines offer up to eighteen days of paid vacation to their employees. Some extra paid time off will help international employers retain high-performing employees.

Expanded parental leave

Similar to offering additional paid time off, providing more globally consistent parental leave provisions in the Philippines will be met with loyalty and commitment in return. In the Filipino culture, family connections are strong and the extended family unit tends to be very close.

As a result, any additional provisions aimed at assisting with parental care are so highly valued in the minds of employees.

Mid-year bonus

In addition to 13-month pay, many companies offer an additional mid-year bonus to their employees. It’s relatively common for local employers to offer this extra payment as an incentive to attract and retain key professionals.

How to set up and manage benefits for international employees

Whether you’re hiring a customer success manager from the Philippines, a translator from Japan, or a public relations executive from Colombia, employees universally evaluate new opportunities based on the quality of the benefits their employers provide.

Instead of building a fully-owned local legal entity with a specialist HR function in each new market, an employer of record provides a cost-effective, fast, and secure alternative to help you grow your team across borders.

When should you use an employer of record?

If you don’t have an established process to manage the complicated parts of scaling global hiring (in APAC or abroad), an employer of record like Remote will give you immediate relief.

Remote’s EOR service gives you the advantage of dedicated global HR experts that can offer the insight you need to create a strong benefits package, a compliant employment contract, and a competitive offer.

We’ve previously dedicated an entire guide to when should you use an employer of record, but there are a few critical trigger areas where an EOR can dramatically minimize your risk:

• Creating a strong global benefits package

• Managing benefits in compliance with local labor laws

• Handling dismissals and terminations

• Protecting any IP & patents produced by your remote employees

An employer of record like Remote manages the complicated parts of international employment. We handle the complexities of running your global HR operations in the backend and our software puts everything in one dashboard where you can:

• Manage payroll and time off

• Handle local employment taxes

• Stay compliant with statutory benefits

• Offer competitive and equitable global compensation packages

• Scale your global team faster

Learn how Remote simplifies international hiring so you can scale your distributed team faster.

Guarantee compliance with Remote’s customized global benefits plans

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