Hiring guide in Philippines

Legal framework

The Philippines Labour Code, introduced in 1974 by President Ferdinand Marcos, sets out the main laws on employment in the country. It covers rules for hiring, work conditions, benefits, working hours, and termination. 

The Department of Labour and Employment (DOLE) oversees these laws and ensures workers are protected from unfair and discriminatory practices. The code applies to all workers, whether in agriculture or other sectors, and includes regulations on training, health and safety, social welfare benefits, and retirement.

Types of employment contracts

The Labour Code outlines various employment types based on job duration and responsibilities in employment contracts. There are five main categories.

These include regular employment, where the employee is hired for an indefinite period; project employment, which is for a specific task with a set duration; seasonal employment, which lasts only during certain times of the year; casual employment, where the employee is hired for temporary work related to the employer’s business; and fixed-term employment, where the contract specifies the duration of the job from the start. 

Fixed-term contracts are not limited to seasonal work and can be agreed upon for any period. Also, part-time employees with regular contracts are entitled to the same rights as full-time permanent staff.

Content of an employment contract

The Labour Code of the Philippines establishes minimum standards for employment contracts to ensure they meet certain conditions. 

These include the employee’s personal details, job title, job description, pay and benefits, the length and terms of the probationary period (if applicable), notice periods, the code of conduct, grievance procedures, and company policies. 

An employment contract is a legal agreement between an employer and an employee that outlines their rights and responsibilities. While both parties can negotiate the terms, they must comply with the minimum standards set by the Labour Code, which cannot be less favourable than those prescribed by law.

Oral, written or electronic employment contracts

An employment contract must meet basic requirements like agreement, purpose, and reason to establish a legal relationship. It also needs to follow certain formal rules. The contract must be written and signed before the employee begins work. 

In the Philippines, the E-Commerce Act and the Supreme Court’s Rules on Electronic Evidence allow electronic signatures and documents to be legally recognised. However, there are specific conditions that electronic signatures must meet for them to be valid.

Working hours

In the Philippines, the standard working hours are 8 hours a day or 48 hours a week, allowing employees enough time for rest and personal activities. Employees are entitled to a daily unpaid meal break of at least one hour or a paid 20-minute meal break. 

In emergencies, employees may be asked to work overtime outside their usual hours, but they must receive the appropriate overtime pay. Employees who work more than eight hours are entitled to overtime pay. This pay is 25% higher than their usual wage or 30% higher if the work is done on a rest day.

Night work

According to the Philippine Labour Code, work carried out between 10:00 PM and 6:00 AM the following day is considered night shift work. Employees working during these hours are entitled to at least 10% more than their regular wage unless they are exempt. However, employers and workers can agree to a different payment arrangement if needed.

There are also specific restrictions on women’s night work. Women are not allowed to work in industrial settings between 10:00 PM and 6:00 AM or in non-industrial settings (except agriculture) between midnight and 6:00 AM. In agriculture, women can work at night only if they are given at least nine consecutive hours of rest.

Breaks and types of leaves

Employers are responsible for ensuring that employees get the required rest, both daily and weekly, to maintain a healthy work pace. Employees must be given at least one hour of unpaid break for meals each day. Although, in certain situations, a shorter break may be allowed, it should be paid for and last no less than 20 minutes. 

Employers can also schedule employees to work six days a week. Employees who are not exempt from these rules are entitled to a rest period of at least 24 hours after six consecutive working days.

Annual leave

In the Philippines, private-sector employers are not required by law to provide annual or vacation leave. However, employees who have worked for at least a year are entitled to a paid service incentive leave (SIL) of five days, except for exempt employees. While the law sets the minimum leave at five days, many employers offer more, with 10 to 15 days of paid leave annually. 

If a company offers more than five days of leave, it is not obligated to provide the additional SIL days. If the SIL is not used by the end of the year, it must be converted into a monetary payment for the employee. Employers also have the right to manage when their employees can take this leave.

Public holidays

The Philippines has 12 regular holidays and 3 special non-working holidays. Each region also observes additional provincial holidays. 

The regular holidays are New Year’s Day (1st January), Maundy Thursday, Good Friday, Eidul Fitr, Eidul Adha, Araw ng Kagitingan (the Monday closest to 9th April), Labour Day (the Monday closest to 1st May), Independence Day (the Monday closest to 12th June), National Heroes Day (the last Monday of August), Bonifacio Day (the Monday closest to 30th November), Christmas Day (25th December), and Rizal Day (the Monday closest to 30th December). 

The special holidays are Benigno S. Aquino Jr. Day (the Monday closest to 21st August), All Saints Day (1st November), and the last day of the year (31st December).

Salary

Employers must pay their workers at least the minimum wage. In addition, they are required to pay overtime for any hours worked beyond the regular working day. The overtime pay rates are as follows:

• For hours worked beyond 8 hours in a day, employees receive 125% of their regular hourly wage.
• For overtime on holidays or rest days, the rate increases to 130% of the hourly wage for the first 8 hours.

All employees who fall under the Revised Guidelines for the 13th Month Pay Law are entitled to a 13th-month bonus. This applies to all workers who have been employed for at least one month during the year, regardless of their salary, position, or type of contract.

To calculate the salary and taxes in the Philippines, click here.

Sick leave

Employees are entitled to sick leave if they are unable to work due to illness or injury. They must provide a medical certificate to the employer before or after taking sick leave. If unaware, the employer must be informed about the sickness within five days.

If an employee suffers from a temporary disability due to injury or illness, they are entitled to receive an income benefit from the system. This benefit will be 90% of their average daily salary, but it will not be less than 10 Pesos or more than 90 Pesos per day. The benefit can be received for a maximum of 120 days unless stated otherwise in the rules.

Paternal leave

Parental leave allows both parents to care for their newborn while keeping their job secure. If the father is absent, deceased, or unable to care for the child, the maternity leave can be transferred to another caregiver. This person can be a close relative or the mother’s current partner who lives with her. 

The mother will choose the most suitable caregiver, considering what is best for the child. This flexibility ensures the child gets the care and attention needed during the important early stages of life, even without the father.

Paternity and maternity leave

Female employees in both the public and private sectors, including those in informal work, are entitled to 105 days of maternity leave with full pay. They can also extend this by 30 days, although this additional time is unpaid. The leave is available to all female workers, regardless of their civil status or the legitimacy of their child. 

The Paternity Leave Act of 1996 entitles married male employees to 7 days of paternity leave with full pay for up to four deliveries by their legitimate spouse, as long as they are living together.

Methods of employment termination

Terminating an employment contract, whether due to dismissal or voluntary resignation, must be done fairly, transparently, and in line with legal requirements. This applies to both employers ending a contract and employees choosing to resign.

In the Philippines, dismissals can only occur for valid or authorised reasons, as outlined in the Labour Code. Employees on trial periods or fixed-term contracts can be let go more easily, but those with open-ended contracts are given more protection. The Labour Code generally forbids the termination of indefinite contracts, except in specific circumstances where authorised or valid reasons apply.

In all cases, the employer must prove the justification for termination. If they fail to provide a valid reason, they will face legal consequences.

Ordinary dismissal by the employer

Employment can be terminated for reasons related to the employee, which may include both personal faults and situations unrelated to wrongdoing. 

Personal faults that can lead to dismissal include serious misconduct, such as disobeying lawful orders from the employer, neglecting duties regularly, committing fraud or breaching trust, or committing a crime against the employer or their family. Other serious violations may also be grounds for dismissal. 

In addition, employers may end employment for business-related reasons to protect their operations. This can include introducing labour-saving measures, making redundancies to reduce losses, retrenching employees due to financial difficulties, or closing a business for reasons not related to financial losses.

Notice period and challenging the dismissal

Courts have the authority to impose serious penalties on employers who fail to follow the proper procedures when terminating an employee. The law generally favours the employee, meaning the employer must provide evidence to justify the termination. If an employer cannot prove a valid reason for dismissal, they will face legal consequences.

If an employee is wrongfully dismissed, they have the right to be reinstated to their position, along with their seniority and benefits.

The required notice period depends on the type of termination. If the employee resigns, they must give at least one month’s written notice. If the termination is authorised, the employer must provide written notice to both the employee and the Department of Labour and Employment (DOLE) at least 30 days before the termination takes effect, explaining the reasons for it.

For a dismissal based on just cause, two written notices must be issued, with a reasonable time gap between them.

Rights and obligations of unemployed persons

In the Philippines, unemployment financial compensation is a monetary benefit available to eligible employees, including domestic workers (kasambahays) and Overseas Filipino Workers (OFWs), both at sea and on land, who are separated from their jobs involuntarily. This could happen for reasons such as retrenchment, downsizing, company closure, the introduction of labour-saving technology, or redundancy.

Severance pay

Severance pay is given only to employees who are dismissed for reasons beyond their control. If the dismissal is not the employee’s fault, they are entitled to severance pay as compensation for losing their job. The amount of severance pay depends on the reason for dismissal, with the calculation always favouring the employee. There are two main categories for severance pay: dismissals due to personal illness and dismissals for work-related reasons.

Probationary period

In the Philippines, probationary employees are protected by labour laws from unfair dismissal. They are usually employed on probation for a period of one to six months, which can be extended if the job requires an apprenticeship. 

During this probationary period, employees are entitled to basic legal protections, including being shielded from dismissal for using their legal rights, such as personal leave or maternity benefits. Employers are also not allowed to discriminate against probationary employees or withhold any contractual benefits during this time.

Intellectual property rights

Under Philippine law, employers usually own the intellectual property (IP) created by employees during their work as long as it is connected to the employer’s business and the employee’s duties. 

Employers should include a clear IP protection clause in employment contracts for new hires, covering the ownership of IP, how IP can be commercialised, conditions for transferring ownership, confidentiality of trade secrets, non-compete agreements, and a power of attorney clause. If the IP is directly related to the business or the employee’s role, it belongs to the employer. 

To avoid confusion, any exceptions to these rules should be clearly stated in the contract. IP protections only apply when there is an employment relationship, so it’s crucial to ensure contractors are properly classified.

Employee data privacy

The Data Privacy Act of 2012 regulates the collection and processing of personal information, including employee data. It is enforced by the National Privacy Commission. Personal information under the law includes any data that can identify someone, like names, addresses, contact details, and sensitive information.

Employers must follow the Data Privacy Act and its rules when handling the personal information of employees and job applicants. Failing to comply can lead to severe penalties, such as fines or imprisonment. Affected individuals have the right to file complaints with the National Privacy Commission or pursue legal action.

Employers need to have proper policies in place to ensure they follow data privacy laws, and these policies should be regularly reviewed and updated to reflect changes in the law or technology.

Prohibition of competition

Non-compete clauses are designed to protect an employer’s business interests without unfairly limiting an employee’s chances of finding another job. In the Philippines, these clauses are legally valid if they are reasonable in terms of duration, scope, and location.

The restriction should last for a reasonable time, in line with the employee’s position and the industry standard. The activities that are restricted should be closely related to the employer’s business, and any geographical limits should be sensible and reflect areas where the employer has a legitimate interest.

Both employers and employees can agree to such clauses in their contracts as long as they do not go against public policy or common decency. Courts may strike down overly harsh clauses that unjustly prevent an employee from earning a living after leaving the employer.

Remote working policy

The Telecommuting Act, also known as Republic Act No. 11165 or the “Work From Home” Law, officially recognises remote working as an accepted option for private employees in the Philippines. Section 4 of this law introduces the Remote Work Programme, allowing employees to work from locations other than the traditional office. The Department of Labour and Employment has set out specific rules for how this programme operates.

The law stresses the importance of clear communication. Employers must explain the terms and conditions of remote work in writing and clarify the responsibilities of remote workers.

Participation in the programme is voluntary and requires mutual agreement between the employer and the employee.

Responsibilities within a remote work arrangement

When setting up a remote working agreement, employers must take the necessary steps based on key principles. Remote work has become increasingly common, and it is important for employers to provide the right tools and resources for employees working from home. 

Clear policies must be put in place to ensure fairness, including guidelines on working hours, communication, performance reviews, and data security. It is also vital to support employees’ mental health and well-being by offering resources and support.

Good communication and coordination are essential for employees working in job-share arrangements. Performance evaluations and pay should reflect the agreed distribution of work. While remote work can be challenging, it offers flexibility and the potential for a more productive work environment.

Health and safety at home

Workplace safety and health go beyond the office and apply to remote work as well, with the home being considered part of the workplace. Employers have a duty to ensure the health and safety of their employees, even when they are working remotely. This means assessing potential risks, finding ways to reduce them, and talking to employees about their work environments. 

Key areas to focus on include managing stress, providing mental health support, ensuring proper use of equipment, and maintaining a safe workspace. Employers must also share safety guidelines, offer necessary training, monitor health, and enforce safety standards for any equipment provided. Adapting health and safety rules for remote work requires a specific approach to ensure all employees work in a safe and healthy environment.

What are the advantages of hiring employees from the Philippines vs other countries?

Hiring employees from the Philippines offers several advantages compared to other countries. The Philippines has a large, well-educated, and skilled workforce, particularly in areas like customer service, IT, and administrative support. English is widely spoken, so communication with international clients or teams is generally easy and efficient. 

The country also has a strong work ethic, with many employees willing to work flexible hours to meet global demands. Labour costs tend to be lower than in other countries, making it a cost-effective option for businesses. 

Additionally, the Philippines has a cultural affinity with Western countries, which helps employees adapt quickly to global work practices.

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• Local support: We can assist you in understanding and complying with the relevant local laws.