Establishing a business entity in the Philippines requires one to be well-versed and familiar with the employment laws and regulations in the country.
The Labor Code of the Philippines is the law that governs everything related to employment - specifying rules and regulations regarding employment in the country, hiring practices, work conditions, benefits, working hours and termination.1
Although the law applies to all Philippines’ enterprises and joint ventures, it extends to employment relationships between Filipino nationals and foreign enterprises in the country as well. The Philippines’ Department of Labor and Employment (DOLE) is the principal government agency that enforces the employment laws in the country, besides monitoring and administering companies’ compliance with labor standards, as well as addressing labor-related issues.2
What is covered in The Labor Code?
Article 6 of The Labor Code of the Philippines states that all rights and benefits apply to all workers in the country, whether they work in the agricultural or non-agricultural sectors.3
Employment contract in the country is defined is an agreement whereby an employee renders services in exchange for compensation to be paid by the employer.4 There are several types of employment recognized by The Labor Code based on the employment contract, which is as the following:5
- Regular employment: Employees perform full-time work for a business over a course of an indefinite period of time.
- Probationary employment: This is a trial period once an employee has been hired, in which the employer can assess the new hire’s performance and suitability for the position. Probationary periods generally last for 6 months.
- Fixed-term employment: This refers to employees who contractually agree to finish work tasks within a finite period of time.
- Seasonal employment: Applies mainly to agricultural workers, or employees that are hired for a season out of necessity.
- Project employment: These employees’ contracts end as soon as the specific project that they are hired for is completed.
- Casual employment: This applies to an employee who engages in a task that is not considered crucial to the main tenets of the business. A casual employee can transition into a regular employee once he or she has worked for a year.
Here are several other important regulations that are included in The Labor Code of Philippines:6
- The normal working hours of an employee is a maximum of 8 hours per day.
- For work that is performed beyond normal working hours, the employee is entitled to be paid for the overtime work, which is subjected to an additional compensation equivalent to the employee’s regular wage plus at least 25% thereof.
- It is the duty of the employer, whether operating for profit or not, to provide each employee with a rest period of not less than 24 hours after every 6 consecutive normal work days.
- An employee shall be paid an additional compensation of at least 30% of his or her regular wage should the employee be made to work on his or her rest day, and shall be entitled to such additional compensation for work performed on Sunday if it is their established rest day.
- Every employee shall be entitled to regular daily wage during regular holidays.
It is noteworthy to mention that employees that underwent illegal dismissal in Philippines will be compensated through reinstatement of their position, entitlement of full back wages, moral and also exemplary damages.7
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- Employment Act And Labor Laws In The Philippines ↩︎
- Philippine Labor Contracts: What You Need to Know ↩︎
- Bureau of Labor Relations: Preliminary Title ↩︎
- Principles of Employment Contracts ↩︎
- 7 things employers need to know about Philippine labor and employment laws ↩︎
- Bureau of Labor Relations: Labor Code of the Philippines ↩︎
- Explainer: Illegal dismissal ↩︎