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Compliance
Published:
January 13, 2026
Last updated:
January 13, 2026
For businesses expanding into the Philippines, understanding the country's comprehensive employment law framework is essential for compliant hiring and payroll management.
The Philippines represents a strategic APAC market with large English-speaking talent pool, strong BPO and customer service sectors, and competitive labor costs. However, employment regulations provide strong employee protections through security of tenure provisions, mandatory benefits, and procedural requirements.
Organizations managing employees across multiple APAC markets face complexity when adding the Philippines. Unlike markets with simpler termination (Singapore, Hong Kong), the Philippines requires demonstrating "just cause" or "authorized cause" with strict procedural compliance.
Employment is regulated by the Labor Code of the Philippines, which establishes minimum labor standards and "security of tenure"—regular employees cannot be dismissed without just cause or authorized cause.
Key legislation:
Regulatory authorities: Department of Labor and Employment (DOLE) conducts inspections and enforcement; National Labor Relations Commission (NLRC) adjudicates labor disputes; SSS, PhilHealth, and Pag-IBIG administer respective benefit programs.
Learn more about Philippines employment compliance.
While oral contracts are valid, written contracts strongly recommended to document terms and prevent disputes.
Mandatory provisions: Employment status (regular, probationary, project-based), job duties, work location, compensation, working hours, leave entitlements, probation period, termination conditions, statutory benefits.
Employment status categories:
Regular Employment: Employees performing necessary and desirable work. After probation (or one year), attain regular status with security of tenure—cannot be dismissed except for just cause or authorized cause.
Probationary Employment: Maximum 6 months trial period. Termination must be for just cause (failure to meet standards, misconduct) with due process. Failure to regularize within 6 months converts employee to regular status.
Project-Based Employment: Hired for specific projects with determined completion dates. Employment ends upon project completion. Must report completion to DOLE within 30 days.
Fixed-Term, Casual Employment: Other categories with specific requirements and automatic conversion to regular status under certain conditions.
Standard working hours: Maximum 8 hours per day. Standard work week typically 6 days (Monday-Saturday), 48 hours total.
Meal breaks: Minimum 1-hour break per 8-hour work period.
Example: Employee earning PHP 20,000/month (PHP 95.24/hour) works:
Regular holidays: 12 days annually (New Year's, Maundy Thursday, Good Friday, Araw ng Kagitingan, Labor Day, Independence Day, National Heroes Day, Bonifacio Day, Eid'l Fitr, Eid'l Adha, Rizal Day, Christmas). Paid 200% even if no work.
Special non-working days: Declared periodically. Paid 100% if no work; 130% if working.
Service Incentive Leave (SIL): Minimum 5 days paid leave annually after one year of service. Unused SIL encashed at year-end or upon separation.
Minimum wage: Varies by region and sector. Metro Manila (NCR): PHP 610/day for non-agriculture as of 2025. Other regions range PHP 350-610/day.
Payment frequency: At least every two weeks or twice monthly (common: 15th and end of month). No interval exceeding 16 days.
Payslip requirements: Itemized showing basic salary, allowances, overtime, holiday pay, night differential, deductions (SSS, PhilHealth, Pag-IBIG, withholding tax), net salary, 13th-month pay.
Mandatory: All rank-and-file employees entitled to 13th-month pay equal to 1/12 of total basic salary earned during calendar year.
Payment deadline: On or before December 24. Many employers split (half mid-year, half December).
Example: Employee earning PHP 20,000/month basic salary (full year): 13th-month pay = PHP 20,000
Permitted deductions: Statutory contributions, withholding tax, court orders, employee-authorized deductions. Arbitrary deductions prohibited.
Explore payroll compliance across APAC markets.
SSS provides retirement, disability, death, sickness, maternity, unemployment benefits.
Contribution: 14% total (employer 9.5%, employee 4.5%) of monthly salary credit (MSC), capped at PHP 30,000.
Deadline: By 10th of following month.
PhilHealth provides health insurance coverage.
Contribution: 4% of monthly salary (employer 2%, employee 2%), minimum PHP 500/month to maximum PHP 5,000/month.
Deadline: By 10th of following month.
Pag-IBIG provides housing loans and savings.
Contribution:
Deadline: By 10th of following month.
Combined employer contributions: Approximately 13-14% of employee's monthly salary.
Example - PHP 25,000/month employee:
Late payment penalties: 2-3% monthly penalties plus interest, with potential criminal liability for persistent non-compliance.
Alien Employment Permit (AEP): Issued by DOLE authorizing foreign national to work for specific employer in specific position. Valid typically one year, renewable.
9(g) Working Visa: Issued by Bureau of Immigration allowing foreign national to work and reside.
Labor market test: Must demonstrate no qualified Filipino workers available through documented recruitment efforts.
Processing time: Typically 2-4 months for AEP + visa.
Penalties: Hiring without valid AEP and visa results in fines, business permit revocation, blacklisting for employers; deportation and entry bans for foreign workers.
Performance/conduct-based: serious misconduct, willful disobedience, gross and habitual neglect, fraud or breach of trust, commission of crime, analogous causes.
Business-related: labor-saving devices, redundancy, retrenchment to prevent losses, closure, employee disease/illness. Separation pay: One month salary per year of service (or one-half month depending on cause).
Failure to follow due process: Makes termination defective even if just cause exists, creating liability for nominal damages (PHP 30,000-50,000) or full illegal dismissal.
If found illegal: reinstatement to former position, full back wages from dismissal until reinstatement (potentially years), moral and exemplary damages in bad faith cases.
Example: Employee with 5 years service earning PHP 25,000/month terminated for redundancy with proper procedure:
Learn more about employee termination challenges across APAC.
DOLE inspections verify wage payment (minimum wage, overtime, 13th-month, holiday pay), working hours, SSS/PhilHealth/Pag-IBIG enrollment, employment contracts, occupational safety, foreign worker documentation.
Enforcement: Compliance orders, work stoppage orders for serious safety violations, administrative fines, public listing of violators, NLRC proceedings for unresolved disputes.
Record retention: Practical recommendation: maintain employment records, payroll documentation, time records minimum 3-5 years.
Strong security of tenure: Among strongest employee protections in APAC, comparable to Japan, significantly higher than Singapore/Hong Kong/Malaysia.
Semi-monthly payroll: Twice-monthly payment cycle differs from monthly cycles in most APAC markets.
13th-month pay: Mandatory benefit unique to Philippines. Budget for additional month's salary annually.
Multiple premium rates: More complex overtime/holiday calculations than most markets (ordinary 125%, rest day 130%, holiday 200%, plus night differential 10%—premiums stack).
Lower statutory contributions: SSS+PhilHealth+Pag-IBIG (~13-14%) lower than Singapore CPF (17%), Malaysia EPF+SOCSO+EIS (~15%), mainland China (30-37%).
Project-based employment: Commonly used with DOLE reporting requirements not typical in other markets.
Explore AYP's EOR services across APAC markets, or learn about compliance challenges when hiring across Asia.
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