Closing a Company in the Philippines: How to Shut Down and Retain Key Talent

Introduction: Why Companies Close Entities (But Keep Talent)

In a fast-moving global market, mid‑sized Singaporean businesses often reassess their presence in the Philippines—closing entities to curb costs, streamline operations, or adapt strategic direction. Yet, despite closing a legal entity, the value of your experienced local team remains vital.

Local employees bring:

• Strong cultural fluency
• Deep regional market insights
• Established client relationships
• Domain expertise

Losing them could disrupt operations, diminish capacity, and create re-entry challenges.

In this guide, we'll show how to close a company in the Philippines while retaining high-performing employees. We’ll explain legal requirements, risks, and how a strategic Employer of Record (EOR) in the Philippines setup lets you hire in the Philippines without an entity, ensuring continuity for both your business and your people.

1. What Happens When You Close a Company in the Philippines

Legal & Compliance Requirements

You must navigate a structured dissolution process, covering:

• Board resolution to initiate closure 
• Submission of closure notice 30 days before termination to both DOLE and employees
• DOLE Notice and documentation before layoff 
• Obtain tax clearance and file final returns with BIR  
• Settle statutory obligations: SSS, PhilHealth, Pag-IBIG, final payroll 
• Asset liquidation and deregistration with SEC or DTI 

This process typically spans 12–18 months, influenced by outstanding liabilities and compliance

Timeline & Workflow

1. Pre-closure planning: Audits, board resolutions 
2. Formal announcement: Notify DOLE and staff 
3. Statutory settlements: Final payroll, benefits, and statutory filings 
4. Liquidation steps: Asset disposal, tax clearance, deregistration 
5. Final struck-off: Formal certificate of closure 

2. Employee Obligations During Shutdown

Philippine labor laws, enforced by the Labor Code, require you to:

• Issue at least 30 days written notice to employees and DOLE
• Provide separation pay for authorized terminations (e.g., redundancy, closure):
  • Redundancy: 1 month salary per year of service (or 1 month, whichever is higher)
  • Closure: 1 month or ½ month per year, whichever is higher
  • Exceptions apply if proven serious business losses
• Ensure final pay includes: unpaid wages, pro-rated 13th-month pay, unused leave, and statutory benefits

Failing to comply with process, notice, or separation pay may result in wrongful dismissal claims, reinstatement orders, or financial penalties.

3. Risks of Talent Loss During Entity Closure

• Operational delays or quality dips due to loss of local know-how 
• IP and confidentiality risks as key employees exit 
• Relationship setbacks, affecting customers or partners 
• High re-entry costs—re-hiring and ramp-up challenges 

4. Retaining Employees Without a Legal Entity: Your Options

Option A: Freelancers / Contractors

Pros: Quick to implement

Cons: Misclassification risks, no statutory benefits, and weaker employee loyalty

Option B: Set Up a New Legal Entity

Pros: Full control

Cons: Takes 3–6 months, requires local office, directors, registration, and high setup costs

Option C (Best Practice): Employer of Record (EOR)

An EOR becomes the legal employer while you retain operational control. Your staff continue on compliant contracts with statutory benefits. This is the most efficient and compliant option, especially through a trusted provider like AYP.

Explore AYP’s Employer of Record Philippines service.

5. How EOR Helps You Retain Employees in the Philippines

What an EOR Does

• Acts as legal employer under the Philippine Labor Code 
• Issues local contracts and manages payroll 
• Handles statutory deductions: SSS, PhilHealth, Pag-IBIG, taxes 
• Manages statutory leave, termination, and due compliance
• Provides HR support and administrative handling

Transition Process

1. Planning phase: Identify staff to retain 
2. Issue termination with 30-day notice 
3. EOR onboarding: AYP hires staff under new contracts 
4. Seamless transition: Payroll, benefits, and employment continuity ensured 
5. Your business retains control of tasks and direction 

This lets you retain employees without entity, hire in the Philippines without entity, and manage employee transfer after entity closure effectively.

Why Choose AYP?

Onboard talent across Asia in days — no entities, no legal risks

• Local expertise. Regional reach
• Fully managed compliance & payroll
• Transparent pricing — no hidden costs, ever

Discover our EOR Philippines solution.

6. Case Study: Keeping Talent After Closure

Business: Singapore-based BPO firm

Employees: 20 in the Philippines

Reason: Strategic consolidation, but needed to preserve client support

Solution: Partnered with AYP for EOR before issuing notices

Outcome:

• 100% staff retention 
• No client disruption 
• Compliance assured: 30-day notice, separation pay handled 
• Smooth handover and entity deregistration completed in <14 months 

“AYP allowed us to effectively close our Philippine entity while keeping our team and clients intact. It was efficient and legally sound.”—Regional HR Director

7. Key Considerations Before Closing an Entity

1. Sequence Matters

Start your EOR transition before termination notices to avoid risks and service gaps.

2. Compliance Hazards

Ensure you:

• Provide correct 30-day notice to employees and DOLE 
• Accurately compute and disburse separation pay using statutory formulas — 1 month/year for redundancy; ½ month/year or 1 month for closures
• Document and ensure fair selection processes and evidence 

3. Communicate with Staff

• Clarify the EOR transition plan
• Reassure about continued employment, benefits, and stability
• Coordinate onboarding with AYP for a smooth experience

4. Prepare HR & Payroll

• Align payroll schedules before dissolution
• Transfer statutory contributions
• Communicate timelines clearly—notice period, last working day, EOR start date

8. Conclusion: Shut Down with Confidence, Keep Your Team Intact

Closing your Philippine company doesn’t require losing your talent. With a strategic EOR approach, you can:

• Reduce operating and compliance costs
• Secure employee retention and productivity
• Maintain regional presence and operational continuity
• Avoid entity formation and execution delays

An Employer of Record in the Philippines is the optimal solution to retain employees without entity, ensuring compliance, cost-efficiency, and speed.

9. Call to Action: Speak to AYP’s Local Experts

Thinking of closing in the Philippines but want to keep your talent?

✅ Free EOR & entity closure consultation

✅ Get a complimentary cost simulation

✅ See how AYP can onboard your team in days, not months

Retain Your Team Without a Local Entity →