Hiring in the Philippines: Four Ways to Build a Team

Your Four Options for Hiring in the Philippines

Philippine law requires that whoever employs a worker in the Philippines is a legal entity registered in the Philippines. That single rule drives every option below. You can become that entity by registering, you can borrow one by using an employer of record, or you can avoid the employment relationship entirely by contracting. The four routes are ordered by commitment, lowest first.

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The dividing line is headcount and horizon. Below roughly twenty employees, or under a two-year commitment, the registration cost and permit overhead of your own corporation rarely pays back. Worth knowing before you commit: winding an entity down again takes 9 to 18 months, because SEC dissolution requires BIR tax clearance first. If you want the detail on the lighter-weight route, see how an employer of record works in the Philippines.

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Can You Hire in the Philippines Without an Entity?

Yes. Hiring in the Philippines without setting up an entity is legal and common, and there are two ways to do it. The first is an employer of record, which employs the person on your behalf through its own licensed Philippine entity, runs payroll, and carries the statutory obligations. The second is an independent contractor arrangement, which avoids employment but only works where the relationship is genuinely one of contract for services. Neither requires you to register with the SEC, obtain LGU permits, or later face a nine-to-eighteen-month dissolution.

• Hire remote employees in the Philippines in five to ten days rather than the weeks a full SEC, BIR and LGU registration takes, with a compliant English-language contract from day one.
• Foreign nationals can still be sponsored for a 9(g) Pre-Arranged Employment Visa and an Alien Employment Permit, because the employer of record is a Philippine entity.
• SSS, PhilHealth, Pag-IBIG, BIR withholding and the mandatory 13th-month pay accrual are handled for you as part of Philippines payroll.
• You avoid creating a permanent establishment in the Philippines for your foreign parent company, which is the tax exposure most companies miss.

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Contractor or Employee in the Philippines?

Employee misclassification in the Philippines is decided by the working relationship, not by what the contract says. The Department of Labor and Employment applies a four-fold test: who selects and engages the worker, who pays the wages, who has the power of dismissal, and above all who controls the means and methods of the work. A well-drafted consultancy agreement carries very little weight against the facts of the day-to-day arrangement.

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Hiring Contractors in the Philippines Without Getting It Wrong

You can hire a contractor if the engagement is genuinely project-based. In that case,

• Write the scope around deliverables rather than hours
• Let the contractor decide method and schedule
• Avoid issuing company equipment or an internal email address
• Do not renew the contractor agreement indefinitely

The moment the arrangement starts to look like a full-time role, convert it immediately. Reclassification is retrospective, so the exposure grows with every month the engagement continues. The Philippines adds a further consequence: an employee who has worked beyond a six-month probationary period is treated as regular, and regular employees can only be dismissed for just or authorised cause. If you decide to bring them in-house, see our guide to converting contractors to employees.

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Hiring a Foreign National in the Philippines

Hiring a foreigner in the Philippines requires an Alien Employment Permit from the Department of Labor and Employment, followed by a 9(g) Pre-Arranged Employment Visa issued by the Bureau of Immigration, both sponsored by a Philippine employer. The contractor route is therefore closed: a contractor cannot be sponsored, because sponsorship presupposes an employment relationship. That leaves two routes: your own domestic corporation or an employer of record, and only one of them is fast. For the wider APAC picture, see our work pass and visa guide.

• The Alien Employment Permit comes first and requires the employer to show the role cannot readily be filled by a Filipino national.
• The 9(g) visa has an initial validity of one to three years and is renewable, tied to the sponsoring employer.
• Both the permit and the visa are employer-specific, so a change of employer means starting again rather than transferring.
• Foreign employees are enrolled in SSS, PhilHealth and Pag-IBIG on the same basis as local employees.

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Switching Routes Later

Most companies change route within two years of their first Philippine hire, and both common transitions are routine. Knowing the mechanics up front removes the main objection to starting with a lighter-weight option.

Converting a Contractor to an Employee

Conversion means issuing a compliant employment contract aligned to the Labor Code and DOLE Department Orders, choosing correctly between probationary, regular and fixed-term project employment, enrolling the person in SSS, PhilHealth and Pag-IBIG, and starting BIR withholding. Continuous service usually restarts from the employment date unless you agree otherwise, which matters because regular status attaches after six months of probationary service.

Moving From an Employer of Record to Your Own Entity

Once your domestic corporation is registered with the SEC and your BIR, SSS, PhilHealth and Pag-IBIG registrations are live, employees transfer by novation, or by resignation and rehire. The Alien Employment Permit and 9(g) visa are employer-specific and do not transfer, so new applications are required and must be sequenced carefully. Accrued leave, tenure and 13th-month pay accrual are negotiated as part of the transfer rather than carried across automatically. AYP’s employer of record is a predictable monthly fee per employee, see our pricing page.

Before You Hire in the Philippines

These apply to every employment route. They are the floor, not the whole picture, and they are the numbers most often out of date in a foreign employer's payroll.

For contribution rates, leave entitlements, filing deadlines, termination law and the full 2026 regulatory timeline, see how an employer of record works in the Philippines.

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Questions? We're Here to Help

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