PhilippinesThe Philippines is the go-to market for customer support, operations, and increasingly engineering: strong English, deep BPO talent, and evening-US-time coverage that no LATAM hire can give you. It also has two rules that surprise US founders every year: mandatory 13th month pay, and some of the strictest termination law in Asia.
Here's the short version.
Quick facts
| Philippines | |
|---|---|
| Currency | Philippine Peso (PHP) |
| Standard work week | 40 hours, 5 days |
| Payroll frequency | Semi-monthly (twice a month, required) |
| Employer statutory cost | ~10-15% on top of gross salary |
| 13th month pay | Mandatory, due by December 24 |
| Probation | Up to 6 months |
| Notice period | 30 days |
| Employees paid in | PHP, required by law |
First decision: contractor or employee?
The Philippines has a large, experienced freelance workforce, and starting with a contractor is normal. Independent contractors run their own schedule, invoice you, and handle their own taxes.
But the Philippines is also a market where misclassification enforcement has teeth, and where the labor code strongly protects employees. If someone works your hours, uses your tools, reports to your managers, and works only for you, they're an employee in substance. The Department of Labor uses a control test, and "but we signed a contractor agreement" is not a defense.
The practical rule: project-based or genuinely independent work → contractor. A core team member on a schedule → employee, through an employer of record (EOR) or your own entity.
Paying contractors in the Philippines
- Collect a W-8BEN before the first payment; it certifies non-US status, and it means you generally don't issue a 1099. Confirm with your accountant.
- Contract under Philippine law with clear scope, rate, IP assignment, and termination terms.
- Pay in USD or PHP, their choice. Contractors can invoice in USD, and many prefer holding dollars. The trap is the payment rail: international wires cost $25-45 each with an FX spread hidden in the rate, and marketplace platforms take 10%+ of what your contractor earns.
Shor pays Filipino contractors over local rails same-day, at a flat disclosed 2% FX margin and $19/month per contractor, with contracts and tax-form collection built in.
Hiring full-time employees
Employer-side statutory contributions on top of gross salary:
| Contribution | Rate (employer side) | Notes |
|---|---|---|
| SSS (Social Security) | ~10% | Total 15% split employer/employee since January 2025 |
| PhilHealth | 2.5% | Employee matches 2.5%; 5% total under the UHC law |
| Pag-IBIG (Housing Fund) | 2% | Capped; employee matches |
| 13th month pay | 8.33% effective | 1/12 of annual basic salary, due by December 24 |
Headline employer load lands around 10-15% plus the 13th month accrual. Budget the 13th month from day one. Treating it as a December surprise is the most common Philippines payroll mistake.
These rates are current for 2026: SSS finished its legislated climb to the 15% total rate in January 2025 (under RA 11199), and PhilHealth's 5% premium is the Universal Health Care Act's terminal rate. If a guide you're reading quotes a lower SSS rate, it's out of date.
Two structural rules to internalize:
- Salaries are paid semi-monthly. Monthly payroll isn't compliant; employees are paid twice a month.
- Employees must be paid in PHP. Contractors can take USD; employees can't.
Leave and benefits
- Service incentive leave: 5 days per year (the statutory floor; competitive employers offer more)
- Sick leave: no separate statutory entitlement; covered by service incentive leave and SSS sickness benefits
- Maternity leave: 15 weeks (105 days) at full pay, state-funded
- Paternity leave: 7 days, paid
- Public holidays: ~18 days, one of the highest counts in the world
Beyond statute, competitive offers in the Philippines commonly add an HMO plan, rice or meal allowance, transportation allowance, and an internet allowance for remote roles.
Ending employment
This is where the Philippines demands respect. Termination risk is high:
- Dismissal requires a legally valid cause: either a "just cause" (serious misconduct, with documented due process) or an "authorized cause" (redundancy, retrenchment)
- Authorized-cause separation pay: one month's salary, or half a month per year of service, whichever is higher
- 30 days' notice to both the employee and the labor department for authorized causes
- Final pay includes accrued salary, prorated 13th month, and unused leave conversion
Wrongful dismissal cases are employee-friendly. If you're restructuring or letting someone go, do it by the book. This is exactly what an EOR's local counsel is for.
Documents we'll collect from your employee at onboarding
TIN (tax number), SSS number, PhilHealth number, Pag-IBIG number, and a Philippine bank account.
What it costs through Shor
- Contractors: $19/month each
- Full-time employees (EOR): $299/month each, with SSS, PhilHealth, Pag-IBIG, 13th month accrual, and filings handled
- Flat 2% FX margin, disclosed on every receipt; the pricing calculator shows the full Philippines math
Next steps, depending on where you are: the EOR pricing comparison puts published provider prices side by side, and EOR vs. your own entity has the breakeven math for when a local entity starts to win. To see the Philippines against the rest of our coverage, the reference tables compare employer costs, notice periods, and public holidays across every country here. Already with another provider? Switching EOR providers covers the traps worth planning around.
FAQ
What is 13th month pay, exactly? A mandatory extra payment of 1/12 of the year's basic salary, paid by December 24. It's not a bonus and not optional. It's law, and it applies to employees (not independent contractors).
Can I pay employees in USD? No, employees are paid in PHP, semi-monthly. Contractors can invoice in USD.
How fast can someone start? Contractors: same-day once paperwork is in. EOR employees: typically 5-10 business days for onboarding and registrations; plan on 10-15 business days to first payroll.
What does an employer of record in the Philippines cost? With Shor, $299/month per employee, plus the statutory contributions and 13th month accrual any employer pays. Deel and Remote charge around $599/month for the same coverage.
Is night-shift work regulated? Yes, night work (10pm-6am) carries a statutory differential on top of base pay. If you're hiring support staff on US hours, budget for it.