How to hire employees in the Philippines

The Philippines is one of the first places a small company hires outside its home market, usually because the talent is strong, the working language is English, and the time zone covers Asia and part of the US day. It is also a market with a well-developed set of employment protections and mandatory contributions, and a strong preference in law for the employee. That combination rewards getting the structure right at the start and punishes improvising.

This guide sets out the decisions in order: whether you can employ at all, the mandatory schemes and the pay elements that surprise foreign employers, how probation and regularisation work, what an exit involves, and where the contractor line sits. It states no rate, threshold or deadline as fact, because those change and are the business of a Philippine adviser rather than a page like this one.

Entity, employer of record, or contractor

Employing directly requires a registered Philippine presence: an entity or a recognised branch that can act as an employer, register with the tax authority, withhold and remit, and enrol employees in the mandatory contribution schemes. Setting that up is a real project with a real running cost, and it is the right answer once you have a team there rather than a person there.

An employer of record is the usual bridge. It employs the person under its own registered entity, runs the statutory obligations, and invoices you for salary plus a fee. You direct the work. This is a good answer for one to a handful of people and a poor answer for twenty, because the fee scales with headcount while your own entity does not.

The third route is engaging an independent contractor. In the Philippines this is a live classification question rather than a formality, and labour authorities look at the substance of the relationship rather than the label on the agreement. Control over how and when the work is done, integration into your team, exclusivity, who provides the equipment, and how long the engagement has run all matter. Contractor vs employee covers the tests in general terms, and contractors are not cheap employees covers why the shortcut usually is not one.

The mandatory contributions, conceptually

Philippine employment carries several mandatory contribution schemes, funded by the employer, the employee, or both. In outline they cover social security, health insurance, and a housing and savings fund, alongside withholding tax on compensation. Each has its own registration, its own contribution table, its own remittance schedule, and its own reporting.

The important planning point is not the rates, which your payroll partner will apply, but the shape: employing someone in the Philippines costs meaningfully more than their salary, and the extra is not optional. Build the fully loaded number before you set the salary. The employee cost estimator takes each employer contribution as a line you name and a figure you enter, which is deliberate, because we will not assert a Philippine rate we cannot stand behind.

The pay elements foreign employers get wrong

Two things routinely catch companies hiring here for the first time.

Thirteenth month pay is a statutory entitlement for rank and file employees, computed from basic salary earned during the calendar year and payable by a deadline near year end. It is not a discretionary bonus and it is not something you can fold into a monthly figure by announcing that you have. If your model assumes twelve months of salary, your model is wrong from the first hire.

Holiday and premium pay rules treat regular holidays and special days differently, and work performed on them attracts premiums. The national holiday list is published annually and local holidays exist on top of it. If you run attendance loosely, you will not be able to answer what someone is owed for a given day, and the answer is not reconstructable after the fact.

Both are reasons to hold attendance and leave in a system rather than a chat thread. The Capstan core includes two-tap attendance with approvals, and a holiday calendar applied per work location rather than one list for the whole company, which is the only version that survives a team split across Manila and somewhere else.

Probation, regularisation and dismissal

Philippine law distinguishes probationary employment from regular employment. An employee who keeps working past the probationary period generally becomes regular, and regular employment carries substantially stronger protection: dismissal requires a lawful ground and a process, and getting the process wrong is itself a finding regardless of the ground.

The practical consequence for a small team is that the standards the employee must meet to be regularised have to be communicated at the start of the engagement, in writing, and the review has to actually happen before the period ends. This is a date nobody remembers and everybody regrets missing. Put it in the system that runs your onboarding rather than in a calendar invite that dies when the manager leaves. The core assigns checklist tasks with due dates tied to the start date, which is the mechanism that makes a probation review something that happens rather than something intended.

Exits

Ending Philippine employment lawfully means having a ground the law recognises and following the process the law requires, including the notices. Separation pay may be due depending on the ground. Final pay covers what is owed on exit, including any earned but unpaid entitlements, and there are expectations about how promptly it and the certificate of employment are provided.

Take local advice on any dismissal. What you can do without advice is keep the record clean: what was agreed, when it changed, what was communicated, what the balances were. That record is either sitting in a system or scattered across five inboxes, and only one of those is available to you two years later. The offboarding checklist sets out the sequence, and the argument for keeping a readable history is in an HR system is a record of the past.

Data and remote work

Philippine data protection law applies to employee data you hold, with obligations around notice, security and breach reporting. If you are hiring here from abroad, your HR system almost certainly holds that data outside the country, which is a question worth being able to answer rather than one to discover in a questionnaire. What a data region actually is explains the difference between residency as a dropdown and residency as a deployment boundary, and HR data security and compliance covers what to ask any vendor.

Remote work is common for Philippine hires by foreign companies, and it changes the practical questions rather than the legal ones: how presence is recorded, how equipment is issued and recovered, and how someone gets their own documents without asking a person in another time zone. The core covers self-service and document access; Asset Management covers the laptop, if you want that tracked in the same place as the person.

Where a system of record fits

A Philippine hire adds a second holiday calendar, a second set of leave rules, a second statutory vocabulary, a second payroll partner, and a set of dates nobody was tracking before. None of that requires software that computes anything. It requires one place that holds the facts and one export that reaches the person who does the computing.

Capstan is that first thing. Employees and contractors in one directory across entities and countries, effective-dated so history survives, leave and holidays per location, exits that close access before they close the record, and an activity log the admin can export themselves. The Payroll module hands your Philippine partner a documented input pack and files their computed results back. Capstan holds no rate, slab or formula for the Philippines or anywhere else, which is a permanent design position rather than a roadmap gap. Prices for everything are on the pricing page.

Before you make the offer

Decide the employment route and price it properly, including the mandatory contributions and the thirteenth month. Get the appointment paperwork drafted locally, with the regularisation standards written into it. Book the probation review the day the person starts. Choose a payroll partner before the first cut-off. And write down the leave and holiday policy for that location, because you now have more than one.

Then hiring in the Philippines is administration rather than exposure.