Employee benefits in the Philippines: All you need to know

Employing Filipino workers presents numerous benefits for businesses aiming to expand their presence in the global talent market. Known for their quick learning capabilities, flexibility, and commitment, Filipinos excel in various professional fields. A significant majority are proficient in English, making this Southeast Asian workforce highly valued for their industriousness and loyalty.

Moreover, the cost of living in the Philippines is considerably lower compared to other major global cities, often being about half of what it is in the United States. This economic difference presents a cost-effective opportunity for businesses looking to optimize their operational expenses without compromising on talent quality.

Venturing into global team expansion, however, comes with its complexities. Navigating through the legal landscape of employee benefits in a country like the Philippines, along with aligning with local compensation expectations, requires thorough understanding and careful planning. This aspect of international employment poses a significant challenge for companies stepping into the global hiring arena.

Here is a short summary, guide on Philippine employee benefits: covers statutory rates, payment deadlines, and supplemental benefits to attract talent.

Lazy to read? Here are the mandatory Employee Benefits in the Philippines

We want to make it easy to understand your obligations as an employer of Filipino talent. As an experienced employer of record with entities all over the world, Remote’s team can make managing a competitive and compliant benefits package across multiple countries (including the Philippines) simple, inexpensive, and scalable.

In this guide to benefits for Filipino employees, we’ll explain the mandatory benefits you must provide as well as additional perks you can offer to give your business an edge in attracting top talent. We’ll walk you through the following key elements of hiring in the Philippines:

• Who is entitled to benefits in the Philippines?
• Employee benefits you must provide by law
• Supplemental benefits to help you attract top talent in the Philippines
• How to set up and manage benefits for international employees

(All ready to start hiring in the Philippines? Visit Remote’s Guide to hiring employees and contractors in the Philippines for more detailed information that will help you get started right away.)

Who is entitled to benefits in the Philippines?

The labor laws in the Philippines are administered by the Department of Labor and Employment. The Philippines employee benefits all depend on which of the four kinds of employment arrangements is underway: regular, project-based, seasonal, and casual employment.

Laws and regulations may differ depending on the nature of the employment arrangement. However, the law recognizes the job security of any employment arrangement.

General minimum conditions of employment in respect to working hours, rest periods, overtime, age, night shift, holidays, and leave are codified in the Book 3 of the Philippines Labor Code. Exceptions can be made for managerial-ranked employees, field personnel, and some other workers.

You must minimize misclassification risk

Note that in the Philippines, independent contractors are not entitled to any specific statutory benefits. Any benefits or remuneration are determined by the contractual agreement between your business and the contractor.

It’s important to understand this delineation, and this is where global employment can start to get more complicated.

Regardless of whether you consider a worker to be an employee or a contractor, legislators will make the only determination that matters. If you’re found to have an employee relationship and you’ve neglected to provide statutory benefits, you’ll open your company up to the serious risks of misclassification and subsequent fines or penalties.

For more detailed information about understanding this concept, be sure to read our dedicated guide to employee misclassification.

Statutory and common employee benefits

Statutory benefits, also known as mandatory benefits, are entitlements that employers are obligated by law to provide to their employees. Common examples include benefits like paid annual leave, parental leave, worker’s compensation insurance, and paid sick leave.

In the Philippines, employers must pay a monthly contribution to the following funds:

Social Security System (SSS)

This state-run insurance program offers benefits under the Social Security and Employees’ Compensation (EC) Programs.

The Social Security Commission administers the program. It is a body made of representatives from the government, employers, and employees.

Social insurance covers private-sector employees, self-employed workers, as well as household workers. A spouse of the insured person is also entitled to receive social benefits under this scheme.

The benefits include:

• maternity pay
• sickness pay
• pensions
• disability benefits
• salary loans
• life insurance
• funeral grants

The contribution depends on the salary bracket of the employee. In general, the employer (ER) is responsible for contributing 7.37% of the total contribution, and the employee is responsible for 3.36%.

Health insurance

PhilHealth is the name of the health insurance plan in place for private employees in the Philippines. As of 2021, the monthly contribution rate for the health insurance program is 3.5% of the employee’s basic salary. The monthly contribution is equally divided between employee and employer. PHP 10,000 is the salary minimum and PHP 70,000 is the salary ceiling.

PhilHealth covers inpatient benefits, outpatient benefits, Z benefits, and SDG benefits (explained below):

• Z benefits are offered to the patients who need prolonged hospitalization and more expensive treatment
• SDG benefits include treatment packages for malaria, HIV-AIDS, tuberculosis, animal bites, and others diseases

Employers are not obligated to provide any specific insurance benefits since PhilHealth offers the above entitlements.

Many global companies may opt out of offering private health insurance to Filipino employees as a result, but it’s still common for many employers to offer secondary health insurance to their employees to help them access more specialized care (and to reduce wait times for more common treatment).

Indeed, offering a health insurance benefit, or other additional insurance benefits (like dental insurance, vision insurance, and life insurance), can be such an effective way to build trust with new hires and separate your offer from that of a competitor in the Philippines.

Download your Global Benefits Guide and attract top global talent

Remote’s global HR experts share practical advice for building a locally relevant and globally compliant benefits program to help you attract and keep the world’s best talent.

Home Development Mutual Fund (HDMF)

The Home Development Mutual Fund (HDMF), more commonly known as the Pag-IBIG Fund, is set to implement new rates and benefits for its members starting February 2024. These changes aim to enhance the fund’s services and offer increased financial assistance for housing to its members across the Philippines. Here’s a detailed expansion of the initial information with additional context:

Key Features and Updates for 2024:

Contribution Rates: The contribution rates for both employees and employers are adjusted to ensure members can enjoy better benefits. Employees earning PHP 1,500 and below will contribute 1%, while those earning more will contribute 2% of their monthly salary. Employers contribute a standard rate of 2% across all salary brackets.

Increased Salary Cap for Contributions: The maximum fund salary cap for computing contributions has been raised from PHP 5,000 to PHP 10,000, reflecting an increase in the ceiling for contribution calculations and potentially higher savings for members.

Enhanced Benefits: Members are poised to receive doubled savings and higher cash loan entitlements, maintaining access to affordable housing loans. This improvement is part of Pag-IBIG’s commitment to providing significant financial aid for housing to its Filipino members.

Specifics for Kasambahays: For Kasambahays (household helpers) earning more than PHP 1,500 and up to PHP 4,999, the employer covers a 4% contribution. If a Kasambahay’s salary is PHP 5,000 or above, both the Kasambahay and their employer will contribute 2% each of the total monthly salary.

Additional Insights:

Membership and Voluntary Contributions: Membership in Pag-IBIG is mandatory for all employed individuals, providing a safety net for housing and loan needs. Self-employed individuals and voluntary members contribute 2% of their declared monthly income, ensuring they also benefit from the fund’s services.

Contribution History and Online Access: Members can view their contribution history online via the Virtual Pag-IBIG platform, allowing easy tracking of payments and ensuring they are up to date.

Continued Contributions for OFWs: Overseas Filipino Workers (OFWs) can continue contributing to Pag-IBIG to maintain their membership status and benefits, including eligibility for housing loans based on their Total Accumulated Value (TAV).

These updates signify Pag-IBIG’s ongoing efforts to adapt to the changing economic landscape and provide meaningful support to its members. The adjustments in contributions, benefits, and the inclusion of specific rates for various employment types underscore the fund’s commitment to inclusivity and support for all Filipinos.

Supplemental benefits to attract top talent in the Philippines

Companies often offer additional benefits in addition to those that are mandatory according to local employment law.

If you develop and offer a globally competitive benefits package to Filipino talent, you’ll put your business in the right position to land a critical candidate over a competitor. Even better – an equitable compensation plan will maintain morale, harmony, and motivation for any globally distributed team (a critical factor for employee retention rates).

Job seekers are now actively searching for certain perks in a global talent market where remote work is readily available (we explain in more detail in our values-based benefits guide).

Creating a globally competitive and compliant benefits package doesn’t have to be complicated. Remote cares passionately about providing perks and benefits to enable your global team to enjoy security, stability, and work-life balance. Our team of internal HR specialists and global benefits experts are constantly working with our customers to create customized and competitive benefits packages to attract top talent.

The size of your business shouldn’t prevent you from sourcing international talent either. If you’re a smaller business looking to employ Filipino workers or other international talent, your benefits plan doesn’t have to be cost-prohibitive.

This small business guide to affordable global benefits will help you find inexpensive perks that international employees will love.

In the Philippines, if you want to attract the highest calibre of candidates, you may consider providing the following additional benefits.

Competitive salary

The average wage in the Philippines is around PHP 44,600 a month. As in any other country, salaries vary widely depending on job title, education, and other factors. Attracting the best Filipino candidates will undoubtedly be heavily influenced by salary levels.

Additional paid leave

Paid vacation in addition to national holidays and annual leave can be an attractive incentive. Many companies operating in the Philippines offer up to eighteen days of paid vacation to their employees. Some extra paid time off will help international employers retain high-performing employees.

Expanded parental leave

Similar to offering additional paid time off, providing more globally consistent parental leave provisions in the Philippines will be met with loyalty and commitment in return. In the Filipino culture, family connections are strong and the extended family unit tends to be very close.

As a result, any additional provisions aimed at assisting with parental care are so highly valued in the minds of employees.

Mid-year bonus

In addition to 13-month pay, many companies offer an additional mid-year bonus to their employees. It’s relatively common for local employers to offer this extra payment as an incentive to attract and retain key professionals.

How to set up and manage benefits for international employees

Whether you’re hiring a customer success manager from the Philippines, a translator from Japan, or a public relations executive from Colombia, employees universally evaluate new opportunities based on the quality of the benefits their employers provide.

Instead of building a fully-owned local legal entity with a specialist HR function in each new market, an employer of record provides a cost-effective, fast, and secure alternative to help you grow your team across borders.

When should you use an employer of record?

If you don’t have an established process to manage the complicated parts of scaling global hiring (in APAC or abroad), an employer of record like Remote will give you immediate relief.

Remote’s EOR service gives you the advantage of dedicated global HR experts that can offer the insight you need to create a strong benefits package, a compliant employment contract, and a competitive offer.

We’ve previously dedicated an entire guide to when should you use an employer of record, but there are a few critical trigger areas where an EOR can dramatically minimize your risk:

• Creating a strong global benefits package
• Managing benefits in compliance with local labor laws
• Handling dismissals and terminations
• Protecting any IP & patents produced by your remote employees

An employer of record like Remote manages the complicated parts of international employment. We handle the complexities of running your global HR operations in the backend and our software puts everything in one dashboard where you can:

• Manage payroll and time off
• Handle local employment taxes
• Stay compliant with statutory benefits
• Offer competitive and equitable global compensation packages
• Scale your global team faster

Creating an FAQ section on employee benefits in the Philippines without direct browsing capability can be challenging. However, based on the information previously discussed and general knowledge, here’s an example of how you could structure such an FAQ section. For actual resources and more detailed, up-to-date information, you would need to refer to official sources such as the Department of Labor and Employment (DOLE) in the Philippines or legal resources specializing in Filipino labor laws.

For those unfamiliar with the concept, here’s a concise video that demystifies the role and benefits of an Employer of Record (EOR).

FAQ: Employee Benefits in the Philippines

What are the mandatory benefits for employees in the Philippines?

Mandatory benefits include contributions to the Social Security System (SSS), Philippine Health Insurance Corporation (PhilHealth), and Home Development Mutual Fund (Pag-IBIG). Employers and employees share the contribution costs to these programs, which provide a range of benefits from healthcare to housing loans.

Department of Labor and Employment (DOLE)(https://www.dole.gov.ph/)
Social Security System (SSS)(https://www.sss.gov.ph/)
PhilHealth(https://www.philhealth.gov.ph/)
Pag-IBIG Fund(https://www.pagibigfund.gov.ph/)

What are the benefits of a regular employee in the Philippines?

Regular employees are entitled to statutory benefits (SSS, PhilHealth, Pag-IBIG), 13th-month pay, and leave benefits such as annual leave, sick leave, and maternity/paternity leave. They may also be eligible for company-specific benefits like health insurance and retirement plans.

What are the leave benefits for employees in the Philippines?

Employees are entitled to annual leave, sick leave, maternity leave (105 days), paternity leave (7 days), and solo parent leave (7 days). There are also special leaves like bereavement and domestic violence leave.

What is the importance of compensation and benefits in the Philippines?

Compensation and benefits are crucial for attracting and retaining talent in the competitive Philippine job market. They ensure employee satisfaction, motivation, and loyalty, contributing to the overall productivity and success of an organization.

What are the payroll rules in the Philippines?

Payroll rules include compliance with minimum wage laws, timely payment of wages (at least once every two weeks), mandatory deductions for SSS, PhilHealth, and Pag-IBIG, and proper documentation and remittance of taxes to the Bureau of Internal Revenue (BIR).

Bureau of Internal Revenue (BIR)(https://www.bir.gov.ph/)

Is bonus mandatory in the Philippines?

The 13th-month pay is a mandatory bonus that must be paid by December 24th each year. It is equivalent to one-twelfth of an employee’s total basic salary earned within a calendar year. Other bonuses, like the 14th-month pay, are discretionary and depend on the employer’s policy.

DOLE on 13th Month Pay Law(https://www.dole.gov.ph/)

Summary

This guide delves into the benefits of hiring Filipino workers for global businesses, highlighting the Philippines’ pool of English-proficient, adaptable, and industrious talents as a cost-effective solution due to the lower living costs compared to other global centers. It explains the necessity of understanding local employment laws, including statutory benefits like contributions to the Social Security System (SSS), PhilHealth, and the Home Development Mutual Fund (Pag-IBIG), as well as regulations regarding working hours, holidays, and various types of leave, underlining the importance of correct employee classification to avoid misclassification risks.

To navigate the complexities of offering competitive and compliant benefits packages in the Philippines, the guide suggests partnering with an Employer of Record (EOR) such as Remote. This approach simplifies managing benefits, ensures legal compliance, and aids in the strategic hiring of international talent. By leveraging an EOR, businesses can efficiently scale their global workforce, provide equitable compensation, and attract top talent, ensuring a seamless expansion into the Philippine market and beyond.