How to Use An Employer of Record in
The Philippines

Hiring in The Philippines means navigating the Labor Code of the Philippines (Presidential Decree No. 442), which mandates 13th month pay, strict termination procedures, and employer contributions to four separate statutory funds (SSS, PhilHealth, Pag-IBIG, and Employees' Compensation). An Employer of Record becomes your legal employer on record, letting you hire compliantly in days without incorporating a local entity. The EOR removes the risk of misclassifying fixed-term contracts, missing Department of Labor and Employment (DOLE) registration deadlines, or miscalculating mandatory benefits that trigger penalties and back-pay claims.

What Is an Employer of Record in The Philippines?

An Employer of Record in The Philippines is a third-party organisation that becomes the legal employer of your staff under Philippine law, handling all statutory obligations, payroll, and compliance while you retain full operational control. The EOR issues employment contracts, registers employees with government agencies, withholds and remits taxes, and manages termination procedures according to the Labor Code. You keep complete authority over daily work, performance management, and business objectives.

Under the Labor Code of the Philippines, every employment relationship creates mandatory employer obligations: 13th month pay (one-twelfth of total basic annual salary), service incentive leave (five paid days after one year), SSS contributions (employer rate 9.5% in 2026), PhilHealth contributions (employer share 2.5% in 2026), Pag-IBIG contributions (employer 2%), and Employees' Compensation contributions (1% to 2.86% depending on sector). The EOR ensures every contract includes required clauses on probationary periods (maximum six months under Article 296), working hours (eight hours daily, 48 hours weekly under Article 83), and termination grounds. If your industry falls under a registered collective bargaining agreement, the EOR applies those terms to the employment contract.

The split is clear: you manage role scope, deliverables, and day-to-day performance. The EOR owns the legal employment relationship, prepares compliant payslips, files monthly BIR Form 1601-C for withholding tax, remits quarterly SSS/PhilHealth/Pag-IBIG contributions, and executes termination procedures that satisfy DOLE requirements. This keeps you compliant without building an in-country HR and legal team.

How Does an Employer of Record Work in The Philippines?

When you hire through an EOR in The Philippines, the service translates your job offer into a compliant employment contract under the Labor Code, registers your employee with four government agencies, runs monthly payroll in Philippine pesos, and manages ongoing filings with the Bureau of Internal Revenue (BIR) and the Social Security System (SSS). The process follows a defined sequence from role definition to compliant onboarding, payroll, and eventual offboarding if needed.

Step 1: Define Role Terms

You provide the EOR with the candidate's details, proposed salary, job title, and start date. The EOR checks whether the role falls under any registered collective bargaining agreement or industry wage order issued by the Regional Tripartite Wages and Productivity Board. If a sector minimum wage applies (for example, Metro Manila non-agriculture minimum wage is ₱645 per day in 2026), the EOR confirms the salary meets or exceeds the floor. The EOR also confirms whether the role qualifies for managerial exemption from overtime under Article 82 of the Labor Code.

Step 2: EOR Compliance Check

The EOR verifies that the proposed terms comply with the Labor Code's core standards: maximum regular working hours (eight hours per day, 48 hours per week), minimum rest periods (24 consecutive hours after six days of work under Article 91), and overtime premium rates (125% for weekday overtime, 130% for rest day or holiday work under Article 87). If you are hiring in a special economic zone or export processing zone, the EOR checks whether zone-specific labor rules apply. The EOR also confirms the correct classification: employee versus independent contractor, which the DOLE scrutinises using the four-fold test (selection and engagement, payment of wages, power of dismissal, and control test).

Step 3: Employment Contract Preparation

The EOR drafts the employment contract in English, which is permissible under Philippine law as a working language alongside Filipino. The Labor Code and DOLE Department Order No. 174 (2017) require the contract to specify: job title and duties, place of work, salary and pay frequency (typically semi-monthly on the 15th and last day of the month), probationary period (maximum six months under Article 296), and grounds for termination. The contract must also detail statutory benefits: 13th month pay (payable by December 24 each year under Presidential Decree No. 851), service incentive leave (five paid days after 12 months of service under Article 95), and maternity/paternity/parental leave entitlements (105 days paid maternity leave for female employees under Republic Act No. 11210, seven days paid paternity leave under Republic Act No. 8187). Fixed-term contracts are permitted only where the nature of the work is project-based or seasonal; otherwise, the DOLE presumes regular employment under Article 295. The EOR ensures probationary terms are clearly stated and do not exceed the six-month maximum, after which the employee becomes regular and termination protections strengthen.

Step 4: Government Registrations

Within 30 days of hire, the EOR registers the employee with the Social Security System (SSS), the Philippine Health Insurance Corporation (PhilHealth), and the Home Development Mutual Fund (Pag-IBIG). The EOR also secures a Tax Identification Number (TIN) from the Bureau of Internal Revenue if the employee does not already have one, using BIR Form 1902 for employees. Late SSS registration triggers penalties under Republic Act No. 11199: a fine of ₱5,000 to ₱20,000 and potential criminal liability for the employer. The EOR files the SSS Form R-1A (Member Registration), PhilHealth Member Registration Form (PMRF), and Pag-IBIG Member Data Form (MDF). The EOR also ensures the employer is registered with the Employees' Compensation Commission (ECC) under Presidential Decree No. 626 to cover work-related injury or illness.

Step 5: Payroll Execution

The EOR runs payroll in Philippine pesos (PHP) on a semi-monthly cycle. Each payslip shows gross salary, deductions for SSS (employee share 5% in 2026, capped at a monthly salary credit ceiling of ₱30,000), PhilHealth (employee share 2.5% in 2026), Pag-IBIG (employee 2%, capped at a monthly salary of ₱5,000 for contribution purposes), and withholding tax calculated under the BIR's graduated income tax table (0% to 35% under the TRAIN Law, Republic Act No. 10963). The EOR withholds tax using BIR Form 1601-C (Monthly Remittance Return of Income Taxes Withheld on Compensation) and remits it to the BIR by the 10th of the following month. The EOR also remits employer contributions: SSS 9.5%, PhilHealth 2.5%, Pag-IBIG 2%, and Employees' Compensation (1% for non-hazardous industries, up to 2.86% for high-risk sectors). The EOR pays the 13th month pay by December 24, calculated as one-twelfth of total basic salary earned from January 1 to December 31.

Step 6: Ongoing Compliance Management

The EOR files monthly BIR Form 1601-C for withholding tax and quarterly SSS, PhilHealth, and Pag-IBIG contribution remittances. The EOR submits the Annual Information Return of Income Taxes Withheld on Compensation (BIR Form 1604-CF) by January 31 each year and issues BIR Form 2316 (Certificate of Compensation Payment/Tax Withheld) to each employee by the same deadline. The EOR tracks service incentive leave accrual (one day per month after the first 12 months) and ensures timely payment of maternity or paternity leave claims filed with SSS. The EOR monitors DOLE issuances, including wage orders that adjust regional minimum wages annually, and updates payroll immediately upon effectivity. The EOR also ensures compliance with DOLE Department Order No. 183 (2017), which governs data privacy in employment records and requires employee consent for personal data processing.

Step 7: Termination Procedures

Termination in The Philippines must follow strict just cause or authorized cause grounds under Articles 297 and 298 of the Labor Code. Just causes include serious misconduct, willful disobedience, gross and habitual neglect of duty, fraud, or commission of a crime; these require two written notices and a hearing, following the twin-notice rule established by DOLE Department Order No. 147-15. Authorized causes include redundancy, retrenchment, closure, or disease; these require 30 days' written notice to the employee and to DOLE. Notice periods and severance vary: for redundancy, one month's pay per year of service; for retrenchment, one month's pay or one-half month's pay per year of service, whichever is higher, with a minimum of one month's pay under Article 298. Collective bargaining agreements may impose longer notice periods or higher severance rates. The EOR drafts the termination letter, ensures compliance with procedural due process, calculates final pay (including unused service incentive leave, pro-rated 13th month pay, and any severance), and files the required establishment termination report with DOLE within 30 days. The EOR issues the Certificate of Employment (required under DOLE rules) and settles all statutory clearances with SSS, PhilHealth, and Pag-IBIG.

Employment Laws and Compliance an Employer of Record Handles in The Philippines

When you hire through an EOR in The Philippines, they assume full legal responsibility for compliance with the Labor Code, Bureau of Internal Revenue regulations, Social Security System rules, and DOLE department orders, so you do not need to build an in-country HR or legal function.

• Employment Contracts and Documentation: The Labor Code requires written contracts that specify job title, duties, salary, probationary period (maximum six months under Article 296), and termination grounds. Failure to document the probationary period in writing results in the employee being deemed a regular employee from day one, significantly restricting your termination rights. The EOR ensures every contract complies with DOLE Department Order No. 174 and includes mandatory clauses on working hours, rest days, and statutory benefits.
• Payroll Tax and Withholding: The Bureau of Internal Revenue requires monthly withholding of income tax using graduated rates from 0% to 35% under the TRAIN Law (Republic Act No. 10963). Employers must file BIR Form 1601-C by the 10th of each month and face penalties of 25% of the tax due plus 12% annual interest for late remittance under the National Internal Revenue Code. The EOR calculates withholding, files on time, and issues BIR Form 2316 to each employee by January 31 annually.
• Social Security and Statutory Funds: Employers must contribute to four funds: SSS (employer 9.5%, employee 5% in 2026), PhilHealth (employer 2.5%, employee 2.5% in 2026), Pag-IBIG (employer 2%, employee 2%), and Employees' Compensation (1% to 2.86% depending on industry risk classification). Late or incorrect SSS remittance under Republic Act No. 11199 triggers fines of ₱5,000 to ₱20,000 and potential imprisonment of six to 12 years for the responsible officer. The EOR handles all registrations, monthly remittances, and quarterly reconciliations with each agency.
• Statutory Leave Entitlements: The Labor Code mandates service incentive leave (five paid days after 12 months under Article 95), paid maternity leave (105 days under Republic Act No. 11210 for female employees), paternity leave (seven days under Republic Act No. 8187 for male employees with legitimate spouse giving birth), and parental leave for solo parents (seven days under Republic Act No. 8972). Employers who deny statutory leave or fail to pay the correct rate face administrative penalties from DOLE and civil claims for unpaid wages. The EOR tracks accruals, processes leave applications, and coordinates SSS reimbursement for maternity and paternity leave.
• Termination, Severance, and Due Process: Articles 297 and 298 of the Labor Code require just cause or authorized cause for termination of regular employees, along with procedural due process. For just cause (misconduct, neglect, fraud), the employer must issue two written notices and hold a hearing. For authorized cause (redundancy, retrenchment, closure), the employer must provide 30 days' written notice to the employee and to DOLE, plus severance pay. Failure to follow the twin-notice rule results in the termination being declared illegal, with the employee entitled to reinstatement and full back wages from termination to reinstatement, often totaling millions of pesos in damages. The EOR manages every step, drafts all notices, calculates severance, and files DOLE reports.
• Working Time and Overtime: The Labor Code sets maximum regular hours at eight per day and 48 per week (Article 83), with mandatory rest periods and premium pay for overtime (125% for regular days, 130% for rest days and holidays under Article 87). DOLE enforces strict penalties for unpaid overtime, including payment of back wages plus damages. The EOR configures timekeeping systems, calculates overtime premiums, and ensures payroll reflects all worked hours.
• 13th Month Pay: Presidential Decree No. 851 requires all employers to pay 13th month pay equal to one-twelfth of total basic salary earned from January 1 to December 31, payable by December 24 each year. Employers who fail to pay face administrative fines from DOLE and civil claims for unpaid wages under Article 116 of the Labor Code. The EOR accrues the liability monthly and processes the payment on time.
• Health and Safety Obligations: The Occupational Safety and Health Standards (OSHS, Rule 1030 of the Labor Code) and Republic Act No. 11058 (the OSH Law of 2018) require employers to register with DOLE, appoint a safety officer for workplaces with 40 or more employees, conduct annual safety training, and maintain accident records. Non-compliance results in fines of ₱20,000 to ₱100,000 and potential closure orders from DOLE. The EOR ensures your workplace complies with DOLE registration requirements and coordinates safety reporting.
• Data Privacy in Employment Records: The Data Privacy Act of 2012 (Republic Act No. 10173) and DOLE Department Order No. 183 (2017) require employers to secure employee consent for processing personal data, implement security measures, and register as a personal information controller with the National Privacy Commission. Violations trigger fines of ₱500,000 to ₱5 million and imprisonment of one to six years. The EOR handles data processing agreements, employee consent forms, and NPC registration.
• Collective Bargaining and Union Rights: If your employees fall under a registered collective bargaining agreement (CBA), the employer must apply CBA wage rates, benefits, and procedural protections, which often exceed Labor Code minimums. Articles 254 to 266 of the Labor Code protect the right to organize and bargain collectively, and DOLE imposes penalties for unfair labor practices. The EOR monitors CBA applicability, ensures CBA terms are reflected in contracts and payroll, and manages union-related filings.

How Much Does It Cost to Use an Employer of Record in The Philippines?

The total cost of hiring through an EOR in The Philippines has two components: the EOR service fee and statutory employer contributions. Statutory costs are fixed by law and apply to every employer in The Philippines, regardless of whether you use an EOR or your own entity. Playroll's EOR service fee starts from $399 per employee per month, billed separately from payroll, and covers contract drafting, government registrations, monthly payroll processing, tax and social security filings, ongoing compliance monitoring, and termination administration.

Let's look at an example that includes a base salary and the EOR service fee.

The EOR service fee covers the entire compliance burden: preparing employment contracts that satisfy Labor Code requirements, registering employees with SSS, PhilHealth, Pag-IBIG, and BIR within statutory deadlines, processing semi-monthly payroll with correct tax withholding and contribution calculations, filing monthly BIR Form 1601-C and quarterly social security remittances, monitoring DOLE wage orders and regulatory changes, managing statutory leave accruals and claims, and executing compliant termination procedures with final pay calculations and DOLE reporting.

Employer of Record vs Setting Up an Entity in The Philippines

Deciding between an EOR and incorporating your own entity in The Philippines depends on how many people you plan to hire, how fast you need to onboard them, and your appetite for ongoing compliance administration. Foreign companies typically set up a Philippine corporation (domestic corporation with foreign equity) or register a branch office, both requiring Securities and Exchange Commission (SEC) registration, Bangko Sentral ng Pilipinas (central bank) approval for foreign investment, and registration with BIR, SSS, PhilHealth, Pag-IBIG, and local government units. Realistic timeline for entity setup is 90 to 180 business days, with incorporation costs ranging from $8,000 to $15,000 in legal and filing fees, not including the minimum paid-up capital requirement of $200,000 for a domestic corporation with foreign equity or $200,000 net worth proof for a branch office.

For companies hiring fewer than 15 employees in The Philippines, an Employer of Record is almost always the faster and more cost-effective route.

Playroll also supports your long-term growth through its Global Entity Setup product, which handles entity incorporation and local payroll in 120+ countries, so you can transition from EOR to your own compliant entity in The Philippines when the time is right, without switching providers or rebuilding your HR processes.

How Long Does It Take to Hire Someone in The Philippines Through an Employer of Record?

You can hire and onboard an employee in The Philippines through an Employer of Record in 10 to 15 business days from signed offer to the employee's first day on payroll.

• Stage 1: Contract preparation and signing (2 to 3 business days): The EOR drafts the employment contract in English, incorporating all Labor Code mandatory clauses, probationary period (maximum six months), 13th month pay terms, service incentive leave accrual, and statutory fund contributions. Timing depends on how quickly you and the employee review and sign the contract, and whether any role-specific terms require clarification.
• Stage 2: Government registrations (5 to 7 business days): The EOR registers the employee with the Social Security System (SSS), Philippine Health Insurance Corporation (PhilHealth), Home Development Mutual Fund (Pag-IBIG), and Bureau of Internal Revenue (BIR). The Labor Code and Republic Act No. 11199 require SSS registration within 30 days of hire, but best practice is to complete it before the first payroll to avoid pro-rated contribution errors. Missing the BIR TIN application before the first pay run can delay withholding tax filings and trigger penalties under the National Internal Revenue Code.
• Stage 3: Payroll configuration and first cycle (2 to 3 business days): The EOR configures the employee in the payroll system with correct SSS, PhilHealth, Pag-IBIG, and BIR withholding rates, sets the semi-monthly pay cycle (typically 15th and end-of-month), and schedules the first payslip generation. If the employee starts mid-month, the EOR calculates pro-rated salary, contributions, and withholding tax for the partial period. The first payslip is delivered on the next scheduled pay date after onboarding is complete.
• Stage 4: Philippines-specific requirements (1 to 2 business days, runs in parallel): If the employee's role or industry falls under a registered collective bargaining agreement, the EOR reviews CBA terms and ensures the contract and payroll reflect any sector-specific wage floors, allowances, or procedural protections. If the role is in a special economic zone administered by the Philippine Economic Zone Authority, the EOR verifies zone registration and applies any zone-specific labor rules. These checks run in parallel with government registrations and typically do not extend the overall timeline.

Timelines can extend if the employee does not yet have a Tax Identification Number (requiring BIR Form 1902 submission, which can add 3 to 5 business days), if the contract negotiation involves multiple revision rounds, or if DOLE or SSS systems experience processing delays (more common around year-end and after wage order updates). Hiring during the December holiday period or in the lead-up to January 31 (BIR annual filing deadline) can add 2 to 4 business days due to government office closures and processing backlogs.

By comparison, incorporating your own Philippine corporation or branch office and setting up compliant payroll takes 90 to 180 business days, or roughly four to nine months, from SEC incorporation through BIR registration, SSS/PhilHealth/Pag-IBIG employer registration, and first payroll run.

How Playroll's Employer of Record Process Works in The Philippines

Hiring through Playroll in The Philippines follows a clear four-step process designed around your operational needs, not a one-size-fits-all template.

1. You Define the Role and Employment Terms

You tell us who you want to hire, the job title, proposed salary, start date, and any role-specific terms. We check that the salary meets the applicable Regional Tripartite Wages and Productivity Board minimum for the location and industry, and confirm whether the role falls under any registered collective bargaining agreement.

2. Playroll Prepares a Compliant Employment Contract

We draft the employment contract in English under the Labor Code of the Philippines, including mandatory clauses on probationary period (maximum six months under Article 296), working hours (eight hours daily, 48 weekly under Article 83), 13th month pay (one-twelfth of annual basic salary under Presidential Decree No. 851), service incentive leave (five days after 12 months under Article 95), and statutory fund contributions (SSS, PhilHealth, Pag-IBIG, Employees' Compensation). We also specify termination grounds and procedural requirements under Articles 297 and 298, and ensure the contract satisfies DOLE Department Order No. 174.

3. Employee Onboarded and Payroll Goes Live

Once the contract is signed, we register your employee with the Social Security System (SSS), Philippine Health Insurance Corporation (PhilHealth), Home Development Mutual Fund (Pag-IBIG), and Bureau of Internal Revenue (BIR) within 5 to 7 business days. We configure payroll with the correct contribution rates and withholding tax brackets, and deliver the first payslip on the next scheduled semi-monthly pay date (15th or end-of-month). Your employee is fully compliant and on the books within 10 to 15 business days from contract signature.

4. Playroll Manages Ongoing Compliance

We run semi-monthly payroll in Philippine pesos, file monthly BIR Form 1601-C for withholding tax, remit quarterly SSS, PhilHealth, and Pag-IBIG contributions, track service incentive leave accruals, process statutory leave claims, monitor DOLE wage orders, and handle termination procedures including final pay, severance calculations, and DOLE establishment reports. If your hiring in The Philippines grows to the point where your own local entity makes sense, Playroll can handle that too through our global entity setup service, so you transition smoothly without changing providers or rebuilding processes.