Employer of Record Guide in 

Philippines

Vacation Leave

• Service Incentive Leave: 5 days annually after 1 year of service (combines vacation and sick leave)
• Commutable: Can be converted to cash if not used
• Accrual: Earned proportionally throughout the year

Sick Leave

• Included in Service Incentive Leave: 5 days total (combined with vacation)
• Medical Certificate: Required for absences exceeding 3 consecutive days
• Maternity-Related: Separate provisions under the Expanded Maternity Leave Act

Maternity Leave

• Duration: 105 days (15 weeks) for normal delivery, 120 days for caesarean section
• Eligibility: Female employees who have paid at least 3 monthly contributions to SSS
• Payment: Paid by SSS, not the employer
• Job Security: Guaranteed reinstatement to the same position

Paternity Leave

• Duration: 7 days for married male employees
• Eligibility: For the first 4 deliveries of the legitimate spouse
• Payment: Full pay provided by the employer
• Timing: Can be taken within the first 60 days from delivery

Parental Leave

• Solo Parent Leave: 7 days annually for solo parents
• Adoption Leave: Same as maternity leave for adoptive mothers
• Expanded Benefits: Additional support for parents with special needs children

Bereavement Leave

• Duration: 3 days for death of immediate family members
• Coverage: Spouse, children, parents, siblings
• Payment: Typically unpaid unless specified in company policy

Special Leave Benefits for Women

• Gynecological Disorders: 2 months leave with full pay
• Pregnancy-Related: Additional leave for pregnancy complications
• Violence Against Women: 10-day leave for women victims of violence

Summary

Termination Types

Termination for Just Cause:

• Serious misconduct, wilful disobedience, gross negligence
• Fraud, breach of trust, commission of crime
• No notice or separation pay required

Termination for Authorised Cause:

• Redundancy, retrenchment, closure of business
• Disease not curable within 6 months
• Requires 30-day notice and separation pay

Termination Without Cause:

• Not permitted under Philippine law
• Must have valid just cause or authorised cause

Notice Period Requirements

Separation Pay

Authorised Cause Termination:

• Redundancy/Retrenchment: 1 month pay or ½ month pay per year of service (whichever is higher)
• Closure: 1 month pay or ½ month pay per year of service
• Disease: 1 month pay or ½ month pay per year of service

Probationary Employment

• Duration: Maximum 6 months
• Standards: Must be made known to employee at time of engagement
• Termination: Can be terminated for failure to qualify, with or without notice

Final Pay Requirements

Employers must release final pay within 30 days of termination, including:

• Unpaid salary and overtime
• Unused service incentive leave
• 13th month pay (pro-rated)
• Separation pay (if applicable)

Security of Tenure

The Philippine Constitution guarantees security of tenure, meaning employees cannot be dismissed except for just cause or when authorised by law. This provides strong protection against arbitrary termination.

National Holidays

Regular Holidays (with pay even if not worked):

Special Non-Working Holidays (no pay unless worked):

Holiday Pay Rules

Regular Holidays:

• Not Working: 100% of daily wage
• Working: 200% of daily wage (double pay)

Special Non-Working Holidays:

• Not Working: No pay (unless company policy provides)
• Working: 130% of daily wage

Local Holidays

Each local government unit may declare additional holidays specific to their locality, which may affect work schedules and pay requirements.

Required Documents for Employment

Employee Documentation:

• Employment Contract: Must specify terms, conditions, and job description
• BIR Form 2316: Certificate of compensation payment/tax withheld
• SSS/PhilHealth/Pag-IBIG Numbers: For social security registration
• TIN (Tax Identification Number): Required for all employees
• Medical Certificate: For certain positions or as required by company policy

Government Compliance:

• Alpha List: Monthly reporting to BIR
• Establishment Registration: With DOLE, SSS, PhilHealth, and Pag-IBIG
• Work Permit: For foreign employees

Foreign Worker Requirements

Work Permit Process:

• Alien Employment Permit (AEP): Required from DOLE
• Special Work Permit: For short-term assignments
• Visa Requirements: Appropriate visa classification (9G, 47A2, etc.)
• Tax Registration: With Bureau of Internal Revenue

Language Requirements

• Filipino and English: Both are official languages
• Contracts: Can be in English, but Filipino translations may be required
• Labour Standards: Must be communicated in a language understood by employees

Background Checks & References

Permitted Checks:

• Criminal background (with employee consent)
• Employment verification
• Educational credentials
• Professional licences (for regulated professions)

Restrictions:

• Must be job-related and proportionate
• Employee consent required
• Compliance with Data Privacy Act

Data Protection & Privacy

Data Privacy Act of 2012:

• Employee consent required for personal data processing
• Appointment of Data Protection Officer (for certain companies)
• Security measures for personal data
• Employee rights to access, correct, and delete personal data

Employment Contract Essentials

Mandatory Inclusions:

• Job title and description
• Salary and benefits
• Working hours and schedule
• Probationary period (if applicable)
• Termination procedures
• Company policies reference

Onboarding Timeline

What the EOR Handles

Borderless AI manages:

• Employment contracts and compliance
• Payroll processing and tax withholding
• Social security registrations
• Government reporting requirements
• Local labour law compliance

Worker Classification

Employee vs. Independent Contractor:

• Control Test: Level of supervision and control over work
• Economic Reality Test: Financial dependence and investment in business
• Integration Test: Whether work is integral to the business

Risks of Misclassification:

• Back payment of benefits and contributions
• Penalties from government agencies
• Potential regularisation of contractors

Labour Relations & Unions

Right to Organise:

• Employees have constitutional right to form unions
• Collective bargaining is protected
• Strikes and lockouts are regulated

Union Security Arrangements:

• Closed shop, union shop, and maintenance of membership allowed
• Check-off of union dues with employee consent

Cultural Considerations

Workplace Culture:

• Respect for hierarchy: "Po" and "Opo" culture
• Pakikipagkapwa: Shared identity and community spirit
• Work-life balance: Family obligations often take priority
• Religious observances: Predominantly Catholic, with respect for religious holidays

Communication Style:

• Indirect communication to avoid confrontation
• "Hiya" (shame) culture affects feedback delivery
• Relationship-building important for business success

Remote Work Regulations

Telecommuting Act (RA 11165):

• Legal framework for remote work arrangements
• Employee rights and employer obligations defined
• Equipment and connectivity provisions
• Health and safety requirements for home offices

Implementation Requirements:

• Written telecommuting agreement
• Performance monitoring systems
• Regular communication protocols
• Compliance with labour standards even in remote setup

Special Economic Zones

PEZA and Other Economic Zones:

• Special labour rules may apply
• Tax incentives for employers
• Streamlined processes for foreign workers
• Enhanced benefits for employees in certain zones

Note: Companies operating in special economic zones should verify specific requirements and benefits applicable to their location.