Everything you need to know about Employer of Record Services in the Philippines

Expanding into the Philippines presents significant opportunities for businesses, thanks to its growing economy and skilled workforce. However, navigating the country’s complex labor laws, payroll processes, and compliance requirements can be challenging. Cadana's Employer of Record (EOR) solution simplifies hiring and workforce management in the Philippines, allowing businesses to focus on growth while ensuring compliance with local regulations. This guide covers everything you need to know about EOR services in the Philippines.

What is an Employer of Record (EOR)?

An Employer of Record (EOR) is a third-party organization that takes on the legal and administrative responsibilities of employing staff in a foreign country. These responsibilities include:

• Hiring employees.
• Managing payroll and tax compliance.
• Ensuring adherence to local labor laws.
• Administering employee benefits and contracts.

With Cadana’s EOR services, businesses can hire in the Philippines without the need to set up a local entity, streamlining operations and reducing administrative burdens.

The Risks of Employee Misclassification

In the Philippines, proper classification of workers as employees or contractors is critical. Misclassification can lead to:

• Tax Penalties: Fines for failing to deduct income tax or contribute to mandatory social programs.
• Legal Disputes: Claims for employee benefits, such as 13th-month pay, sick leave, and severance pay.
• Reputational Damage: Non-compliance with labor laws can harm your business's reputation.

Cadana ensures proper worker classification, protecting your business from these risks while adhering to the Labor Code of the Philippines.

Benefits of Using an Employer of Record

Cadana’s EOR solution provides several advantages for businesses hiring in the Philippines:

1. Simplified Compliance: Navigate complex labor laws and payroll regulations with ease.
2. Faster Market Entry: Begin operations without establishing a local entity.
3. Cost-Effective Expansion: Save time and resources while focusing on business growth.
4. Reduced Administrative Burden: Let Cadana handle payroll, taxes, and benefits administration.
5. Enhanced Employee Experience: Provide timely pay and access to comprehensive benefits.

Overview of Hiring in the Philippines

Employment Laws

The Labor Code of the Philippines governs employment practices, covering hiring, working conditions, and benefits. It applies to all enterprises and employment relationships in the country.

Onboarding Process

Employers in the Philippines typically require:

• Valid identification (e.g., passport or national ID).
• Tax Identification Number (TIN).
• Social Security System (SSS) number.
• PhilHealth and Pag-IBIG Fund (HDMF) numbers.
• NBI or police clearance.

Payroll Management and Tax Compliance

Payroll Frequency

In the Philippines, employees are usually paid bi-monthly, specifically on the 15th and 30th of each month. Employers can also opt for monthly payroll but must ensure wages are paid at least every two weeks.

Minimum Wage

As of 2024, the daily minimum wage in Metro Manila is ₱645 for non-agricultural workers. Wage rates vary by region and are subject to periodic adjustments.

Mandatory Payroll Deductions

1. Income Tax: Progressive rates ranging from 0% to 35%.
2. Social Security System (SSS): Employers contribute 9.5% of the monthly salary.
3. PhilHealth: Health insurance contributions shared equally between employer and employee.
4. Pag-IBIG Fund: Housing fund contributions at 2%.

Cadana automates payroll processing, ensuring accurate calculations, timely payments, and compliance with Philippine tax laws.

Overview of Employment Contracts

The Philippines recognizes various types of employment contracts, including:

1. Regular Employment: For indefinite periods with full benefits.
2. Probationary Employment: Lasts up to six months, allowing employers to assess suitability for permanent roles.
3. Project-Based Employment: Ends upon project completion.
4. Seasonal Employment: Linked to specific seasons or periods.
5. Fixed-Term Employment: Clearly defines the contract's duration.

Cadana drafts compliant employment contracts, tailored to your business needs and Philippine labor laws.

How an EOR in the Philippines Can Ensure Compliance with Employment Law

The Labor Code of the Philippines sets strict requirements for:

• Minimum wages and working hours.
• Leave entitlements, such as service incentive leave and maternity leave.
• Termination processes and severance pay.

Cadana’s EOR solution ensures your business complies with all these regulations, mitigating risks of fines or disputes.

Employee Benefits and Compensation

Statutory Benefits

1. 13th Month Pay: Equivalent to one-twelfth of an employee's annual salary, paid by December 24.
2. Social Security System (SSS): Provides retirement, disability, and death benefits.
3. PhilHealth: Offers basic health insurance coverage.
4. Pag-IBIG Fund: Assists employees with housing loans and savings.

Leave Entitlements

1. Annual Leave: Employees with at least one year of service are entitled to five days of service incentive leave.
2. Maternity Leave: Female employees receive 105 days of paid leave, with an additional 15 days for solo parents.
3. Paternity Leave: Seven days of paid leave for married male employees.
4. Public Holidays: The Philippines observes 12 regular holidays and several special non-working days annually.

Cadana administers these benefits, ensuring employees receive their entitlements without delays.

How an EOR Can Improve Employee Experience

Cadana’s EOR services enhance employee satisfaction by:

• Providing timely and accurate payroll.
• Offering comprehensive statutory and supplemental benefits.
• Resolving HR and payroll queries with local expertise.

This fosters a positive work environment, improving retention and productivity.

Get Started with an EOR in the Philippines

Expanding into the Philippines is made simple with Cadana’s EOR solution. Our platform streamlines:

• Hiring and onboarding processes.
• Payroll and benefits administration.
• Compliance with local labor and tax laws.

Implementing EOR Solutions: A Practical Guide for Success

1. Assess Your Needs: Identify the roles and skills required for your Philippine workforce.
2. Choose Cadana as Your EOR Partner: Leverage our expertise to handle local compliance.
3. Streamline Onboarding: Cadana ensures contracts, tax registrations, and benefits administration are handled efficiently.
4. Monitor Progress: Regularly evaluate Cadana’s services to ensure alignment with your business goals.

Why Choose Cadana for Your Expansion into the Philippines?

Expanding into the Philippines offers exciting opportunities, but managing compliance, payroll, and employee benefits can be complex. Cadana’s EOR solution simplifies these challenges, enabling your business to thrive.

From ensuring compliance to enhancing employee experience, Cadana is your trusted partner for seamless expansion. Connect with us today to start building your Philippine workforce effortlessly!