TL;DR, Hiring in Philippines
- Fully-loaded employer cost: ~10–12% on top of gross salary
- 13th-month pay (Presidential Decree 851) due by 24 December, mandatory, not discretionary
- SSS, PhilHealth, Pag-IBIG are the three statutory employer contributions
- Probation max 6 months; regularization after triggers strong dismissal protection
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Statutory employer costs in Philippines
In the Philippines, employers contribute roughly 10–12% on top of gross salary: 10% SSS social security (employer share, on salary up to ₱35,000/mo), 2.5% PhilHealth health insurance (split with employee, on salary up to ₱100,000/mo), and ₱100–200/month Pag-IBIG housing fund. The mandatory 13th-month pay (one extra month's salary) effectively adds another 8.3%.
| Contribution | Employer rate | Notes |
|---|---|---|
| SSS (Social Security System) | 10% | Employer share; capped at ₱35,000/mo Monthly Salary Credit. Rate increased Jan 2025. |
| PhilHealth | 2.5% | Half of 5% total split with employee; capped at ₱100,000/mo salary |
| Pag-IBIG (HDMF) | 2.0% | On monthly comp up to ₱5,000; effectively ₱100/mo employer share |
| Employees' Compensation (EC) | ₱10–30/mo | Flat employer-only contribution via SSS |
Mandatory employee benefits
Beyond statutory contributions, Philippines law requires the following benefits the employer must fund.
- 13th-month pay
- 1/12 of basic salary earned in the year, paid by 24 December. Tax-free up to ₱90,000. Excluded from the SSS, PhilHealth and Pag-IBIG contribution bases (RA 11199 / PD 851 IRR treat it as outside regular monthly compensation), so it adds no further employer contribution.
- Service Incentive Leave (SIL)
- 5 paid leave days/year after 1 year of service. Most employers grant 15+ days vacation + 15 sick leave.
- Maternity leave
- 105 days fully paid (RA 11210, 2019); SSS reimburses employer.
- Paternity leave
- 7 days fully paid for first 4 deliveries of spouse.
Termination, notice and severance
Probation
Maximum 6 months; after that the employee is 'regularized' and gains tenure protection.
Notice period
30 days minimum written notice for authorized causes (redundancy, retrenchment, closure). For just causes (misconduct), two-notice rule, notice to explain + notice of decision.
Severance
Authorized cause termination: 1 month or 0.5 month per year of service (whichever higher) for redundancy/retrenchment; 1 month or 1 month per year for closure. Just cause: no separation pay unless company policy provides it.
Common compliance pitfalls
- 13th-month pay is computed on basic salary only, but many employers misclassify regular allowances as 'bonuses' to reduce the base. The DOLE audits this; mistakes trigger back-pay claims.
- Probationary employees can only be terminated for failing pre-disclosed performance standards. 'Did not work out' is not a legal cause and creates an illegal dismissal claim.
- Tax-free 13th-month cap is ₱90,000, anything above is taxable. Year-end bonuses pushed above this threshold surprise employees with withholding.
- Independent contractor classification is heavily scrutinized post-DOLE Department Order 174. Repeat engagement of the same freelancer for >6 months risks regularization claim.
Frequently asked questions
EOR platform fees for the Philippines range from $199–$699 per employee per month. On top, employer-side contributions add ~10–12% to gross salary, plus the mandatory 13th-month pay (~8.3%), bringing total employer cost to roughly 20–22% above gross.
13th-month pay and other bonuses are tax-exempt up to ₱90,000 per year combined (TRAIN Law). Above ₱90,000, the excess is taxed at the employee's regular income tax bracket. The EOR handles withholding.
SSS (Social Security System) covers retirement, disability, sickness, maternity, and death benefits, like US Social Security. PhilHealth is the national health insurance program covering hospital and outpatient care. Both are mandatory for all formal-sector employees.
Only if the employer has communicated the regularization standards in writing at hiring and can document that the employee failed to meet them. 'Bad fit' or 'not enough work' are not legal grounds. After 6 months, the employee is automatically regularized and gains full tenure protection.
Strong English fluency, US-aligned timezones (when working night shifts), cultural compatibility with North American work norms, and salaries 60–80% below US/EU equivalents make the Philippines the #1 EOR destination for customer support, content moderation, and back-office BPO roles.
Sources
Statutory rates and rules verified against the following authorities. We update this page when rates change.