Development costs are rising, cutting into your profits. Outsourcing tasks to an offshore team in the Philippines can help you save costs.
But do you have a solid grasp of Philippine labor laws as an employer?
This guide will help you understand Philippine labor laws, empowering you to comply and start your offshore outsourcing journey to attain company growth.
Check out our resource center for more guides and articles on the topic.
For now, let’s dive in!
Disclaimer: This article is purely for education and information, not legal advice. It’s crucial for you to seek advice from legal professionals for this topic.
Key Philippine Labor Laws
The Philippines is an excellent place to find great talent. Additionally, Filipinos are hardworking, respectful, and kind, making them great to work with.
Here are some things you need to know about the country’s labor laws.
Employment Terms
Minimum Wage
The minimum wage in the country varies from region to region. The Regional Tripartite Wages and Productivity Board, a group of government bodies established to regulate and set the Philippine minimum wage, set the minimum wage rate.
Based on the sources you find, the minimum wage for non-agricultural workers in Manila is P570 per day.
Be sure to check with local regulations regarding the exact salaries for the region you’ll be setting your offshore development team.
Work Hours and Overtime Pay
Employees typically work up to eight hours daily, but if they work longer due to a compressed workweek arrangement, they should receive overtime pay. This pay is at least 25 percent more than their regular wage rate.
The overtime rate may change depending on whether they work on a rest day, holiday, special day, or between 10 PM and 6 AM.
However, some types of employees aren’t entitled to overtime pay, including:
- Government employees
- Managerial employees and officers
- Field personnel
- Members of the employer’s family are dependent on them for support.
- Domestic helpers and those in personal service to another
Nightshift Differential
The night shift differential pertains to extra pay of a minimum of 10 percent of an employee’s hourly wage rate. Employees (excluding exempt ones) who work between 10 PM and 6 AM are given additional pay.
This information is crucial if you’re considering setting up an offshore team in the Philippines and planning to have them work the graveyard shift.
Holidays
Mind you, the Philippines has many public holidays, so don’t be surprised! You need to be aware of this to make the necessary adjustments to maintain smooth operations.
It’s essential to note that the Philippines observes major religious holidays such as the Holy Week for Roman Catholics and Ramadan for Muslims.
There are 12 regular holidays in the country, namely:
- New Year’s Day (1 January)
- Maundy Thursday (movable date)
- Good Friday (movable date)
- Eidul Fitr (movable date)
- Eidul Adha (movable date)
- Araw ng Kagitingan (Monday nearest 9 April)
- Labor Day (Monday nearest 1 May)
- Independence Day (Monday nearest 12 June)
- National Heroes Day (Last Monday of August)
- Bonifacio Day (Monday nearest 30 November)
- Christmas Day (25 December)
- Rizal Day (Monday nearest 30 December)
Each employer must compensate employees, except exempt ones, with their standard daily wage for any regular holiday they do not work.
If a non-exempt employee is required to work on a regular holiday, they should be paid at least twice their usual wage rate for that day.
The compensation rate for working on a regular holiday is subject to change if the work occurs between 12 MN and 6 AM or between 10 PM and midnight of the holiday.
Rest Days
Employers may be required to provide rest days to employees.
Non-exempt employees have the right to a rest period without pay lasting at least 24 hours for every six consecutive standard working days.
If they work on their rest days, the employer must compensate them with their regular wage rate plus at least 30 percent.
However, this rate may vary if the rest day coincides with a regular holiday or a special day or if the work is between 10 PM and 6 AM (remember night differentials?)
Employers can only compel employees to work on their scheduled rest days if certain conditions are met and appropriate compensation is provided.
Maternity and Paternity Leaves
In the Philippines, maternity leave is a crucial benefit granted to pregnant female employees, regardless of marital status. The law mandates a maternity leave of 105 days for normal deliveries and 60 days for cases of miscarriage or emergency termination of pregnancy.
Expectant mothers receive full pay, with benefits covered by either the Social Security System (SSS) for private sector employees or the Government Service Insurance System (GSIS) for public sector employees.
Paternity leave is for married male employees expecting a child. It consists of 7 days of paid leave taken before or after childbirth.
Like maternity leave, paternity leave benefits are covered by either the SSS or GSIS, depending on the sector of employment.
Both maternity and paternity leave aim to support the health and well-being of employees and their families during significant life events.
13th Month Pay
The 13th-month pay is a mandatory benefit provided to all rank-and-file Philippine employees, regardless of the nature of their employment, designation, or payment method.
It’s an additional compensation equivalent to one-twelfth (1/12) of an employee’s total basic salary earned within a calendar year.
This ensures that every employee receives an additional sum equivalent to one month’s salary, payable on or before December 24th of each year. The purpose of this benefit is to help employees cope with the increased expenses associated with the holiday season.
If an employee has worked for part of the year, they’re still entitled to a proportionate 13th-month pay based on the months they have worked.
Let’s zone in on the types of employment in the next section.
Types of Employment
There are different types of employment in the country, namely:
Regular Employment
The employee is a full-time staff member handling vital tasks for the company. Regular employees get all the benefits and job security, like joining unions and receiving health and social benefits from the employer. We go more in depth on this topic here.
Seasonal Employment
Employers hire seasonal workers to meet the demands of specific seasons, and their employment lasts only for that particular season. While these workers may seem like regular employees, their status is temporary and limited to the current season.
Probationary Employment
Philippine employees undergo a trial period called the probationary period, during which the employer evaluates their performance to determine their eligibility for regular employment.
The assessment criteria are communicated to the employees upon initial company engagement. You can also read more about this topic here!
Project Employment
Employers hire project employees for particular projects or tasks with set timeframes. During the project, these employees enjoy similar benefits to regular employees but do not have job security beyond completion.
Casual Employment
Casual employment entails hiring workers for tasks not typically central to the employer’s primary operations. If a casual employee works continuously or intermittently for at least one year, employers may regard them as regular employees for their specific tasks.
Fixed-Period Employment
Often referred to as term or contractual employment, this arrangement entails an employee committing to render services for a defined duration.
Such employment remains legitimate when tied to the nature of the work itself and isn’t intended to bypass workers’ job security rights.
Termination of Employment
The Labor Code of the Philippines in 2024 outlines guidelines for ending employment, safeguarding employees’ rights, and enabling employers to manage their workforce efficiently.
Familiarizing yourself with these regulations is essential to conduct termination procedures lawfully and ethically when offshore outsourcing.
Here are the three primary methods of termination in the Philippines:
Termination for Just Cause
This termination occurs when the employer initiates dismissal due to the employee’s serious violation of company policies or standards. Instances may include habitual neglect of duties, a deliberate breach of trust, and involvement in criminal activities against the employer or their immediate family members.
The process necessitates giving the employee due notice and allowing them to explain or defend their actions.
Termination for Authorized Cause
This termination stems from the business’s operational needs, such as the introduction of technologies, redundancy, retrenchment to mitigate losses, closure or cessation of operations, and the illness or incapacity of the employee (more on this below), posing a risk to the health of the workforce.
In such instances, the employer must give written notice to the affected employees and the Department of Labor and Employment at least 30 days before the termination, along with the separation pay as mandated by law.
Termination Due to Serious Diseases or Health Conditions
When an employee becomes incapable of fulfilling their duties due to a severe illness, the employer reserves the right to terminate their employment to uphold operational efficiency and safeguard the well-being of other employees.
The Labor Code necessitates the provision of a medical certificate to substantiate the decision to terminate, stating that the illness remains incurable within six months despite adequate medical treatment. The affected employee is entitled to separation pay per the provisions outlined in the Labor Code.
Navigating the termination process and following the notice periods with empathy and legality is vital for cultivating a positive company culture.
CoDev can help you navigate the intricacies of offshore outsourcing for your business, so you don’t have to worry about these details.
Labor Unions
What are labor unions?
Filipino workers can negotiate employment terms through collective bargaining agreements. These agreements cover five years and include a two-month “freedom period” after expiration.
They encompass economic aspects, such as wages, night shift differentials, service incentive leave, and non-economic provisions about terminations, working conditions, and disciplinary measures.
Workplace Safety
The Department of Labor and Employment (DOLE) instituted compulsory Occupational Safety and Health Standards to safeguard Filipino workers from workplace injuries, illnesses, and other safety risks.
These standards allow employees to be informed about workplace hazards, decline unsafe tasks, report accidents, and utilize protective gear.
Employers must register their businesses with the DOLE and implement essential training to handle emergencies and mitigate risks.
Now that we’ve covered key labor laws, let’s learn how to stay compliant.
How to Stay Compliant With Philippine Labor Laws
Laws can get confusing, but with a bit of research, you’ll be able to understand them quickly.
Here are ways you can stay informed about labor laws in the Philippines:
1. Stay Informed and Educated
Keeping up with the latest developments and amendments to labor laws in the Philippines is paramount for tech companies. Establish a system for regularly reviewing updates from government agencies such as the Department of Labor and Employment (DOLE) and seek legal counsel if needed to ensure understanding and compliance. When in doubt – ask!
2. Establish Clear Policies and Procedures
Develop policies and procedures that align with Philippine labor laws and regulations. These should cover workplace safety, employee rights, termination processes, and leave policies. Ensure all employees know these policies and provide training if necessary to ensure adherence.
3. Foster a Culture of Compliance
Emphasize the importance of following labor laws and regulations to promote a culture of compliance within your organization. Encourage open communication channels where employees feel comfortable raising concerns or seeking clarification on labor-related matters.
4. Regularly Conduct Audits and Reviews
Conduct internal audits and reviews of your company’s practices regularly to identify areas of non-compliance or areas for improvement. Address issues promptly and implement corrective actions to ensure ongoing compliance with labor laws.
5. Seek Professional Guidance When Needed
When in doubt, seek professional guidance from legal experts or consultants specializing in Philippine labor laws. They can provide insights and assistance in navigating complex regulations and ensuring compliance with legal requirements.
6. Work With an Offshore Provider
Working with an offshore outsourcing company like CoDev will help your company stay compliant and keep you on top of Philippine labor laws.
Through their expertise in local regulations, monitoring systems, and implementation of best practices, these outsourcing firms ensure that employee management aligns with legal requirements.
Stay Compliant With CoDev
Understanding Philippine labor laws is essential for companies operating in the country. It ensures the fair treatment of employees and avoids legal complications. By complying with these regulations, you can maximize your offshore operations in the country.
By leveraging CoDev’s expertise, companies like yours can navigate labor laws in the Philippines without fear.
Ready to take your business to new heights?
Book a free call with us to learn more about how we can help you.
