Compare hiring through a local corporation, an employer of record or a contractor, with verified employer costs at three salary points, the 13th month and separation pay rules, and what the contested Metro Manila wage orders mean for payroll.
By Manjuri DuttaVerified 9 October 2026Wage floor under Wage Order NCR-28An overseas employer has three practical routes: incorporate a Philippine corporation, hire through an employer of record, or engage the person as an independent contractor. A 100% foreign-owned company serving the local market needs US$200,000 in paid-in capital, or US$100,000 once a majority of at least 15 staff are Filipino. For a first team of under 15 people, an EOR is usually the right route, and contractor arrangements fail the four-fold test more often than buyers expect.
Employer cost comes from three capped contributions and one cost that never caps. SSS takes 10% of a salary credit that stops at ₱35,000, PhilHealth takes 2.5% of salary up to ₱100,000, and Pag-IBIG is a flat ₱200, so contributions top out at ₱6,230 a month. The 13th month is a twelfth of every peso of basic pay, and from about ₱42,400 a month it costs more than the SSS share.
The first group holds the rules that changed this year or that DOLE inspections most often find broken in foreign-run payrolls.
Employer cost falls as salary rises, because SSS caps at a ₱35,000 salary credit and PhilHealth at ₱100,000, while the 13th month keeps scaling with basic pay.
₱5,438 a month on top of salary. SSS is charged on the full ₱25,000 salary credit and EC is ₱30 because the credit is above ₱15,000. This is the only point where SSS costs more than the 13th month accrual.
₱10,230 a month. SSS has hit its ₱35,000 salary credit ceiling and stays at ₱3,530 at every salary above this. The 13th month accrual is now the largest line, at almost half of the employer cost.
₱21,230 a month. PhilHealth stops at its ₱100,000 ceiling, so contributions are fixed at ₱6,230 and the 13th month makes up 71% of the cost. The employee, not the employer, pays tax on bonuses above ₱90,000 a year.
SSS at 15% of the monthly salary credit (employer 10%, employee 5%), credit range ₱5,000 to ₱35,000, under RA 11199 and the SSS contribution schedule in force since 1 January 2025. Employees' Compensation is employer-only: ₱10 below a ₱15,000 credit and ₱30 from ₱15,000. PhilHealth at 5% of basic salary split equally, floor ₱10,000 and ceiling ₱100,000, under RA 11223, retained for 2026. Pag-IBIG at 2% employer on a fund salary capped at ₱10,000 (₱200), raised from ₱5,000 in February 2024. 13th month at one twelfth of basic salary under PD 851. Overtime, night differential, holiday premiums, retirement pay under RA 7641 and private HMO cover are not included.
Pick a country and a salary. Every statutory contribution, ceiling and accrual is applied separately, so the total is close to what a provider will actually invoice.Compare other countries
Private health cover, equipment stipend, meal or transport allowance.
Typically $0 to $2,000 depending on provider and country.
Refundable, but it ties up cash. Most providers hold one to two months.
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Total employer cost, per employee per month
Statutory rates current as of . Exchange rates indicative as of . Contribution ceilings, regional variation, employee age and collective agreements all shift the real figure. Use this to build a budget, then validate against a written quote.
The route decides who holds the SEC, BIR, SSS, PhilHealth and Pag-IBIG registrations, and who pays reinstatement and back wages if a worker is reclassified.
Misclassification risk. DOLE and the NLRC apply the four-fold test: who selected the worker, who pays wages, who can dismiss, and above all who controls how the work is done. A contractor who fails it is a regular employee, owed back SSS, PhilHealth and Pag-IBIG contributions, the 13th month and security of tenure. A job contractor without substantial capital is a labour-only contractor under Department Order No. 174-17, which makes you the direct employer.
Annual leave by statute is five days after a year of service, so the leave policy in your contract matters more than the law. Family leave and the 13th month are where the statutory cost sits.
Labor Code arts. 94 and 95 (service incentive leave; establishments regularly employing fewer than 10 workers are exempt). Proclamation No. 1006, s. 2025 (2026 holidays). RA 11210 (Expanded Maternity Leave Law): SSS pays a maternity benefit and the employer pays the salary differential unless exempt. RA 8187 (Paternity Leave Act). RA 11861 (Expanded Solo Parents Welfare Act). RA 9262 (Anti-Violence Against Women and Their Children Act). RA 9710 (Magna Carta of Women). PD 851 (13th month pay). RA 7641 (Retirement Pay Law). SSS sickness benefit under RA 11199, advanced by the employer and reimbursed by SSS.
The Philippines is not at-will: after probation a dismissal needs a just or authorised cause and the right procedure, and the cause decides whether separation pay is owed.
Labor Code arts. 297 to 300, as renumbered by RA 10151, and DOLE Department Order No. 147-15 on the two-notice procedure. A fraction of at least 6 months counts as a full year for separation pay. Closure caused by serious business losses carries no separation pay. Genuine fixed-term and project contracts end on their stated date without separation pay. Illegal dismissal claims go to the NLRC, with reinstatement and full back wages as the remedy. Under DOLE Labor Advisory No. 06-20, final pay is due within 30 days of separation and a certificate of employment within 3 days of request.
Through an employer of record, a first Philippine hire typically runs from decision to first payroll in two to four weeks, and a foreign national adds two to three months.
Choose EOR or entity on your headcount plan. A foreign-owned domestic corporation needs US$200,000 in paid-in capital and three to six months of SEC, BIR, local government and agency registrations before first payroll.
Find the regional wage board for the work location. Metro Manila is ₱755 a day under NCR-28, and pay bands near the old ₱695 floor need a wage distortion review under Labor Code art. 124.
State probationary status and the regularisation standards in writing on day one, with pay, hours, the 13th month and any leave above the 5-day statutory floor. Probation cannot run past six months.
Collect SSS, PhilHealth, Pag-IBIG and TIN numbers, file BIR Form 1902 if the hire has no TIN, and report the new employee to SSS on Form R-1A within 30 days of the start date.
Pay at least twice a month, no more than 16 days apart. Remit SSS, PhilHealth and Pag-IBIG monthly, file withholding tax on BIR Form 1601-C, and start accruing the 13th month.
Four providers we have reviewed that employ in the Philippines. Full scoring and the ranked list sit on the Philippines EOR page.
Widest product set of the four, from contractors at $49 to payroll and HR. Its Philippine entity model is not published, and a refundable deposit applies.
Employs through its own Philippine entity, the only one of the four we could verify. The rate is $459 on annual billing and $499 month to month.
Formerly Velocity Global, running EOR alongside entity setup for a later move to a Philippine subsidiary. The $399 rate carries terms, so confirm the Philippine quote in writing.
Lowest published rate of the four, employing through a licensed local partner rather than its own entity. No setup or termination fees, and no minimum term.
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The eight where published guidance is most often out of date, or where employers most often get caught.
₱755 a day for non-agriculture work, from 26 September 2026 under Wage Order NCR-28. Agriculture, retail and service firms with 15 or fewer workers, and manufacturers with fewer than 10, pay ₱718. Much published guidance still quotes NCR-27, which set the same rates from 25 July and a ₱25 step to ₱780 on 20 January 2027, but a Pasig court has enjoined it and labour groups have taken it to the Supreme Court. No directive requires back pay for late July to September, so keep payroll records in case a ruling changes that.
No. The 13th month is statutory under PD 851: one twelfth of the basic salary earned in the calendar year, paid by 24 December and pro-rated on exit. A Christmas bonus is discretionary unless the contract or company practice makes it binding. The decree covers rank-and-file employees, so managerial staff are outside it, though most employers pay them too by contract. The 13th month and other bonuses are tax-free to the employee up to ₱90,000 a year combined. A bill to raise that to ₱150,000 has not passed.
Between 11.8% and 21.8% of gross across the three cost points above, falling as salary rises. SSS, PhilHealth and Pag-IBIG stop rising at ₱6,230 a month combined, while the 13th month keeps adding 8.33% of basic pay. Those figures leave out overtime, night differential, holiday premiums and private HMO cover, which is not statutory but which most professional candidates expect. An EOR fee of $199 to $599 a month from the four providers above sits on top.
Yes. Probation cannot exceed six months under Labor Code art. 296, and an employee still working past that point is regular by operation of law, with full security of tenure. The same happens from day one if the employer never told the employee the standards for regularisation when probation started, so put them in the contract or a signed document. Ending probation for failing those standards needs written notice before the six months run out.
No. After probation a dismissal needs a valid cause. Authorised causes such as redundancy need 30 days' written notice to both the employee and DOLE, plus separation pay. Just causes such as serious misconduct need two written notices and a chance to be heard, and carry no separation pay. A valid cause with the wrong procedure costs nominal damages, set by the Supreme Court at ₱30,000 for just cause and ₱50,000 for authorised cause. No valid cause means reinstatement and full back wages.
No. PhilHealth is the only statutory health cover, at 5% of basic salary split equally up to a ₱100,000 ceiling. Private HMO plans are a market expectation for office and BPO roles rather than a legal duty, and candidates compare them across offers, so price one into the package. Ask any EOR whether its plan covers dependants and when cover starts, because activation can lag the start date.
Yes, if the EOR's own or partner entity is the employer named on the permit. The employer files an Alien Employment Permit with DOLE after a labour market test, posting the vacancy on at least three platforms including PhilJobNet, and the Bureau of Immigration then issues a 9(g) pre-arranged employment visa. Department Order No. 248-25 added an Economic Needs Test for some sectors, and since 9 June 2026 every AEP is processed at DOLE Central Office. Plan on two to three months.
Yes. EORs operate openly in the Philippines, and we know of no EOR reclassified on this ground. The risk sits in Labor Code art. 106 and Department Order No. 174-17, which prohibit labour-only contracting, where a contractor supplies workers without substantial capital and the client controls the work. An EOR arrangement sits close to that line, so ask the provider how its contract addresses DO 174 and get the answer in writing.
Compare the providers that employ in the Philippines on pricing, entity ownership and onboarding speed.