EOR.net.au
Employing in the Philippines
The Philippines is a long-standing source of skilled staff for Australian businesses, from customer support and finance to software and design. English is widely spoken, the time zone is 2 to 3 hours behind Sydney and salaries are competitive.
Many Australian companies start with offshore contractors and later want proper employees. That move matters: the Labor Code gives regular employees security of tenure, and 13th month pay and statutory contributions are compulsory. An EOR lets you employ staff properly without registering a Philippine entity.
Why Australian businesses go there
- Large English-speaking talent pool
- Time zone suits Australian business hours
- Strong experience supporting Australian clients
- Competitive salary costs
What to watch
- Budget for 13th month pay, a twelfth of the year's basic salary, paid before 24 December
- Regular employees have security of tenure after probation
- Night shift work attracts a 10% differential
- Minimum wages are set regionally and change often
Hiring and contracts
- Employment contracts
- The Labor Code governs employment. After probation, employees become regular employees with security of tenure, and labour-only contracting is banned.
- Probation
- Probation can last up to 6 months. Employees must be told at the outset what standards they need to meet to become regular, or they count as regular from the first day.
- Working hours
- The normal working day is 8 hours. Overtime carries a premium of at least 25%, and work between 10pm and 6am earns a 10% night shift differential, which is relevant for teams covering Australian business hours.
- Minimum wage
- Regional wage boards set minimum wages. From 26 September 2026 the non-agricultural minimum in the National Capital Region is ₱755 a day under Wage Order NCR-28.
Leave and holidays
- Annual leave
- Employees with 1 year of service receive 5 days of service incentive leave, which can be converted to cash if not used.
- Sick leave
- Apart from service incentive leave there is no statutory sick leave. Eligible SSS members can claim a sickness benefit.
- Parental leave
- The Expanded Maternity Leave Law provides 105 days of paid maternity leave. Married fathers get 7 days of paid paternity leave, and solo parents receive additional leave.
- Public holidays
- Regular holidays and special non-working days are proclaimed every year. Employees who work a regular holiday are paid 200%.
Employer costs
- Retirement and social security
- Since January 2025, Social Security System contributions total 15% of the monthly salary credit, split 10% employer and 5% employee. PhilHealth and Pag-IBIG contributions are also due, and statutory retirement pay applies at 60 to 65 where there is no better plan.
- Payroll taxes
- Employers withhold income tax and lodge returns with the Bureau of Internal Revenue.
- Mandatory benefits
- 13th month pay, worth at least one twelfth of the basic salary earned in the year and due by 24 December, plus SSS, PhilHealth and Pag-IBIG.
Ending employment
- Notice periods
- Resigning employees owe 30 days notice. Where an employer ends employment for an authorised cause such as redundancy, it must notify the employee and the Department of Labor and Employment in writing 30 days beforehand.
- Dismissal protection
- Regular employees have security of tenure. Dismissal requires a just or authorised cause and due process, and just-cause cases follow a two-notice procedure.
- Severance
- Authorised-cause terminations attract separation pay. For redundancy it is generally the higher of 1 month of pay or 1 month per year of service, and for retrenchment the higher of 1 month or half a month per year.
Contract terms and visas
- IP and restraint clauses
- A non-compete can be enforced when it is reasonable in time, place and trade. Confidentiality and IP assignment clauses are standard.
- Visas and right to work
- Foreign nationals generally need two approvals to work: an Alien Employment Permit issued by the Department of Labor and Employment and an appropriate work visa.
Compared with Australia
| Philippines | Australia | |
|---|---|---|
| Annual leave | Employees with 1 year of service receive 5 days of service incentive leave, which can be converted to cash if not used. | Full-time employees get 4 weeks of paid annual leave a year (5 weeks for some shift workers), built up progressively. Unused leave is paid out when employment ends, and many awards add 17.5% leave loading. |
| Sick leave | Apart from service incentive leave there is no statutory sick leave. Eligible SSS members can claim a sickness benefit. | Full-time employees get 10 days of paid personal/carer's leave a year, plus 2 days of unpaid carer's leave and 2 days of paid compassionate leave per occasion. Every employee can also take 10 days of paid family and domestic violence leave a year. |
| Notice | Resigning employees owe 30 days notice. Where an employer ends employment for an authorised cause such as redundancy, it must notify the employee and the Department of Labor and Employment in writing 30 days beforehand. | Under the National Employment Standards an employer gives 1 week of notice for up to 1 year of service, rising to 4 weeks for more than 5 years, plus an extra week for employees over 45 with at least 2 years of service. Pay in lieu is allowed, and awards set the notice employees must give. |
| Retirement and social security | Since January 2025, Social Security System contributions total 15% of the monthly salary credit, split 10% employer and 5% employee. PhilHealth and Pag-IBIG contributions are also due, and statutory retirement pay applies at 60 to 65 where there is no better plan. | On top of wages, employers pay the Superannuation Guarantee at 12% of qualifying earnings. Payday Super has applied since 1 July 2026, so contributions go out with each pay and must arrive in the fund within 7 business days. Australia has no separate employer social security levy. |
| Dismissal protection | Regular employees have security of tenure. Dismissal requires a just or authorised cause and due process, and just-cause cases follow a two-notice procedure. | After the minimum employment period, employees can claim unfair dismissal if an award or agreement covers them or they earn under the high income threshold, $190,100 from 1 July 2026. Protection against adverse action under the general protections starts on day one, and small businesses may rely on the Small Business Fair Dismissal Code. |
Frequently asked questions
What is 13th month pay?
A mandatory payment of at least one twelfth of the basic salary earned in the calendar year, paid by 24 December.
Can we keep Philippine staff as contractors?
Only if they are genuine independent contractors. Labour-only contracting is prohibited, and people working like employees are likely to be treated as employees.
How long can probation last?
Six months at most. Explain on the first day what the person must achieve to be made regular, because if you do not, the law treats them as regular from the start.
