Step-by-Step Guide to Employer of Record in the Philippines

Hiring employees in the Philippines can give international companies access to a large English-speaking talent pool without requiring every employee to work as an independent contractor.

The challenge is employment infrastructure.

A foreign company that wants to employ someone in the Philippines must consider local employment contracts, payroll, taxes, statutory contributions, benefits, holidays, 13th-month pay, leave, and termination requirements.

One option is to establish a Philippine legal entity and employ workers directly.

Another is to use an Employer of Record (EOR) in the Philippines.

An EOR becomes the employee's legal employer in the Philippines while your company continues to manage the employee's work.

This guide explains how to use an EOR in the Philippines step by step.

Step 1: Decide Whether You Actually Need an EOR

Before contacting EOR providers, determine whether an Employer of Record is the right employment structure.

An EOR is commonly considered when:

• Your company is based outside the Philippines.

• You do not have a Philippine legal entity.

• You want to hire one or several Philippine employees.

• You want the workers to be formally employed rather than engaged as independent contractors.

• You want someone else to administer Philippine payroll and statutory contributions.

• You are testing the Philippines before establishing a permanent local operation.

For example, imagine a US consulting company wants to hire three employees in the Philippines.

Creating a Philippine corporation solely to employ those three people may introduce incorporation, accounting, tax, banking, payroll, government registration, and administrative requirements.

Using an EOR gives the company another option.

The structure becomes:

Foreign company → Philippine EOR → Philippine employee

The EOR handles the formal employment relationship while the foreign company manages the employee's day-to-day work.

Step 2: Understand What the EOR Will Be Responsible For

Before selecting a provider, understand exactly what an EOR does.

The EOR generally becomes the employee's legal employer.

Depending on the provider and employment arrangement, the EOR may handle:

• Employment contracts

• Employee onboarding

• Payroll

• Income tax withholding

• SSS contributions

• PhilHealth contributions

• Pag-IBIG contributions

• 13th-month pay

• Payslips

• Leave administration

• Holiday payroll

• Benefits administration

• Employment records

• Employee offboarding

• Final pay

• Termination administration

Your company still typically manages:

• The employee's job

• Daily responsibilities

• Projects

• Performance expectations

• Work tools

• Team communication

• Business strategy

That division of responsibilities should be clearly documented in your EOR agreement.

Step 3: Define the Employee You Want to Hire

Before asking providers for quotations, determine the actual employment requirements.

Prepare the following information:

• Job title

• Job description

• Monthly salary

• Work location

• Working hours

• Expected start date

• Probationary or regular employment arrangement

• Benefits

• Allowances

• Equipment requirements

• Bonuses or commissions

• Leave policies

• Reporting manager

The more complete the information, the more useful the EOR quotation will be.

Do not compare providers based solely on a generic advertised monthly fee.

Ask for the cost of employing your specific employee in the Philippines.

Step 4: Calculate the Real Cost of the Employee

One of the most common mistakes when hiring in the Philippines is assuming:

Monthly salary × 12 = annual employment cost.

Formal employment includes additional obligations.

Depending on the employee and current regulations, these can include:

• Employer SSS contributions

• Employer PhilHealth contributions

• Employer Pag-IBIG contributions

• 13th-month pay

• Applicable holiday pay

• Overtime

• Night-shift differential

• Benefits

• EOR fees

For example, an employee receiving ₱50,000 per month has:

₱50,000 × 12 = ₱600,000 annual base salary

But that is not necessarily the company's complete employment cost.

13th-Month Pay

Eligible rank-and-file private-sector employees are entitled to 13th-month pay.

The Philippine Department of Labor and Employment states that the minimum 13th-month pay is generally:

Total basic salary earned during the calendar year ÷ 12

DOLE reiterated this requirement in its December 2025 guidance and states that covered employees who have worked at least one month during the calendar year are entitled to the benefit.

For an employee earning ₱50,000 in basic salary for a complete year:

₱600,000 ÷ 12 = ₱50,000 in 13th-month pay

That means salary plus 13th-month pay alone becomes:

₱650,000

before other employer costs.

Step 5: Understand SSS, PhilHealth and Pag-IBIG

A Philippine EOR should also administer the statutory programs applicable to the employee.

Social Security System

The Philippine Social Security System, or SSS, provides social security benefits to covered workers.

Employers have responsibilities involving registration, contribution calculation, remittance, and reporting.

Your EOR should explain:

• The employee contribution

• The employer contribution

• The applicable salary-credit bracket

• Employees' Compensation contributions

• Remittance schedules

Official information is available through the Philippine Social Security System.

PhilHealth

PhilHealth provides national health insurance coverage.

PhilHealth states that private-sector employers are required to register so that employees can receive coverage, and employers are responsible for remitting applicable employee premiums and employer counterpart shares.

Official information is available through PhilHealth.

Pag-IBIG

The Home Development Mutual Fund, commonly known as Pag-IBIG Fund, provides savings and housing-related benefits.

Employers generally have registration, contribution, and remittance responsibilities for covered employees.

Official information is available through the Pag-IBIG Fund.

When requesting an EOR quotation, ask the provider to show these employer contributions separately rather than presenting only one combined total.

Step 6: Research Philippine EOR Providers

Once you understand your hiring requirements, compare providers.

Do not choose based solely on the provider's website or advertised price.

Create a shortlist and investigate:

• Philippine experience

• Legal employment structure

• Payroll capabilities

• Pricing

• Customer support

• Employee support

• Contract terms

• Security

• Data protection

• Benefits administration

• Onboarding process

• Offboarding process

• References or client reviews

One particularly important question is:

Which legal entity will actually employ my worker?

Some global EOR companies operate their own local entities.

Others use local partners.

You should know which structure your provider uses in the Philippines.

Step 7: Ask for a Fully Loaded Cost Estimate

Do not ask only:

"How much is your EOR fee?"

Instead ask:

"What will this employee cost us in total every month and every year?"

Request an estimate showing:

This makes providers much easier to compare.

Also ask whether additional charges apply for:

• Onboarding

• Security deposits

• Foreign exchange

• International bank transfers

• Benefits

• Insurance

• Expense reimbursements

• Off-cycle payroll

• Contract changes

• Equipment

• Visa or immigration assistance

• Employee termination

• Final payroll

• Offboarding

A low advertised EOR fee is not necessarily the lowest total price.

Step 8: Verify the Employment Contract

After selecting an EOR, review the proposed Philippine employment agreement.

The contract should clearly state important employment terms, such as:

• Employer

• Employee

• Position

• Salary

• Start date

• Work location

• Working hours

• Employment status

• Benefits

• Leave

• Company policies

• Confidentiality requirements

• Termination provisions

If the employee will initially be probationary, pay particular attention to the probationary terms.

The Philippine Labor Code states that probationary employment generally must not exceed six months from the date the employee starts working, subject to applicable exceptions.

The EOR should ensure the employment documentation complies with applicable Philippine requirements.

For higher-risk or unusual arrangements, consider having Philippine employment counsel review the structure.

Step 9: Sign the EOR Services Agreement

There are usually two separate relationships:

Your company ↔ EOR

and

EOR ↔ Employee

Your company's service agreement with the EOR should explain:

• Services included

• EOR fees

• Payroll funding

• Payment deadlines

• Deposits

• FX rates

• Benefits

• Responsibilities of each party

• Confidentiality

• Data handling

• Employment changes

• Termination procedures

• Liability

• Contract termination

• Offboarding

• Dispute procedures

Read the termination clauses particularly carefully.

Hiring through an EOR can be straightforward. Ending an employment relationship may be much more sensitive because Philippine termination rules need to be followed.

Step 10: Complete Employee Onboarding

Once the contracts are signed, the EOR can begin employee onboarding.

The employee may need to provide information such as:

• Government identification

• Tax information

• SSS details

• PhilHealth details

• Pag-IBIG information

• Bank details

• Address

• Emergency contact information

• Other required employment documents

The EOR should establish the employee in its payroll and employment systems.

Your company should separately handle operational onboarding.

That may include:

• Company email

• Software accounts

• Laptop or equipment

• Team introductions

• Job training

• Internal documentation

• Security access

• Communication tools

• Performance expectations

Do not assume that because the EOR handles legal onboarding it will also handle operational onboarding.

Step 11: Establish the Payroll Cut-Off

Before the employee begins work, understand the EOR's payroll calendar.

Ask:

• What is the monthly payroll cut-off?

• When do we need to fund payroll?

• When does the employee receive salary?

• How are expenses submitted?

• How are bonuses submitted?

• How are commissions processed?

• What happens if information is submitted late?

• Are off-cycle payments possible?

• Is there a fee for off-cycle payroll?

This is especially important if your company is funding Philippine payroll from another country.

International transfers and foreign-exchange conversion can create additional lead time.

Step 12: Fund Payroll

The EOR typically provides the client company with an invoice or funding request.

This may include:

Gross salary

Employer statutory contributions

Benefits

13th-month accrual

EOR service fee

Other applicable costs

The client funds the required amount.

The EOR then processes local payroll, withholds applicable amounts, and pays the employee.

Make sure you know whether the provider bills:

• In Philippine pesos

• In US dollars

• In another currency

Also ask which exchange rate is used and whether an FX spread or currency-conversion fee is added.

For companies hiring several employees, small FX differences can become material.

Step 13: Check the First Payroll Carefully

The first payroll should be reviewed in detail.

Verify:

• Employee name

• Salary

• Payroll period

• Gross pay

• Deductions

• Employer contributions

• Employee contributions

• Benefits

• Expense reimbursements

• Net pay

• EOR fees

• Exchange rates

• Payment date

Ask the employee to confirm that payment arrived correctly and that their payslip is understandable.

Errors are much easier to correct at the beginning than after several payroll cycles.

Step 14: Account for Philippine Holidays

Philippine holidays can affect payroll.

The country distinguishes between regular holidays and various special days, and different pay rules may apply depending on whether an employee works on the day.

DOLE publishes labor advisories that specify applicable holiday-pay rules. For example, its current Labor Advisory page includes 2026 wage-payment guidance for regular holidays and special non-working days.

Employers should therefore not simply apply US, European, or other foreign holiday rules to Philippine employees.

Ask the EOR to provide:

• The Philippine holiday calendar

• Applicable holiday classifications

• Payroll treatment

• Cut-off dates

• Requirements when employees work on holidays

Step 15: Track 13th-Month Pay Throughout the Year

Do not treat 13th-month pay as a surprise December expense.

Ask whether your EOR accrues the expected obligation throughout the year.

For example:

Employee basic salary:

₱60,000/month

Approximate full-year 13th-month pay:

₱60,000

Monthly budgeting equivalent:

₱60,000 ÷ 12 = ₱5,000/month

This does not necessarily mean the employee receives ₱5,000 extra each month. It means the employer can account for the expected annual obligation when calculating the real monthly cost of employment.

DOLE states that covered employees' 13th-month pay must be paid no later than December 24.

Step 16: Establish a Clear Leave Process

Determine how employees request leave.

For example:

Employee → Client manager approval → EOR payroll/HR system

or

Employee → EOR system → Client approval

Avoid having two separate systems where the employee tells your company one thing and the EOR records something different.

Agree on how to manage:

• Vacation

• Sick leave

• Statutory leave

• Unpaid leave

• Maternity-related leave

• Other applicable leave

The EOR should advise which requirements are statutory and which are company benefits.

Step 17: Manage Performance Yourself

An EOR should not replace your company's responsibility for actually managing employees.

Your company should still handle:

• Objectives

• Feedback

• Performance reviews

• Training

• Promotions

• Team management

• Role changes

• Performance concerns

However, before making a material employment decision, communicate with the EOR.

For example, if you want to:

• Reduce salary

• Change working hours

• Change employment terms

• Discipline an employee

• Put an employee on a formal performance plan

• Terminate employment

inform the EOR first.

These decisions can have employment-law implications.

Step 18: Do Not Terminate an Employee Informally

This is one of the most important steps.

Do not simply message the employee saying:

"Your employment ends today."

The Philippines has rules governing termination and post-employment rights.

The Labor Code contains specific provisions relating to termination, regular employment, probationary employment, authorized causes, just causes, and other post-employment matters.

If termination is being considered:

1. Contact the EOR.

2. Explain the circumstances.

3. Provide relevant documentation.

4. Determine the appropriate legal process.

5. Calculate final pay and other applicable amounts.

6. Have the EOR administer the employment termination.

For complicated cases, legal advice may also be appropriate.

Step 19: Review Your EOR Every Year

An EOR should not automatically remain your permanent employment structure.

Review the arrangement periodically.

Ask:

• Has the EOR fee increased?

• Is payroll accurate?

• Is employee support responsive?

• Are employees satisfied with the service?

• Are FX costs competitive?

• Are benefits still appropriate?

• Are there recurring payroll issues?

• Is the company hiring significantly more employees?

• Would establishing a Philippine entity now make financial sense?

For three Philippine employees, an EOR may be very convenient.

At 30, 50, or 100 employees, the economics may look very different.

The correct break-even point depends on your company and should be modeled rather than assumed.

Step 20: Consider Establishing Your Own Philippine Entity as You Scale

An EOR can also serve as a market-entry strategy.

A company might:

Phase 1

Hire its first 1–5 Philippine employees through an EOR.

Phase 2

Expand to 10–20 employees while validating the operation.

Phase 3

Compare EOR costs with the cost of establishing a Philippine entity.

Phase 4

Establish its own entity if long-term headcount makes that more economical.

This allows a foreign company to test the Philippine market before committing to permanent local infrastructure.

EOR vs. PEO in the Philippines

Employer of Record and Professional Employer Organization services are sometimes confused.

The important distinction is the legal employment structure.

If a US company does not have a Philippine entity and wants someone else to legally employ workers on its behalf, the EOR model is generally the relevant structure.

EOR vs. Independent Contractor

Foreign businesses sometimes hire Philippine workers as contractors instead.

Contractors can be appropriate where the relationship is genuinely independent.

But employment status should not be determined simply by which arrangement is cheaper.

The actual working relationship matters.

If the company expects a person to operate like a long-term employee, with defined working arrangements and integration into the organization, the company should carefully evaluate the proper classification.

An EOR offers one route for creating a formal employment relationship without establishing a Philippine entity.

Seek professional advice if classification is uncertain.

Checklist for Choosing a Philippine EOR

Before signing an agreement, confirm:

• Who legally employs the employee?

• Does the provider have a Philippine entity?

• If not, which local partner is used?

• What is the monthly EOR fee?

• Is a deposit required?

• What FX rate is used?

• Are there FX fees?

• Does the provider handle SSS?

• Does it handle PhilHealth?

• Does it handle Pag-IBIG?

• Does it calculate 13th-month pay?

• Does it administer holidays?

• Does it administer leave?

• Which benefits are included?

• How often is payroll processed?

• What is the payroll cut-off?

• What support does the employee receive?

• Are there onboarding fees?

• Are there offboarding fees?

• How are terminations handled?

• What happens if you change EOR providers?

• How do you retrieve employee and payroll records?

Frequently Asked Questions

What is an Employer of Record in the Philippines?

An Employer of Record legally employs Philippine workers on behalf of another business. The foreign client manages the employee's work while the EOR handles the formal local employment relationship.

Can a US company hire employees in the Philippines without establishing a Philippine company?

An EOR can provide a structure through which a foreign company hires Philippine employees without first establishing its own local employing entity, subject to the provider's structure and applicable Philippine requirements.

Does an EOR handle Philippine payroll?

Payroll administration is normally a central part of the EOR service.

This can include salary processing, tax withholding, statutory deductions and contributions, payslips, and other payroll obligations.

Does an EOR handle SSS, PhilHealth and Pag-IBIG?

A Philippine EOR would generally be expected to administer applicable statutory contributions for employees it legally employs.

Confirm the exact responsibilities with the provider before signing.

Who manages the employee's day-to-day work?

The client company typically manages the employee's actual role, tasks, performance, and responsibilities.

The EOR manages the legal and administrative employment relationship.

Does an EOR handle 13th-month pay?

A Philippine EOR should account for applicable 13th-month pay obligations for covered employees.

DOLE's current guidance states that covered rank-and-file private-sector employees are entitled to at least one-twelfth of their total basic salary earned during the calendar year.

How quickly can an employee be hired through an EOR?

Timelines vary by provider, employee documentation, background checks, contract requirements, and payroll cut-offs.

Rather than relying on a generic promise such as "48-hour onboarding," ask the provider for a specific estimated start date for your employee.

How much does an EOR in the Philippines cost?

EOR providers may charge a fixed monthly fee per employee, a percentage-based fee, or another pricing structure.

The EOR fee is normally only one part of total employment cost.

Companies should also budget for:

• Salary

• Statutory employer contributions

• 13th-month pay

• Benefits

• Insurance

• FX costs

• Other provider fees

Is an EOR cheaper than establishing a Philippine company?

It depends primarily on scale and duration.

For a small number of employees, an EOR may avoid the fixed costs and administrative burden of establishing an entity.

For a large permanent workforce, operating your own Philippine entity may eventually become more economical.

Final Step: Compare the Entire Employment Structure, Not Just the EOR Fee

Using an Employer of Record in the Philippines can make the first international hire considerably easier.

But the process should not begin by simply selecting the provider with the lowest advertised monthly price.

Start by determining the employment structure you need.

Then calculate the employee's actual cost, compare EOR providers, understand Philippine statutory obligations, review the employment contract, establish payroll procedures, and clarify how employment changes and termination will be handled.

The practical process is:

1. Determine whether an EOR is appropriate.

2. Define the employee and compensation.

3. Calculate total employment cost.

4. Compare Philippine EOR providers.

5. Verify the provider's legal employment structure.

6. Review the EOR service agreement.

7. Review the Philippine employment contract.

8. Complete employee onboarding.

9. Establish payroll and funding procedures.

10. Verify the first payroll.

11. Manage holidays, leave, statutory contributions, and 13th-month pay.

12. Coordinate employment changes with the EOR.

13. Follow the proper process when an employee leaves.

14. Reassess whether an EOR remains economical as your Philippine team grows.

Used correctly, an EOR can provide a practical bridge between hiring your first Philippine employee and eventually establishing a larger permanent operation in the country.

Official Philippine Resources

Employers should verify current requirements directly with the relevant government agencies:

• Department of Labor and Employment: employment standards, labor advisories, holidays, 13th-month pay, and Labor Code resources

• Social Security System: employer and employee social security contributions

• PhilHealth: employer registration, premiums, and health insurance contributions

• Pag-IBIG Fund: membership savings and employer contributions

Regulations, contribution schedules, wage orders, and provider terms can change. Employers should verify current requirements with the relevant government agency, their EOR, or qualified Philippine employment counsel before making employment decisions.