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What Employers Need To Know
Key Country Facts
Currency: Philippine Peso (PHP)
Time zone: GMT +8
Capital city: Manila
Official language: 63.7% of Filipinos over the age of 5 can speak English (82% in Manila and 70% in the biggest island of Luzon). 96.4% of Filipinos speak Tagalog, the official language. There are 150 recognized languages and dialects spoken in homes across the Philippines.
The Filipino Labor Code is the country’s general employment legislation, which regulates the relationship between employees and their employer as well as all other employment-related matters. The law applies to all Filipino enterprises, joint ventures, and to all employment relationships between Filipino nationals and foreign enterprises.
Employment contracts are required. While they may be oral or written, they must satisfy the essential requirements and minimum statutory standards laid down in the Labor Code. Any element of an employment contract that fails to do so is considered invalid
In general, employment contracts are written in English, but employers must provide dual language contracts, with the other language being Filipino, if the employee in question is a Filipino national. The contract must clearly state the employment terms relating to each employee type in order to avoid confusion or future disputes.
In the Philippines, holidays are classified as regular or special holidays each year. There are currently 12 regular holidays and 8 special non-working holidays in the Philippines:
New Year’s Day – January 1
Lunar New Year – January 12
EDSA Revolution Anniversary (Special) – February 25
Maundy Thursday (Regular) – April 1
Good Friday (Regular) – April 2
Black Saturday (Special) – April 3
Day of Valour – April 9
Labor Day (Regular) – May 1
Eid Al Fitr (Regular)* – May 13
Independence Day (Regular) – June 12
Eid al Adha (Regular)* – July 30
Ninoy Aquino Day (Special) – August 21
National Heroes Day (Regular) – August 30
All Saints’ Day (Special) – November 1
Additional (Special) (Non-Working) Day – November 2
Bonifacio Day (Regular) – November 30
Immaculate Conception (Special) – December 8
Additional (Special) (Non-Working) Day – December 24
Christmas Day (Regular) – December 25
Rizal Day (Regular) – December 30
New Year’s Eve (Special) – December 31
Confirmation of public holidays for Eid Al Fitr and Eid al-Adha will be announced separately.
Employees are entitled to five days of paid vacation leave after 12 months of service, referred to as service incentive leave (SIL) by the Labor Code. This is not applicable to those enjoying vacation leave with pay of at least five days and those employed in establishments regularly employing less than ten employees. Generally, this SIL is only for low income or blue-collar workers who may not receive annual leave as part of their contracts.
The service incentive leave should be converted to its money equivalent and paid to the nonexempt employee by the employer if not used or exhausted by the said employee at the end of the year. As a rule, an employer can regulate the schedule of the service incentive leave of its employees.
Staff members are not legally entitled to statutory sick leave. But in practice, employees tend to be granted it through voluntary employer policies or collective bargaining agreements.
An employee who has paid at least three monthly SSS contributions in the 12-month period immediately preceding the period of sickness or injury and is confined for more than three days in a hospital or elsewhere with the approval of the SSS will be paid by his/her employer a daily sickness benefit equivalent to 90% of his/her average daily salary credit for each day of confinement. However, this allowance will only begin to be paid after all sick leave with full pay due from the employer has been exhausted.
A female employee, who has rendered a continuous aggregate service of at least six months for the last twelve months, is entitled to a special leave benefit of two months with full pay based on her gross monthly compensation, following surgery caused by gynecological disorders.
The SSS will reimburse the employer 100% of the daily sickness benefits, provided that the SSS receives satisfactory proof and the legality of that payment, and the employer has notified the SSS of the confinement within five calendar days after receipt of the notification of sickness or injury from the employee.
Employees who become ill or experience work-related injuries can make a claim to the Employees’ Compensation Program (ECP). The ECP is designed to provide assistance (in the form of medical services, rehabilitation services, and/or income cash benefit) to employees for work-related injury, sickness, disability or death. Only the employer is required to pay monthly contributions, no contribution is due from the employee. The employer’s contributions for the ECP make up the State Insurance Fund, from which compensation for approved claims is sourced.
The Filipino Labor Code grants up to 105 days of paid maternity leave for female employees, and additional 15 days if the mother is a solo parent.
A female member of the SSS, who has paid at least three monthly contributions in the 12-month period immediately preceding her childbirth or miscarriage, will be paid a daily maternity leave benefit equivalent to 100% of the average daily salary credit (based not on actual salary but on the SSS graduated scale, with a maximum monthly salary credit of PHP 15,000)
In addition to the maternity leave benefit, the Republic Act No. 9710, also known as the “Magna Carta for Women,” guarantees access for women to services, such as:
Maternal care including pre- and post-natal services to address pregnancy and infant health and nutrition,
Promotion of breastfeeding, and
Responsible, ethical, legal, safe and effective methods of family planning.
Seven days of paid paternity leave for male employees.
The Philippines takes termination seriously. As a result, it’s an arduous process. Termination may only occur for just or authorized causes, but the employer bears the burden of proving the lawfulness of the employee’s dismissal. Employees must provide a 30-day resignation notice outlining whether it’s with just cause. Basically, there’s no such thing as hire and fire “at will.”
An employee who is dismissed for a just cause is not entitled to severance or termination pay. Staff members dismissed for an authorized cause receive severance pay that is equivalent to at least a half or full month’s pay for every year of service, depending on the reason for their termination.
Authorized causes could be automation, downsizing, restructuring, due to financial losses. Depending on the cause, the amount of severance will be half or one month for each year of service.
In cases of retrenchment to prevent losses, illness, closure or cessation of operations not due to serious business losses, the minimum separation pay is one-half a month’s pay for every year of service. Separation due to redundancy or the installation of labor-saving devices entitles the employee to a minimum separation pay of one month’s pay for every year of service.
A 13th month bonus in Philippines is mandatory, and an additional Christmas 14th month bonus is customary. All employers are required to pay their rank-and-file employees the 13th month pay, regardless of the nature of their employment and irrespective of the methods by which their wages are paid, provided they worked for at least one month during a calendar year.
The 13th month pay of a rank-and-file employee should be equivalent to at least 1/12 of the total basic salary that the employee earns within a calendar year. It should be paid no later than December 24th of each year. Nonetheless, an employer may give its rank-and-file employees half of the required 13th month pay before the opening of the regular school year in June and the other half on or before December 24th. The frequency of payment of the 13th month pay may also be the subject of an agreement between the employer and the collective bargaining agent of its rank-and-file employees.
Philippines Social Security System (SSS)
It is the policy of the State to establish a tax-exempt SSS and provide meaningful protection to members and their beneficiaries against the hazards of disability, sickness, maternity, and other contingencies resulting in loss of income or financial burden.
Monthly contributions are based on the compensation of SSS members and payable under two programs:
Social Security (SS): 12% of the monthly salary credit (MSC) not exceeding PHP 20,000 and paid by both employer (8.50%) and employee (4.50%).
Employees’ Compensation (EC): Starting January 1st, 2007, PHP 10 for employees with an MSC of PHP 14,750 and below, and PHP 30 for employees with an MSC of PHP 14,750 and up; paid by the employer only.
All premium contributions are withheld at source. Remittance schedules depend on the employer registration number, usually on a monthly basis in arrears.
Philippines Health Insurance Law
The National Health Insurance Program (NHIP) is a compulsory health program for employees who are included in the SSS. The NHIP basically provides health insurance coverage for employees.
All government and private sector employers are required to register with PhilHealth to enable them to provide social health insurance coverage to their employees. As of 2020, 6% of the MSC not exceeding PHP 60,000 is paid by both employer (3%) and employee (3%), effective January 1st, 2020. Based from the law enacted by the government, this contribution will increase at an increment of 0.05% until year 2025.
PhilHealth benefits cover maternity plans, while health insurances do not. The main coverage of PhilHealth’s maternity plan is the prenatal check-ups, delivery, post-natal check ups and newborn screening, to be conducted at their accredited hospitals and clinics.
Philippines Home Development Mutual Fund (HDMF)
The HDMF or the PagIBIGFund is a nationwide tax-exempt mutual provident savings system for private and government employees supported by matching mandatory contributions of their employers with housing as the primary investment.
Mandatory coverage of the employer shall take effect on the first day of business operation and that of the employee on the date of his/her employment. Coverage shall not be mandatory for Filipinos employed by foreign-based employers whether deployed locally or abroad but whose respective employers are exclusively based outside of the Philippines. If the employer maintains an office or agent in the Philippines that effectively acts as an employer of the Filipino, then such office or agent shall be deemed an employer, subject to mandatory coverage.
4% of the MSC not exceeding PHP 5,000 is paid by both employer (2%) and employee (2%).
This information does not constitute legal advice.