When expanding your business and hiring in the Philippines, it’s crucial to have a clear understanding of the country’s labor laws. As you build virtual teams and convert freelancers or virtual assistants into full-time employees, you may encounter common misconceptions that can lead to costly mistakes.
Comply.ph, with its comprehensive Employer of Record services, helps you navigate Philippine labor laws and ensures compliance, allowing you to focus on growing your business with confidence.
This blog will clarify the 10 most common misunderstandings about Philippine labor laws, explain how to avoid them, and show you how our platform can make the process of building a compliant team simple and stress-free.
1. Freelancers and Contractors are Exempt from Philippine Labor Laws
Misunderstanding: Many employers believe that freelancers and contractors in the Philippines are not subject to labor laws, such as minimum wage, social security, and healthcare benefits.
Reality: Freelancers and contractors are not automatically exempt from these labor protections. However, the scope of their rights depends on the nature of their employment relationship. If you are looking to build virtual teams or convert freelancers into permanent employees, it’s crucial to be aware that they will be entitled to employee benefits once they become full-time staff.
How Comply.ph Helps: At Comply.ph, we specialize in converting freelancers and contractors into full-time employees while ensuring they receive the same benefits as any other employee in the Philippines, such as healthcare, social security, and holiday pay.
2. Overtime Pay Is Optional
Misunderstanding: Employers sometimes assume that paying overtime is optional if the employee is salaried or works remotely.
Reality: Philippine labor laws require overtime pay for any work beyond the standard 8 hours a day or 48 hours a week. Employees who work extra hours must be compensated at a higher rate, typically 1.25 times their normal hourly rate for the first 8 hours of overtime and 1.30 times for any overtime beyond that.
How Comply.ph Helps: Our platform ensures that your employees’ working hours are tracked and that they are compensated correctly according to Philippine labor laws, taking the risk and hassle off your plate.
3. Employees Have No Rights to Paid Leaves in the Philippines
Misunderstanding: Some employers mistakenly believe that employees in the Philippines are not entitled to paid leaves.
Reality: Full-time employees in the Philippines are entitled to paid leaves, including:
- Vacation leave (at least 5 days per year)
- Sick leave (at least 10 days per year)
- Special leave for women (under the Magna Carta for Women)
- Maternity and paternity leave
How Comply.ph Helps: When you convert your contractors into employees, we ensure that they receive the appropriate paid leave benefits, complying with Philippine labor laws and fostering long-term loyalty and job satisfaction.
4. There’s No Need for Employee Benefits for Remote Workers
Misunderstanding: With the rise of remote work, many employers assume that employees working from the Philippines don’t require the same benefits as those working on-site.
Reality: Remote workers are entitled to the same employee benefits as their on-site counterparts. This includes health insurance, social security, and Pag-IBIG (a government housing program). If you want to secure talent for the long term, offering these benefits is crucial.
How Comply.ph Helps: Our Employer of Record service ensures that your remote employees in the Philippines are provided with the necessary benefits to maintain compliance and build employee loyalty.
5. You Can Avoid Taxes and Payroll Processing by Hiring Directly
Misunderstanding: Employers sometimes believe that hiring directly and paying contractors under the table will save on taxes and payroll processing costs.
Reality: Avoiding taxes and payroll processing by hiring employees without going through the proper channels is illegal. The Philippine government strictly regulates income tax and other deductions for employees. Non-compliance can lead to heavy penalties.
How Comply.ph Helps: We manage payroll processing, tax withholdings, and other legal requirements on your behalf, ensuring full compliance with Philippine tax laws. By using Comply.ph to manage your team, you avoid unnecessary risks and focus on growing your business.
6. The Probationary Period is Unlimited
Misunderstanding: Employers may think that the probationary period for employees can be extended indefinitely if performance issues arise.
Reality: Under Philippine labor laws, a probationary period can only last up to 6 months. After that, employees must either be regularized or terminated. Keeping employees on probation beyond the allowed period can lead to legal complications.
How Comply.ph Helps: Our platform ensures that your employees are properly classified and that probationary periods are adhered to, minimizing legal risks.
7. Employee Contracts Are Not Necessary for Filipino Workers
Misunderstanding: Some employers assume that a verbal agreement is sufficient for employees in the Philippines, especially when building a team remotely.
Reality: Philippine labor law requires a formal, written contract for every employee. This contract should clearly define the terms of employment, compensation, benefits, and working hours to avoid disputes in the future.
How Comply.ph Helps: We provide all necessary employment contracts for your Filipino employees, ensuring compliance with Philippine labor laws and protecting your business from potential legal issues.
8. Only Full-Time Employees Are Protected by Labor Laws
Misunderstanding: Employers may assume that part-time workers, or those working on a temporary basis, are not entitled to the same protections under Philippine labor law.
Reality: Both full-time and part-time employees are entitled to basic protections, such as minimum wage, social security, and paid leave. Employers must treat all employees fairly and according to the law, regardless of their working hours or contract type.
How Comply.ph Helps: Whether you’re hiring full-time employees or part-time staff, Comply.ph ensures that all your workers are covered by the relevant labor protections in the Philippines.
9. You Don’t Need to Pay for Employees’ Health Insurance
Misunderstanding: Some employers may believe that they are not obligated to provide health insurance to employees working in the Philippines, especially if they are working remotely.
Reality: Under Philippine labor laws, all employees must receive health benefits, such as PhilHealth (the Philippine Health Insurance Corporation), as part of their compensation package. Failing to provide this benefit can result in penalties.
How Comply.ph Helps: Comply.ph ensures that your employees are enrolled in PhilHealth and other mandatory benefits, ensuring full compliance with Philippine labor laws and enhancing employee satisfaction.
10. You Can Dismiss Employees Without Following Proper Procedures
Misunderstanding: Employers sometimes believe they can terminate employees at will, without following due process.
Reality: Philippine labor laws strictly regulate employee termination. Employers must provide just cause and observe due process when dismissing an employee, including giving the employee a chance to explain themselves.
How Comply.ph Helps: We handle all employee termination processes in compliance with Philippine labor laws, ensuring that you avoid costly disputes and maintain a professional relationship with your team.
Conclusion: Navigating Philippine Labor Laws with Comply.ph
Misunderstandings about Philippine labor laws can be costly for businesses, especially when building virtual teams or converting freelancers into full-time employees. By partnering with Comply.ph, you gain access to expert guidance on compliance, payroll, employee benefits, and labor law requirements.
Our platform simplifies the process of hiring, onboarding, and managing your Filipino team, ensuring full compliance with Philippine labor laws. Whether you’re building a new team or converting existing contractors into employees, we make the process seamless, ethical, and cost-effective.
Book your free consultation call today and let us help you build a loyal, compliant team in the Philippines for the long-term success of your business.
