If you’re managing or looking to build virtual teams in the Philippines, payroll compliance is one of the most critical areas to understand. Whether you’re hiring full-time virtual staff for the first time, or going through employee conversions from freelancers to formal employees, navigating Philippine labor laws can be overwhelming.
This blog breaks down eight of the most common payroll-related questions employers have about PH labor laws. As you read, you’ll also discover why using our platform at Comply.ph is the most seamless way to stay compliant, save time, and protect your business as you grow your remote or hybrid teams in the Philippines.
Understanding Payroll in the Philippines: Where Most Companies Struggle
Before we jump into specific questions, let’s take a moment to understand why payroll compliance matters.
Here’s what often happens when companies hire Filipino freelancers, contractors, or even full-time workers without proper compliance support:
- You unknowingly misclassify workers and break local laws
- Your remote team doesn’t receive government-mandated benefits
- You face risks of lawsuits, back pay claims, and penalties
- You lose talented people to companies who provide security and perks
That is exactly why Comply.ph exists. Our platform helps foreign companies or startups like yours grow sustainably, whether you’re planning to build virtual teams from scratch or perform employee conversions to formal, long-term employment.
So with that, let’s explore the eight key payroll questions we hear most from business owners just like you.
1. Are 13th-Month Pay and Bonuses the Same Thing?
Short answer: No.
In the Philippines, 13th-month pay is a mandatory benefit required by law, and it must be paid to all rank-and-file employees who have worked for at least one month during a calendar year. It is equal to one-twelfth of the employee’s total basic salary earned in a year.
Here’s a breakdown:
- Mandatory Benefit: 13th-month pay is required for eligible employees
- Not a Bonus: Performance or Christmas bonuses are optional and separate
- Deadline: Must be paid on or before December 24 each year
If your organization is planning to offer bonuses on top of 13th-month pay, that’s great, but it doesn’t replace your 13th-month responsibility. When we onboard your virtual staff through Comply.ph, we help calculate and issue the proper amount, ensuring full compliance.
2. What Are the Required Employee Benefits in PH?
If you’re working with freelancers now, many of them may not be receiving benefits at all. However, once you convert your team members into full-time employees, you’re legally required to provide government-mandated benefits. These provide safety nets for employees and show your commitment to their well-being.
Here’s what’s required:
- SSS (Social Security System): Retirement, sickness, disability, maternity, and death benefits
- PhilHealth: National health insurance for medical, surgical, and hospitalization needs
- PAG-IBIG Fund: Savings and housing loan support for Filipino workers
- 13th Month Pay: One month’s salary bonus each year
- Paid Leave & Holiday Pay: Depending on tenure and holiday type
- Overtime Pay: For overtime hours worked beyond 8 hours per day
These benefits reflect a respectful employer-employee relationship and help ensure your employees feel valued and protected. At Comply.ph, all these contributions and deductions are handled automatically, so you can focus on helping your team grow instead of obsessing over compliance details.
3. How Is Overtime Pay Calculated?
Overtime pay applies when an employee works more than 8 hours in a day. The formula depends on when the overtime is performed:
- Regular Day OT: 25 percent of the hourly rate for hours worked beyond 8 hours
- Rest Day OT: 30 percent more for overtime on a scheduled rest day
- Holiday OT: 30 to 200 percent extra pay depending on the type of holiday and work rendered
Employees need clear agreements in place to avoid misunderstandings. At Comply.ph, we customize employment agreements and set payroll systems so your team is paid precisely, even in complex scenarios like holidays or night-shifts.
4. What Are the Rules for Terminations and Final Pay?
Terminating an employee in the Philippines involves several important legal steps, even for remote or hybrid teams. Under Philippine labor laws, employees are protected against unjust dismissals, so companies need to follow due process to avoid penalties.
Key points on final pay:
- Final Pay Components: Unpaid wages, unused leave, pro-rated 13th-month pay, and deductions (if applicable)
- Timeframe: Should be released within 30 days from termination
- Separation Pay: Mandatory only in certain cases like business closure, redundancy, or illness
If you’re handling employee conversions or hiring through agencies, you may miss critical legal requirements. That’s why it’s extremely helpful to use Comply.ph. We manage terminations ethically and legally within our local entity, removing the legal risks from your shoulders.
5. What Are the Types of Leaves in the Philippines?
Different types of paid and unpaid leaves are granted to Filipino workers by law:
Leave Types:
- Service Incentive Leave: 5 days of paid leave per year (for those with at least one year of service)
- Maternity Leave: 105 days for mothers, with 15 extra days if solo parent
- Paternity Leave: 7 days for married male employees
- Parental Leave for Solo Parents: 7 working days per year
- Special Leave for Women: 2 months for gynecological issues
- Bereavement and Emergency Leave: Depending on company policy
Handling leaves fairly is part of a legal and respectful work culture. Our platform places all these safeguards in place, so your employees feel secure and your business stays compliant.
6. Can I Hire Freelancers Instead of Full-Time Employees?
Many companies start with freelancers but eventually face compliance issues. While you technically can work with freelancers, here’s what you need to know:
- You must avoid treating them like employees (no operational control)
- You cannot dictate their working hours, tools, or methods
- You bear the risk of misclassification if they work exclusively for you
If you treat freelancers like employees, Philippine labor law will likely consider them as such. That’s why employee conversions are a smart move. With Comply.ph, we can help you turn freelancers or VAs into legitimate employees without disruption. They receive fair pay and benefits, and you get long-term loyalty and legal protection.
7. What Taxes Apply to Employees and Employers?
Taxation in the Philippines varies based on salary, benefits, and employee type. Here’s a simplified overview:
For Employers:
- Responsible for withholding income tax monthly
- Must also remit SSS, PhilHealth, and PAG-IBIG contributions (with employer and employee shares)
For Employees:
- Taxed based on taxable compensation income
- Tax brackets range from 0 percent to 35 percent depending on annual earnings
All payroll tax calculations and filings are mandatory and time-sensitive. Our Comply.ph platform automates these processes and files on your behalf, ensuring accuracy every month and zero legal blind spots.
8. How Can I Stay Compliant Without Building a Local Entity?
You’re busy running a business, developing your brand, and growing sales. Learning every detail of PH labor laws shouldn’t be on your to-do list. That’s why Employer of Record (EOR) services like ours exist.
With Comply.ph:
- There is no need to set up a local business entity
- You avoid legal risks tied to misclassification
- Payroll, benefits, and taxes are managed accurately for you
- You build an ethical, loyal workforce without the complexity of multi-country HR
You simply:
- Tell us what you need
- We onboard and manage your virtual staff under our local entity
- You scale faster while we handle compliance
It’s the safest way to build virtual teams or manage employee conversions in the Philippines.
Why Partner with Comply.ph for Payroll and Compliance?
With thousands of companies now employing Filipino talent remotely, we took the most challenging parts of the employment process and turned them into a stress-free experience.
Here’s what makes our platform better than handling things on your own:
What You Get with Comply.ph
- Complete payroll management and tax remittances
- Employee benefits setup and monthly government filings
- Employment contracts aligned with Philippines labor law
- Legal compliance with zero HR overhead
- No misclassification risk
- Onboarding support and ongoing HR support
What Your Employees Get
- Fair, predictable monthly salary
- Full benefits and health insurance
- 13th-month pay and leave entitlements
- Protection under PH labor laws
- Job security and longevity
When your team feels valued and secure, they give you their best. You avoid turnover, boost performance, and build a stable workforce that supports your long-term growth.
Final Thoughts: Build with Confidence, Grow with Comply.ph
Whether you’re just starting to explore options to build virtual teams in the Philippines or you already have freelancers you want to retain for the long-term, payroll compliance is non-negotiable.
You don’t need to be an expert in Philippine labor laws – that’s exactly what our platform at Comply.ph is here for.
We’ll help you:
- Transition freelancers into “real” employees through structured employee conversions
- Give your virtual staff the benefits they deserve
- Save time and money while keeping your business compliant and respected in the market
Ready to simplify your payroll, stay compliant, and secure your Filipino team for the long haul?
Book your free consultation call now at Comply.ph
Let’s talk about how we can help you grow with peace of mind and make your people feel truly valued.
