An employer of record in the Philippines is a locally registered company that hires a worker on a buyer's behalf, issues a Labor Code-compliant contract, runs payroll, remits mandatory social contributions, and absorbs the legal employer role for a company with no Philippine entity. The country combines strong statutory protection for employees, most visibly security of tenure and mandatory 13th month pay, with three separate mandatory contribution schemes an employer must register for and pay into every month: SSS, PhilHealth and Pag-IBIG.
What an EOR does in the Philippines
A Philippine EOR becomes the legal employer of record for tax and labor purposes: it issues the employment contract, runs monthly payroll, withholds and remits income tax, and registers the worker with the Social Security System (SSS), which provides compulsory coverage to employers and employees alongside benefits such as sickness, maternity, disability and retirement pay. On top of SSS, a compliant employer also enrols and contributes to PhilHealth for health insurance and Pag-IBIG for the national housing fund; missing any one of the three is a common and easily audited compliance gap for buyers running Philippine payroll themselves for the first time.
Security of tenure and termination under the Labor Code
The Labor Code's security-of-tenure provisions in Book Six mean a regular employee cannot be dismissed except for a just cause, such as serious misconduct, gross and habitual neglect of duty, or fraud, or an authorised cause, such as redundancy, retrenchment to prevent losses, or closure of the business. A worker dismissed without a valid cause is entitled to reinstatement with full backwages. Where the dismissal is for an authorised cause like redundancy or retrenchment, separation pay is due at a minimum of one month's salary or one month's pay per year of service, whichever is higher; where the cause is a disease that makes continued employment unsafe, the minimum drops to half a month's pay per year of service. An EOR that treats Philippine termination like an at-will jurisdiction is building buyers a liability, not a service.
13th month pay and mandatory contributions
13th month pay is not discretionary. Under Presidential Decree 851, employees who have worked at least one month in the calendar year are entitled to a 13th month payment equal to at least one-twelfth of the basic salary earned that year, and it must be paid on or before 24 December with no exemption available on request. Layered on top are the three statutory contribution schemes: SSS for social insurance, PhilHealth for health coverage and Pag-IBIG for housing savings, all shared between employer and employee at rates set by government circular and updated periodically, most recently effective January 2025 for SSS. A buyer quoting Philippine payroll cost needs all four of these, 13th month plus three contributions, added to base salary before comparing it with any other country.
Entity vs EOR trade-off
Setting up a Philippine branch or subsidiary means registering with the SEC or DTI, the Bureau of Internal Revenue, and separately with SSS, PhilHealth and Pag-IBIG as an employer, a process that commonly takes two to three months before the first payslip can be run compliantly. An EOR replaces that with an existing registration the buyer plugs into within days, at the cost of a per-employee fee and less direct control over benefits design. For a single hire or a small pilot team, the EOR route is close to always cheaper once the entity's ongoing compliance filings are counted; the calculation shifts once headcount is large enough to justify a standalone HR and payroll function.
Questions people ask about employer of record philippines
Is 13th month pay mandatory for every employee?
Yes, for rank-and-file employees who have worked at least one month in the calendar year, under Presidential Decree 851. It equals at least one-twelfth of basic salary earned that year and must be paid by 24 December.
Can an employer terminate a Philippine employee without cause?
No. Security of tenure under the Labor Code means termination requires a just cause, such as serious misconduct, or an authorised cause, such as redundancy, and dismissal without one exposes the employer to reinstatement and full backwages.
What social contributions does an employer register for in the Philippines?
Three: the Social Security System (SSS) for social insurance, PhilHealth for health coverage, and Pag-IBIG for the national housing fund, each with employer and employee shares set by government circular.
What is separation pay in the Philippines?
For dismissal on an authorised cause like redundancy or retrenchment, it is at least one month's salary or one month's pay per year of service, whichever is higher; for disease-related termination the minimum is half a month's pay per year of service.