With a mixture of emerging and booming economies, political uncertainty and extreme contrasts in business customs, Asia-Pacific jurisdictions can never be categorised as one homogeneous whole.
Managing payroll in Asia Pacific can be made more complex by such economic, political contrasts, and the differing business customs within each market. However for regional and global HR and payroll managers, there are common challenges and opportunities. Let’s take a look at how HR and Payroll works in the Philippines.
Social security system
Employers and their employees are obliged to contribute to:
- Social Security System (SSS) - based on one’s gross monthly compensation.
- Philippine Health Insurance Corporation (PhilHealth/PHIC) - based on one’s monthly compensation.
- Home Development Mutual Fund (HDMF) - both employer and employee contribute Php 100.
- Overtime work compensation must be the equivalent to his regular wage plus at least 25% thereof.
- On holiday or rest days compensation must be equivalent to the rate of the first eight hours (holiday or rest day rate) plus at least 30% percent thereof.
- Probationary employment shall not exceed six (6) months from the date the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period.
- An employee may terminate the employee-employer relationship without just cause (includes: serious insult by the employer, inhuman and unbearable treatment, among others) by serving a written notice on the employer at least one (1) month in advance.
- An employer may terminate an employment for any of the following causes:
– serious misconduct or willful disobedience by the employee
– fraud or willful breach by the employee of the trust reposed in him/her by his/her employer
– installation of labor-saving devices
– the closing or cessation of operation of the establishment; among others.
- Wages shall be paid at least once every two weeks or twice a month at intervals not exceeding sixteen days.
- Every employee who has rendered at least one year of service is entitled to Service Incentive Leave (SIL) of five days with pay. This benefit applies to all employees except:
– Government employees
– Managerial employees (specific conditions apply)
– Officers or members of a managerial staff (performing specific duties and responsibilities)
– Field personnel and unsupervised employees
– Those enjoying vacation leave with pay of at least five days
– Those employed in establishments regularly employing less than ten employees; among others.
Foreign personnel and work permits
- The government permits employment of foreign nationals to attract foreign investment, and has liberalised visa requirements for certain categories of foreigners.
- All foreign employees working for more than 6 months in the Philippines are required to obtain an Alien Employment Permit (AEP) from the Department of Labour and Employment (DOLE).
– Only issued if no Filipino citizen is available at the time of application to perform the services to be performed by the foreign employee.
Special Work Permit: Given to foreign nationals who will engage in gainful employment in the Philippines for three to six months. The initial application is for three months and may be extended by just another three month period.
Pre-arranged Employment Visa: for foreigners who will be occupying an executive, technical, managerial or highly confidential position in a company for at least 6 months, but not exceeding five years.
Provisional Work Permit: This is issued to a foreign national during the pendency of an application for a pre-arranged employment visa.
Treaty Trader Visa: for foreigners belonging to a country with which the Philippines has a reciprocal agreement for the admission of treaty traders or investors (as per the Section 9(d) of the Philippine Immigration Act)
Multiple Entry Special Visa: for employees of Regional or Area Headquarters (RHQ) or Regional Operating Headquarters (ROHQ) of multinational companies, their spouses and unmarried children (under 21 years). This visa is valid for three years.
Special Non-immigrant Visa: for foreign workers employed by companies registered with the Philippine Economic Zone Authority and the Board of Investments.
Special Subic - Clark Work Visa: for foreigners possessing highly technical skills who are employed by companies within the Subic Bay Freeport or the Clark Freeport Zone.
HR and payroll legislation
- The Philippines’ Labour Code - implemented by the Department of Labor and Employment - regulates (but is not limited to):
– Employment conditions and occupational health and safety standards
– Hiring and dismissal of employees, overtime, employee benefits and organisation and membership of labour unions
– Occupational health and safety requirements
– Social security benefits for employees
- Minimum wage is determined by the National Wages and Productivity Commission (NWPC; an attached agency of DOLE) at regional, provincial and/or industry levels.
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Note: This is only a short summary. We highly recommend to check any information in detail based upon the individual case.