Philippines

This guide has important information for businesses looking to hire employees or contractors in the Philippines. With a nominal GDP of approximately USD 494 billion in 2025 and projected real GDP growth of 5.3-5.7% in 2026 (per ADB and AMRO estimates), the Philippines remains one of Southeast Asia's fastest-growing economies. The country has a growing middle class with a large and young population. The Philippines is a major destination for outsourcing/offshoring for US businesses due to cultural affinity between the two countries. Many companies operate BPO operations and call centers in the Philippines, making it essential to understand local labor law compliance.

Category	Details
Minimum Wage	PHP 695/day in Metro Manila (varies by region)
Overtime Wage	1.25x regular wages (1.30x on rest days/holidays)
Meal Breaks	60 minutes (unpaid)
Rest Breaks	No federal mandate
Working Hours	8 hours/day, 48 hours/week
Salary Payment Cycle	Monthly
Payroll Taxes	SSS (15%), PhilHealth (5%), Pag-IBIG (4%)
Paid Vacation	5 days after one year of service
Overtime Hours	Beyond 8 hours in a day
Night Shift Differential	110% of regular pay between 10 PM and 6 AM
Regular Holidays	10 per year
Special Non-Working Days	8 per year

Hiring in The Philippines

A business needs a local entity in Philippines to hire locally. Setting up an entity in Philippines involves registering with multiple agencies and can take 30 days. If you want to register a subsidiary in The Philippines, you will need to invest at least $200,000 as equity. A business requires at least four officials, two of whom must be residents of the country.

Setting up an entity in The Philippines is a 5-step process that requires you to register with SEC, provincial government, mayor’s office, Bureau of Internal Revenue, Social Security, and the health insurance corporation. You will also need to comply with benefits, payroll, tax, and HR laws. Philippines differentiates between employees and contractors. There are different rules for both, and incorrect classification can lead to fines.

Minimum Wage in Philippines

The Philippines does not have a national minimum wage rate. Rates are set by Regional Tripartite Wages and Productivity Boards (RTWPBs) under DOLE. While all employers must pay the specified minimum wage for the region, in the outsourcing industry, you need to pay significantly more to attract good talent.

The NCR rate of PHP 695 took effect July 18, 2025 under Wage Order No. NCR-26 (a PHP 50 increase). Current minimum daily wage rates by region are:

Region	Non-Agriculture (Daily)	Agriculture/Retail (Daily)
NCR (Metro Manila)	PHP 695	PHP 658
CALABARZON (IV-A)	PHP 450-560	PHP 425-500
Central Visayas (VII)	PHP 520-550	PHP 480-510
Other regions	PHP 435-550 (varies)	Lower tiers apply

Working Hours in Philippines

Work hours are tightly regulated in Philippines. Standard working hours in Philippines are 8 hours per day and one hour of lunch break. Working hours include the time during which the employee is required to be at the workplace and all hours that he is asked to work. It also includes any short breaks or rest periods during the working hours.

Employees must be given one day off after every six consecutive days of work. Employers must pay 10% extra for nightshift. Overtime is to be paid at 125% of regular pay for extra hours worked on a regular workday. Any work done on a holiday or weekend is to be paid at 130% of regular work.

Payroll and Taxes in Philippines

Employers typically follow a monthly payment schedule, with salaries paid on the first of every month. Salary is prorated for employees joining in the middle of a month. Salary must be paid in cash, by check, or by direct deposit to the employee’s account at a bank or other financial institution. Employers also need to pay the 13th month salary to every eligible employee by December 24th . Any employee who has worked for at least one month in the year is eligible to receive the 13th month salary.

It’s mandated by the government through a presidential decree in 1975. Many employers pay the 13th salary in two installments with the second one paid in December. Failing to pay the 13th month salary can lead to legal action and penalties against the employer. Many employers also pay a Christmas bonus to their employees in December. But that is not mandated by law.

Individual Income Tax

In Philippines, domestic income is subject to income tax for both citizens and foreigners. Any foreign income of a resident is also taxed in the Philippines. Philippines income tax system follows a slab structure. It means individuals pay income tax based on their income level. This is also called the progressive tax system in which a person with higher earnings pays higher taxes. Employers must deduct and withhold income tax on employees’ compensation. Failing to do so has legal consequences. This tax is paid to the government by the employer. The following table shows income tax rates under the TRAIN Law (effective 2023 onward, unchanged for 2026):

Annual Taxable Income (PHP)	Tax Rate
Up to 250,000	0% (Exempt)
250,001 - 400,000	15% of excess over 250,000
400,001 - 800,000	PHP 22,500 + 20% of excess over 400,000
800,001 - 2,000,000	PHP 102,500 + 25% of excess over 800,000
2,000,001 - 8,000,000	PHP 402,500 + 30% of excess over 2,000,000
Over 8,000,000	PHP 2,202,500 + 35% of excess over 8,000,000

13th-month pay and bonuses up to PHP 90,000 are non-taxable.

Employer Costs in Philippines

Employers bear the following mandatory contribution costs in the Philippines (2026 rates):

SSS (Social Security System)

• Total rate: 15% of Monthly Salary Credit (MSC) -- increased from 14% in January 2026
• Employer share: 10%
• Employee share: 5%
• Employees’ Compensation (EC): additional 1% paid entirely by employer
• MSC range: PHP 5,000 (minimum) to PHP 35,000 (maximum)

PhilHealth (Public Health Insurance)

• Total rate: 5% of monthly basic salary (unchanged from 2025)
• Employer share: 2.5%
• Employee share: 2.5%
• Income floor: PHP 10,000 / Ceiling: PHP 100,000
• Minimum contribution: PHP 500/month / Maximum: PHP 5,000/month

PhilHealth provides several benefits including inpatient and outpatient treatments, coverage for long-term treatments, and specialized care. Many employers provide a secondary health insurance cover to attract high-quality employees.

Pag-IBIG (HDMF - Home Development Mutual Fund)

• Maximum Fund Salary (MFS): PHP 10,000
• Employee share: 2% (or 1% if salary is PHP 1,500 or below)
• Employer share: 2%
• Maximum monthly contribution: PHP 200 each (PHP 400 total)

Pag-IBIG provides housing loans and financial assistance to help Filipinos afford decent housing.

Statutory Leave Policies in Philippines

Public Holidays 2026

The Philippines has 10 regular holidays (paid) and 8 special non-working days. Eid'l Fitr and Eid'l Adha dates are proclaimed separately each year.

Regular Holidays (10)

Date	Holiday
January 1 (Thu)	New Year's Day
April 2 (Thu)	Maundy Thursday
April 3 (Fri)	Good Friday
April 9 (Thu)	Araw ng Kagitingan
May 1 (Fri)	Labor Day
June 12 (Fri)	Independence Day
August 31 (Mon)	National Heroes Day
November 30 (Mon)	Bonifacio Day
December 25 (Fri)	Christmas Day
December 30 (Wed)	Rizal Day

Special Non-Working Days (8)

Date	Holiday
February 17 (Tue)	Chinese New Year
April 4 (Sat)	Black Saturday
August 21 (Fri)	Ninoy Aquino Day
November 1 (Sun)	All Saints' Day
November 2 (Mon)	All Souls' Day
December 8 (Tue)	Feast of the Immaculate Conception
December 24 (Thu)	Christmas Eve
December 31 (Thu)	Last Day of the Year

Leave Entitlements

Employers in the Philippines must give five days of paid leave to employees who have worked for at least one year. Employees can get paid for unused portion of the leave.

Employees get 90% of their average daily salary for up to 120 days in a year if they fall sick. The employer pays the salary to the employee. This is reimbursed by the social security system. All female employees get 60 days of paid maternity leave for their first four pregnancies. If a C-section or surgery is needed, the employee can get up to 78 days of leave. Women employees who undergo a gynecological surgery get up to 60 days of paid leave, provided they have worked for at least six months. Married male employees get seven days of paternity leave for the first four pregnancies of their wives. In Philippines, a solo parent can take up to seven days’ leave.

Employee Benefits

Philippines has a comprehensive social security system that offers several mandatory benefits to employees:

• maternity pay- sickness pay- pensions- disability benefits- salary loans- life insurance- funeral grants In addition, many employers also provide supplemental health, dental and vision insurance to their employees. In fact, a good health insurance plan can be a very attractive recruiting tool in Philippines.

Employee Termination

An employee can be terminated for authorized causes as per the Labor Code. Employer can also terminate an employee for violation of corporate rules and regulations. An employee can terminate the employment at will. Employer must give a notice period of 30 days for terminating the employee. Employees are eligible for one month of severance pay for every year of service.