Compensation and benefits are important to employees and your company. Following all the Philippines’ compensation laws means your company will stay compliant, and providing a competitive benefits plan will attract the best employees to your open positions. Globalization Partners can help you navigate complex employment laws and take care of your Philippines benefit management plan. When you work with us, you’ll get a partner who will keep you in compliance, hire employees on your behalf, and take the stress off your shoulders and onto our own.
Philippines Compensation Laws
The minimum wage in the Philippines depends on the location of your business. A general estimate is that an employee would need at least 9,064 pesos to make a living throughout the country. Employees are entitled to overtime of 1.30% of their regular wages if they work on Sunday or a paid holiday. If an employee works more than eight hours a day, they should receive 1.25% of their regular wages. However, these figures could change if an employee is part of a union or collective bargaining agreement.
Employers are also responsible for giving employees a 13th-month salary. This 13th-month bonus is equal to one month’s salary and has to be given to employees before December 24. Most employers will try to give out 13th-month bonuses at the beginning of December since Filipinos often use these bonuses to purchase Christmas gifts.
Guaranteed Benefits in the Philippines
Your Philippines benefit management strategy must include statutory benefits that every employee is guaranteed to receive. For example, employees must get five days of paid time off that can be used for vacation or sick leave. The Philippines has two types of holidays — regular and special non-working days. Employees get paid time off for regular holidays and non-paid time off for special non-working days.
Philippines Benefits Management
An important part of dispersing benefits is also giving out supplemental benefits that aren’t required but are generally expected by employees. Offering these additional benefits can also make a big difference in finding key talent to help your company grow. Many employers choose to give housing, transportation, and medical allowances, which are tax-deductible if they’re classified as a cost of living allowance. You can also offer supplementary insurances such as life, disability, and health insurance in addition to the country’s universal healthcare scheme.
Restrictions for Benefits and Compensation
The biggest restriction to benefits and compensation in the Philippines is that you cannot hire or pay employees before setting up a subsidiary in the country. From start to finish, the process could take months to complete, delaying your operations and causing you to lose top employment prospects.
Globalization Partners makes it easier. Choosing Philippines compensation outsourcing with us means using our Employer of Record platform to operate quickly and efficiently. We can get you started in a matter of days by hiring employees on your behalf and helping you avoid the lengthy subsidiary setup process.
Philippines Competitive Benefits Planning
As your business grows, you’ll confront new countries with different benefit requirements and expectations. With the right strategy for employee benefits planning in the Philippines, you can build your enterprise with confidence and keep your company competitive in the market.
Philippines Employee Benefits Plans
Benefits plans are valuable to your growing company in a few ways. They can make your open positions stand out in the labor market, encouraging job seekers to apply. Your benefits can also improve morale and retention rates within the workplace, helping you build your business further.
Fringe benefits, or the provisions you offer outside of the requirements of the labor laws, will set your company apart from the competition. Potential offerings include:
- Housing allowances
- Transportation stipends
- Allowances for health care
- Holiday bonuses
- Education opportunities
- Meal subsidies
Benefits Required by Law
Before you consider fringe benefits for your employees, you need to meet the provisions required in the labor laws. These requirements include:
- Public holidays off
- Paid annual leave
- Social security contributions
- Health insurance
- Home Development Mutual Fund contributions
Designing Philippines Employee Benefit Plans
Designing your benefits plan can feel like a challenge when you’re operating in an unfamiliar area. Your goal is to find a balance between your company’s resources and your employees’ needs and expectations. With research and preparation, you can create a benefits plan that supports your success.
1. Assess Your Resources and Goals
Spending more on benefits than your company can afford will hinder your growth, so assessing your resources is essential. Look into potential revenue and existing expenses to set a budget for your benefits spending.
You can also use this initial stage to identify your goals and how your benefits plan may support them. For instance, if you want to focus on retention, you can offer benefits that many other companies don’t.
2. Study the Labor Market
You can only compete with other companies if you understand what they offer. Research businesses similar to yours in size and industry to find which provisions are standard in the market. These standards will also inform employees’ expectations.
This stage is also an excellent time to talk to workers about what they want from their employers. You can distribute surveys or conduct interviews to gather this information.
3. Design Your Benefits Plan
With everything you’ve learned about your company, workers, and the labor market, you can create your plan. Allocate your benefits funds to required provisions first, and use the remaining money on priority fringe benefits you discovered in your research.
Average Cost of Benefits
Businesses offer different benefits based on their industry, size, and location. With so many factors affecting the scope of a company’s benefits plans, there’s not an average price you can use to gauge your own planning. Creating a budget based on your unique revenue and expenses is the best way to manage costs.
How to Calculate Benefits
The calculation process will look different depending on the benefits you provide. You can find guidance for calculating required benefits in the labor regulations.
For example, employers and employees must contribute a total of 12 percent to the nation’s social security fund. Employees pay 4 percent of their paychecks, and employers contribute 8 percent on their workers’ behalves.
How Are Employee Benefits Taxed in the Philippines?
Generally, the law considers fringe benefits taxable. The policy for this taxation exists in two categories. Rank-and-file employees pay the standard income tax rate on their fringe benefits, while managerial and supervisory employees pay a 32-percent fringe benefit tax. As an employer, you’re responsible for including these tax deductions in employee paychecks.
There are exceptions to this benefits taxation. The following benefits are not taxable:
- Benefits exempt under special law
- Contributions to retirement, hospitalization, and insurance
- Fringe benefits required within a trade
- Benefits granted for the convenience of the employer
- De minimis benefits defined by the Secretary of Finance
Employee Health Benefits
The country has universal health coverage through the Philippine Health Insurance Corporation, or PhilHealth. Employers are required to contribute to this national insurance scheme by deducting a percentage from employees’ paychecks and paying a share on their behalves.
There are healthcare organizations that take private insurance schemes. However, employees are not obligated to provide these schemes. They may choose to offer them as a supplemental benefit to appear more competitive in the labor market.
Work With Globalization Partners for Employee Benefits Planning in the Philippines
Get in touch with our team today to learn more about our services.