Compensation and benefits are important to both employees and employers. By meticulously aligning with statutory requirements and offering a competitive benefits plan, your company not only remains compliant but also becomes more appealing to jobseekers in the Philippines.

Philippines compensation laws

The minimum wage in the Philippines varies by region. Rates are set by Regional Tripartite Wages and Productivity Boards and depend on the employee’s work location. They may also vary by industry, employer size, locality, or employee category. Rank-and-file employees covered by hours-of-work rules are entitled to statutory benefits such as overtime pay (125% of the regular hourly rate), rest day or special non-working holiday pay (130% of regular wages), and night differential pay (additional 10% of regular wages for work between 10 p.m. and 6 a.m. PHT). Overtime on a rest day or special non-working day adds 30% to the applicable hourly rate. However, these figures could change if an employee is part of a union or Collective Bargaining Agreement.

Employers are also responsible for giving covered rank-and-file employees 13th-month pay. This is equal to at least one-twelfth of the employee’s total basic salary earned during the calendar year. It must be paid no later than December 24, though employers may pay it earlier or in installments.

Guaranteed benefits in the Philippines

A strong benefits management strategy must include statutory benefits first and foremost. For example, covered rank-and-file employees generally receive 5 days of paid Service Incentive Leave after at least 1 year of service. This can be used for vacation or sick leave, unless a more favorable leave benefit applies. The Philippines has 2 types of holidays, regular holidays and special non-working days. Employees generally receive paid time off for unworked regular holidays if they worked or were on approved paid leave on the preceding workday. Special non-working days are generally unpaid if not worked.

Philippines benefits management

An important part of dispersing benefits is also providing supplemental benefits that aren’t required by law but are generally expected by local 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. Employers 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 companies cannot hire or pay employees before setting up a subsidiary in the country. From start to finish, the process can take months to complete, potentially delaying operations and causing jobseekers to look for employment opportunities elsewhere.

Philippines competitive benefits planning

As your business grows, you’ll face new countries with different benefits requirements and expectations. With the right strategy in the Philippines, you can build your team 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 top talent to apply. Your benefits plans can also improve morale and retention rates.

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 healthcare
  • Holiday bonuses
  • Education opportunities
  • Meal subsidies

Benefits required by law

Before you consider fringe benefits, 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 benefits plans

Designing a benefits plan can feel like a challenge when you’re operating in an unfamiliar area. The 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 fringe benefits that other competitors 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 employers. You can distribute surveys or conduct interviews to gather this information.

3. Design your benefits plan.

With everything you’ve learned about the local labor market, you can create a well-rounded benefits plan. Allocate your benefits funds to required provisions first and use the remaining resources on priority fringe benefits you discovered in your research.

Average cost of benefits

Businesses offer different benefits based on industry, size, location, and budget. 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 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 combined total of 13% to the nation’s social security fund. Employees pay 4.5% of their paychecks, and employers contribute 8.5% on their workers’ behalf.

The current SSS contribution rate is 15% of the employee’s Monthly Salary Credit. Employers contribute 10%, while employees contribute 5%. Employers withhold the employee share through payroll and remit both shares to the SSS.

How are employee benefits taxed in the Philippines?

Generally, the law considers fringe benefits taxable. The policy for this taxation exists in 2 categories. Rank-and-file employees are generally not subject to fringe benefits tax on their fringe benefits. For managerial and supervisory employees, the employer generally pays a 35% fringe benefits tax on the grossed-up monetary value of the benefit. Employers are 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 must register with PhilHealth, report covered employees, deduct the employee share from payroll, and remit both employee and employer contributions on time.

There are healthcare organizations that take private insurance schemes. However, employers are not obligated to provide these schemes, but may choose to offer them as a supplemental benefit to appear more competitive in the labor market.

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As your partner in global expansion, G-P will handle payroll and compliance, so you can focus on growing your team and scaling your business. Our market-leading Global Growth Platform™ is powered by the first fully customizable suite of global employment products and backed by the industry’s largest team of in-country HR and legal experts to streamline payroll management and help you offer competitive, compliant local benefits.

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