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Compensation & Benefits in PhPhilippines.

Population

109,035,343

Languages

1.

Filipino

2.

English

Country Capital

Manila

Currency

Philippine peso (₱) (PHP)

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. . Partner with G-P under the Service Provider Model and you’ll get a partner who will keep you in compliance, assign Professionals to complete requisite Services and take the stress off your shoulders and onto our own.

Philippines Compensation Laws

The minimum wage in the Philippines will depend on the region where the business is located. A general estimate is that an employee would need at least 12,540 pesos to make a living throughout the country. Non-Managerial employees are entitled to various statutory benefits such as eligibility for overtime pay (1.25% of regular wages), holiday pay (1.30 or 2.00 % of regular wages), and night differential pay (1.10% of regular wages for any work rendered between 10 pm to 6 am PHT). 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.

G-P makes it easier. G-P’ Service Provider Model enables you to obtain requisite services and complete projects in the Philippines with the support and assistance of designated Professionals without being burdened with legal, HR, payroll, tax, and compliance matters.

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 13 percent to the nation’s social security fund. Employees pay 4.5 percent of their paychecks, and employers contribute 8.5 percent on their workers’ behalves.

As of January 2023, the Philippine government announced that the social security contribution will increase to 14%. Employers will be required to contribute 9.5% while employees must contribute 4.5%. The total contribution is set to increase once again in 2025 to 15%.

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 benefits 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.

 

Disclaimer

THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. You should always consult with and rely on your own legal and/or tax advisor(s). G-P does not provide legal or tax advice. The information is general and not tailored to a specific company or workforce and does not reflect G-P’s product delivery in any given jurisdiction. G-P makes no representations or warranties concerning the accuracy, completeness, or timeliness of this information and shall have no liability arising out of or in connection with it, including any loss caused by use of, or reliance on, the information.

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