Made up of 7,640 islands forming an archipelago, the Republic of the Philippines is full of stunning beaches and mountains, as well as historic cities full of things to see and do. Manila, the capitol of the Philippines and sometimes referred to as "The Pearl of the Orient," is known for its many food markets, shopping centers, and museums. It is the industrial port of the Philippines, where it is the center of textile factories, printing, and chemical processing. Manila is also the financial hub of the Philippines, where trade flourishes between international markets.
With both English and Filipino as the official languages of the Philippines, the country is a popular place for international businesses looking abroad to hire team members that are fluent in English. In this article, we'll look at vacation benefits and other kinds of paid leave that US employers need to know about when hiring Filipino team members. Let's first start with some background information on worker classification in the Philippines.
Employment contracts versus independent contractor agreements 📑
While an official employment contract is technically not required in order to hire workers in the Philippines, it is common practice for a company to provide an employment contract to employees before they begin their service to the employer. These contracts should include the specifics of the job: a description of the work involved, the job's pay, and the conditions of employment.
Employers should keep in mind that there are repercussions for misclassifying an employee as a contractor. In the Philippines specifically, a company that misclassifies a worker may be required to pay back taxes or back pay, and may even face legal fees for not providing employee protections like a rest day or rest days, “13th month pay,” or other types of special leave, such as ones that are dependent on a collective bargaining agreement.
Here is a general overview of the different types of employment in the Philippines:
In this employment relationship, the duties performed by an employee are considered desirable and necessary for the employer's business to run. A worker is also considered a regular employee when they have been working for an employer for at least one year, regardless of whether that relationship was continuous or not.
Project employment applies to those workers who are assigned a specific project or task with a set end date. Their employment ends when the task or project is complete.
Seasonal employment is work performed for one season (e.g. farm work). Sometimes ,seasonal employment may be categorized as regular employment, as regular seasonal employees may be laid off for one season but then reemployed during another. This is considered regular employment because regular work, by definition, does not have to be continuous for it to be considered regular.
Fixed-term employment occurs when the employer and employee agree upon a fixed period of time for a task or project to be completed, without any force or violation of the employee's consent.
Probationary employment occurs when an employer hires an employee for a trial period, during which the employer determines whether the employee qualifies for regular employment. It's important that the employer clarifies the standards under which the employee will qualify as a regular employee when the employee is hired. If the standards aren't clarified, then the employee will be considered a regular employee under labor code.
Written contracts for independent contractors
While other countries may not require the same formalities for hiring an independent contractor as they do an employee, that is not the case in the Philippines. For instance, if someone with a fixed-term contract or a project contract is hired by an employer, that employer must provide a written contract for the contract worker to sign. As is the case for many independent contractors around the world, however, labor code requires that they register as a contractor with the Philippine government. If the employer does not provide a written contract, they may face significant fines, and then will automatically be responsible to the contractor to provide all the benefits and provisions an employer is required to provide under the labor code.
Yearly service incentive leave and statutory leave benefits 💸
There are a few statutory leave benefits in the Philippines that an employer must provide for their employees. Statutory benefits are mandated by labor code, and such benefits may include financial assistance, paid vacation, maternity leave, paternity leave, holiday leave, or sick leave, depending on the country. Every employee in the Philippines is entitled to a service incentive leave, and many employers also offer other forms of leave to qualifying employees.
Service incentive leave (SIL)
An employee who has worked for at least one year is allowed five days of a yearly service incentive leave. The employee is entitled to the salary they would normal earn during that five-day period.
The service incentive leave is not a vacation leave per se. Employers who do not offer vacation leave may offer a service incentive leave to be used as vacation leave. The service incentive leave does not apply to those who have already been provided leave with pay of at least five days.
Paid sick leave
Paid sick leaves are not required by law in the Philippines. The employee is, of course, entitled to their annual service incentive leave of at least five days, which can be used as paid sick leave, but the company policy for this type of paid leave will vary. Some private companies or government employers may provide an employee with 15 days of sick leave with pay after one year of service to an employer.
It takes time for a mother to recover from giving birth, and maternity leave is a statutory leave benefit in the Philippines that is afforded to mothers of newborn children. A pregnant mother qualifies for maternity leave if they have rendered at least three monthly contributions to the social security system for at least a year, or the twelve month period before giving birth.
Even if their pregnancy does not end in a normal delivery, as in the case of a miscarriage or emergency termination of pregnancy, the employee still qualifies for 60 days of paid leave. In order to qualify for maternity leave, the pregnant employee must notify her employer of her expected delivery date, and file a maternity leave application. If the pregnant employee has met these requirements, she is entitled to 105 days of maternity leave and must be paid a daily maternity benefit equivalent to 100% of her salary credit for the applicable amount of maternity leave to which she is entitled after giving birth. This period is counted in calendar days, and includes weekends and non-working holidays.
In an effort to expand maternity leave benefits, the government signed the 105-Day Expanded Maternity Leave Law (RA 11210) into law in February 2019. In addition to extending maternity leave for mother for up to 105 days, female employees are allowed an additional 30 days without pay.
Before this law passed, mothers were only given 60 days of paid leave after normal delivery, or for miscarriage or emergency termination. If the baby was delivered via caesarian delivery, mothers were allowed 78 days of paid leave. With the recent expanded maternity leave law, the Philippines are now on par with other global practices for maternity leave benefits.
Fathers of newborn children are entitled to take some time off after their spouse has given birth. In the Philippines, the law requires new fathers be granted seven days of paternity leave with full pay to help take care of his family after the birth of a newborn via normal delivery or caesarian delivery. A man's wife who has just given birth may also reallocate some of her maternity leave to her husband. In this case, seven days of additional leave can be transferred from the mother to the father, resulting in 14 days total of paternity leave for the husband.
Parental leave for solo parent
The law states that solo parents, whether they be single fathers or single mothers, are entitled to as much maternity leave as any mother with a legitimate spouse living in the same household. If an employee is the sole caretaker of a new child, they must apply for a Solo Parent Identification Card.
Paid holidays and holiday leave 🏝
The Philippines celebrates many public holidays that are considered paid days off. If an employee works on non-working holidays, they must receive 100% of pay in addition to their daily salary rate for each holiday. If the employee does not work on paid holidays, then the employee receives wages they would earn on a normal day.
Occasionally, two paid holidays may occur on the same day--that is, a national holiday that also falls on a moveable holiday. In this case, an employee is entitled to two holiday's pay in addition to their regular full pay.
Paid public holidays incentivize employees to participate in national holidays, particularly those with significant cultural import. Here is a list of paid public holidays that employees are entitled to:
- New Year's Day
- Chinese New Year
- People Power Revolution
- Davao City Day
- Maundy Thursday
- Good Friday
- Black Saturday
- The Day of Valor
- Labor Day
- Eid'l Fitr
- Independence Day
- Manila Day
- Eidul Adha
- Birthday of Manuel L Quezon
- Ninoy Aquino Day
- National Heroes' Day
- All Saints' Day
- Bonifacio Day
- Immaculate Conception Day
- Christmas Day
Some of these holidays may sound familiar to US-based employers, while others may not. People Power Revolution, for example, is unique to Filipino history. The national holiday commemorates the protest in 1986 that forced dictator Ferdinand Marcos to abdicate his position as president. It was a moment of triumph for the people of the Philippines, many of whom were activists fighting against Marcos' rule long before 1986. As a result of their push for social and economic change, the government led by President Corazon Aquino adopted policies that would undo the laws created under Marcos' leadership.
While the majority of Filipinos are Christian, about 6% of the population practice Islam. In 2019, President Robert Duterte proclaimed June 5 as a national holiday to celebrate Eid'l Fitr, the Muslim holiday commonly known as Eid. Eid is now a non-working holiday on the Filipino calendar. The "Festival of Fast-breaking" celebrates the last day of Ramadan, which is the 29- to 30-day holy period of fasting in the Islamic tradition.
13th month salary
The 13th month salary is a required end-of-the year bonus given to employees that is common practice among countries around the world. In the Philippines, the bonus is equal to one-twelfth of the total basic salary earned by an employee within 12 months or a calendar year; in other words, the 13th month salary is equivalent to one month's full pay.
If a Filipino employee has worked for less than a year, the 13th month salary they receive is calculated by dividing the total salary received by the number of months the employee was employed.
Working hours and rest days 😴
A Filipino employee's working hours may not exceed eight hours a day. If an employee works beyond those hours, they shall be entitled to 25% of their daily salary rate on top of their regular pay. Overtime that occurs on the employee's rest days, special working days, or paid holidays are calculated as 30% the employee's daily salary rate in addition to their regular rate.
Managing labor laws, payroll, and tax compliance in the Philippines ⚖️
Labor and employment law in the Philippines can be complex, especially for a company who is not familiar with compliance abroad. Anywhere a company hires creates certain risks for that company if they do not understand the country's employment regulations. It is in the best interest for these companies to hire an HR platform that provides assistance for payroll, benefits, and compliance.
Partnering with Pilot
Requirements for vacation leaves in other countries will vary, depending on where your company decides to hire employees or contract workers. These details can be challenging to keep track of, especially if your company has locations in multiple countries. No matter the case, navigating compliance and local labor laws amidst the rest of your duties as an employer can be difficult without some help.
Pilot can assist your company with the complexities of hiring abroad. We specialize in payroll, benefits, and compliance for remote teams, including vacation leave for international employees. For US-based companies who want to grow globally, our international and fully distributed team has expert knowledge on the essentials for hiring globally. From classifying workers to determining vacation leave, acquiring work permits to payroll, and labor laws to tax compliance, our team can assist you.
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⚖️ Legal Disclaimer: The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter.