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Our staff are experts in fields ranging from operations, payroll, accounting, and more. Learn what you need to expand your business and hire staff in Philippines.
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Philippines, island country of Southeast Asia in the western Pacific Ocean. It is an archipelago consisting of more than 7,000 islands. The Philippines has a mixed economic system that includes a variety of private freedom, combined with centralized economic planning and government regulation.
Employees can be majorly divided into two categories – Contractors and Employees and defining relation with the employee is very important to avoid risks associated with misclassification.
The courts in India have applied the control and integration test to determine whether a person can be classified as an employee or independent contractor. The prima facie test is the control test to determine whether an employer-employee relationship exists and it is not merely to direct the nature of work that has to be carried out but also to control the manner in which it is done.
Another difference between an employer and contractors is an employer is required to withhold tax at the time of payment of salary to employees. The salary paid to an employee may include benefits and allowances that the employee is entitled to, which is beneficial to the employee from a tax perspective. However, with respect to independent contractors, the employer must withhold the applicable taxes; however, the amount paid may not be in the form of salary, but as professional fees for services performed. In both these cases, the employee and independent contractor/s will be required to file their income tax returns as prescribed under law.
The payroll cycle in the Philippines is generally made at least once every two weeks or twice a month at intervals not exceeding 16 days.
Employees are entitled to monetary benefits such as the minimum wage, 13th month pay, and overtime pay, among many others. In addition, the Labor Code also requires employers to become members of the Pag-IBIG Fund, PhilHealth, and SSS, as well as remit monthly contributions on behalf of their employees to these government offices. This ensures that employees have access to affordable house financing, health insurance, and social security benefits, as mandated by the law.
Individual – Taxes on personal income
The Philippines taxes its resident citizens on their worldwide income. Non-resident citizens and individuals, whether or not resident in the Philippines, are taxed only on income from sources within the Philippines.
Rates of tax on income of individuals, resident or not, depend on the nature of their income (i.e. compensation income, income subject to final tax, or other income).
Compensation tax rates
For resident individuals and non-resident individuals doing business and receiving compensation income, the tax rates are as follows:
An employer shall observe procedural due process before terminating one’s employment.
A. In a termination for just cause, due process involves the two-notice rule:
a) A notice of intent to dismiss specifying the ground for termination, and giving said employee reasonable opportunity within which to explain his or her side;
b) A hearing or conference where the employee is given opportunity to respond to the charge, present evidence or rebut the evidence presented against him or her;
c) A notice of dismissal indicating that upon due consideration of all the circumstances, grounds have been established to justify termination.
B. In a termination for an authorized cause, due process means a written notice of dismissal to the employee specifying the grounds at least 30 days before the date of termination. A copy of the notice shall also be furnished the Regional Office of the Department of Labor and Employment (DOLE) where the employer is located.
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