In a typical business environment, opportunities always come with challenges and responsibilities. While foreign business partnerships can benefit both sides and function peacefully, we need to recognize some cost-effective options. What if you can start your international presence and explore the global market easily?
The Philippines has one of the rapidly developing economies in Southeast Asia. The country welcomes foreign businesses to a door of opportunities. It has top-notch local talents that can compete on a global scale. Hence, many multinational companies like Google have set up their offices there.
No wonder; many international companies that operate in the Philippines generate better financial results. Here are some things that you need to know when you plan to expand in the Philippines:
Full-time employees work eight hours a day, five days a week. Overtime rates apply when they work longer hours.
Filipinos are collaborative people that respect mutual working relationships. Meetings and appointments are kept on time by Filipino professionals. They often address their colleagues as “sir” and “ma’am,” though calling them on a first name basis is also appropriate.
There are two types of holidays in the Philippines, National Regular Holidays and Special Non-Working Days.
There are 12 national holidays in the Philippines, and employees do not work on these days. If an employer demands them to work, they must double the daily rate of the employee. For special non-working days, the employer must pay a rate equal to 130% of their regular daily rate. The Philippine government mandates eight to ten special non-working days per year.
Employers must additionally make a 13th-month payment by the 24th of December. It’s equivalent to one-twelfth of a person’s annual salary. This payment is pro-rated if the employee does not work full-time. It’s not to be confused with a Christmas bonus, which is optional and at the employer’s discretion. The compensation for the 13th month is non-negotiable.
The Philippine Labor Code mandates employers to provide employees with a 5-day Service Incentive (Annual Leave) each year.
If a Filipino worker does not take five days of annual vacation during the year, the law requires the employer to pay it out at the end of the year.
Social Security and Other Benefits
For Filipino employees, social security contributions go to the Social Security System (SSS). It aims to help employees with lost wages due to illness, maternity, disability, retirement, death, and funeral costs. Employers have a share of the contribution as well as the employee.
Employers must additionally pay into the Home Development Mutual Fund (HDMF) and the PhilHealth contribution. The HDMF provides loans and access to housing programs for Filipinos, and the PhilHealth contribution is for health insurance in the Philippines.
Effective Ways to Expand Your Business in the Philippines
Work with a Trustworthy Partner
Foreign companies may be unsure how to hire a remote employee in the Philippines. The business process and labor requirements in the Philippines are entirely complicated. Hence, it’s ideal to choose a trustworthy HR partner or an Employer of Record. These providers will facilitate registration, hiring, document filing, and other mandatory steps in establishing your business. It must also guide you with their local expertise and experiences as you expand your workforce.
Physical Office or Remote Workforce?
All major cities in the Philippines have designated business districts. Often, they offer tax exemptions or incentives to attract new businesses. However, setting a physical office is expensive and comes with government requirements like office space size, lease terms, infrastructure, SEC enlistment, licenses to operate, and other extra taxes.
Meanwhile, the Philippines is the first in the world in the amount of time spent online. In a recent study, 9 out of 10 Filipino professionals prefer work-from-home arrangements. Due to COVID-19 protocols, Filipino employees shifted from their office-based jobs to working remotely.
Olivia Yu has decades of experience in the Human Resources industry. She’s the Regional Director for Asia Pacific of a famous international HR company. Olivia’s international experience inspires her to write articles about human resources and global staffing.