Philippine Labor Law Essentials for Hiring Offshore Talent

Offshore talent pertains to skilled individuals from a foreign country who are hired to work remotely for a company. Labor laws in the Philippines are applicable to employees of this kind. And as such, it is important for foreign companies to understand basic labor standards to comply with them and to keep their employees happy.

Below is a quick guide to the fundamental labor laws in the Philippines to help keep you updated on what you should be following.

Why Understanding Philippine Labor Law Matters in Offshore Hiring

The offshore industry is projected to generate up to $61 billion or roughly P3.45 trillion for the Philippine economy by 2030 due to its rapid expansion. In terms of employment for Filipinos, it is expected to ring up to almost 1 million more jobs than it has today. These numbers are the reason why local labor laws must continue to protect Filipino workers.

Applying labor laws in the Philippines, even to offshore hiring, ensures smoother onboarding, better employee retention, and overall legal protection for both parties in an employee-employer relationship. Most importantly, it gets rid of possible abuses in the labor field. 

Knowing the basics of labor law isn’t just about compliance—it’s about building trust and long-term success with your Filipino team.

Key Labor Code Principles Every Employer Should Know

The Labor Code, as amended, applies to all employees in all establishments and undertakings whether for profit or not, except for government employees, managerial employees, field personnel, members of the family of the employer who are dependent on him for support, domestic helpers, persons in the personal service of another, and workers who are paid by results.

The central themes of the Labor Code pertain to employees’ right to security of tenure, a fair living wage, reasonable working hours, and set rest days. A number of landmark cases, such as Agabon v. NLRC & Ang Tibay v. CIR, affirm, interpret, and apply these labor principles. 

To learn more about these landmark cases, legal resource tools such as Digest PH contain summaries of these cases and many more.

Probationary vs. Regular Employment in the Philippines

Another important concept to remember for employers hiring offshore talent from the Philippines is the difference between probationary and regular employees.

Under the Labor Code, probationary employees are required to undergo a probationary period of 6 months to determine their fitness to qualify for regular employment. Regular employees, on the other hand, are those who are either 1) engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer or 2) one who has rendered at least one year of service.

Some employees have used the probationary status to circumvent employees’ security of tenure, such as in the case of Dusit Hotel v. Gatbonton. As employers, remember the two most important guidelines when hiring probationary employees:

1. The services of a probationary employee can only be terminated for just cause or when he fails to qualify as a regular employee, and
2. An employee who is allowed to work after a probationary period shall be considered a regular employee

	Regular Employee	Probationary Employee
Term	If exceeding 1 year, deemed regular	Does not exceed 6 months
Security of Tenure	Wider (Dismissed only for Just/Authorized Causes)	Narrower (Dismissed for Just Causes or Failure to Meet Standards)
Standards to Meet	Subject to management prerogative	Pre-communicated standards upon hiring

Mandatory Benefits You Must Provide to Filipino Employees

Now that the main principles of Labor Law in the Philippines have been discussed, the following are the more specific legal benefits for Filipino offshore employees. 

SSS (Social Security System)

The Social Security System (or SSS) provides that private employees and employers alike shall contribute part of the income given to the former and remit such contributions for certain benefits, such as death, retirement, and even unemployment benefits. Aside from this, SSS contributions can entitle one member to loans. 

Philhealth

PhilHealth, like SSS, mandates contributions from both the employees and employers to entitle the former to medical coverage and hospitalization benefits. Employers are expected to register their company with PhilHealth to ensure that their employees are entitled to these health benefits.

Pag-Ibig Fund

PAG-IBIG (or Pagtutulungan sa Kinabukasan: Ikaw, Bangko, Industriya at Gobyerno) is mandatory for all employees covered by the Social Security System (SSS). Specifically, employees are entitled to housing and savings benefits. Furthermore, PAG-IBIG now offers an optional MP2 program, which offers a higher rate of savings on your investments. 

13th Month Pay

PD 851 mandated that all employees shall be paid an equivalent of 1/12th of their annual salary not later than December 24 of every year. 

Service Incentive Leave (SIL)

Article 95 of the Labor Code states that employees who have rendered at least 1 year of service shall be entitled to a yearly service incentive leave of five days with pay.

Separation Pay

Articles 298 and 299 of the Labor Code refer to separation pay or additional pay given to employees whose employments are terminated due to causes where they are not at fault. This is equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher.

Legal AI tools such as Digest AI can help clarify and verify updates on statutory limitations and requirements to ensure that you stay compliant with existing labor laws.

Common Legal Compliance Mistakes When Hiring Offshore

Labor laws in the Philippines are tricky, such that employers have to ensure that they are not selling their employees short. These common legal compliance mistakes are listed below to help you avoid them.

1. Failure to Relay Employment Standards

In order for you to expect your employees to deliver quality work, you have to let them know what standards to meet. Failure to inform them of such would be fatal in cases of unjust termination.

Ensure that you won’t commit this mistake by informing your HR department that standards must be communicated well and clearly during orientations and hiring calls.

2. Misunderstood Employee Classifications

As can be gleaned from our labor laws, employees are classified into different kinds. The importance of these classifications is the determination of the benefits your employees are entitled to.

As abovementioned, knowing whether your employee is properly probationary or regular is essential in determining which labor provisions, standards, and benefits are applicable to them. 

3. Inadequate Employee Benefits 

Failure to determine which classifications your employees belong under can lead to inadequate provision of benefits, although unintentionally done. To avoid this, ensure that you keep yourself updated with labor law standards and jurisprudence. Lessen research workload by consulting available legal tools and summary databases online.

4. Failure to Classify as an Employee

Jurisprudence has stated that in order for a talent to be considered an employee, the company must have the following powers over them: the selection and engagement of the employee; the payment of wages; the power of dismissal; and the power to control the employee’s conduct. The most important requisite is the last one, the power of control.

Various jurisprudences have narrated that multiple companies have tried to circumvent the rights of employees by classifying them as independent contractors and not their employees. To avoid such cases, check out cases on labor standards to know how these requisites are met and exercised by companies.

Final Thoughts: Building Trust Through Compliance

Offshore hiring is an important step in increasing Filipino employment rates and productivity. To ensure that numbers keep on growing higher, build trust and make your employees feel safe and happy by complying with labor law standards and benefits.

By combining offshore talent with your company’s mission and vision, you can create a safe working environment that leads to sustainable success for both parties.