Labor Laws in the Philippines

September 6, 2024

The Philippines’ labor laws are governed by the Labor Code, which outlines the rights and responsibilities of both employers and employees. This provides an overview of the labor code, how expats can work in the country, employment types, pay rates for holidays, employee benefits, and various compliance requirements related to employing people in the Philippines after you complete business registration.

Overview of the Labor Code of the Philippines

The Labor Code of the Philippines (Presidential Decree No. 442) regulates all aspects of employment in the country. It covers employment standards, employee rights, and conditions for termination and hiring, ensuring employees’ protection while balancing the interests of businesses. The labor code also outlines the requirements for wages, leaves, benefits, and health and safety provisions.

The Department of Labor and Employment (DOLE) enforces these laws, ensuring that employers comply with minimum labor standards. Employers are obligated to provide mandated benefits, ensure a safe working environment, and follow the proper procedures for employee termination.

How Foreigners and Expats Can Work in the Philippines

Expats who wish to work in the Philippines must secure the necessary work permits and visas. The most common work permits include the Alien Employment Permit (AEP) and the 9g Working Visa. The AEP is issued by DOLE, which certifies that the expat’s employment will not prejudice the employment of Filipino workers. Once this permit is secured, expats must obtain the 9g Working Visa from the Bureau of Immigration.

Additionally, expats can obtain Special Work Permits (SWP) for short-term work or specific visas like the PEZA visa for those working in export-oriented enterprises. Foreigners involved in business activities may also secure the 9d Treaty Trader Visa or the Special Investor’s Resident Visa (SIRV).

Types of Employment in the Philippines

Employment in the Philippines is classified into several categories:

Regular Employment: An employee becomes regular after completing a probationary period of up to six months, where they can be evaluated based on performance.
Probationary Employment: New hires undergo probation for up to six months. If they meet the company’s standards, they become regular employees.
Fixed-Term Employment: Employees are hired for a specific project or period with an agreed end date.
Seasonal Employment: Employees work during peak periods, such as holidays, agricultural seasons, or special events.
Casual Employment: Casual employees are hired for short-term, non-regular tasks that are incidental to the company’s main business.

Types of Holidays and Pay Rates

There are two types of holidays in the Philippines: Regular Holidays and Special (Non-Working) Holidays. Learn more about Working Hours in the Philippines here. The pay rate depends on the kind of holiday:

Regular Holidays: Employees receive 100% of their daily wage, and if they work on a regular holiday, they are entitled to an additional 100% pay (double pay).
Special Holidays: If an employee works on a special holiday, they receive 130% of their daily wage. If they do not work, they are only entitled to pay if the company policy says otherwise.

Types of Leave Allowed

Maternity Leave: Female employees are entitled to 105 days of paid maternity leave. If the employee is a solo parent, an additional 15 days of paid leave is granted.
Paternity Leave: Male employees are entitled to seven days of paid paternity leave for the first four deliveries of their legal spouse.
Sick Leave: Companies are encouraged to provide at least five days of paid sick leave per year, although this is not mandated by law.
Vacation Leave: While not mandated by the labor code, many companies offer at least five days of paid vacation leave as part of employee benefits.
Service Incentive Leave: Employees who have worked for at least one year are entitled to five days of service incentive leave, which can be used for any purpose.

Regularization of Employees

Employees who complete the six-month probationary period and meet the company’s standards are entitled to regularization. A regular employee enjoys the security of tenure and cannot be terminated without just or authorized cause, as outlined in the labor code.

Termination of Employees and Due Process

The Labor Code outlines a strict process for employee termination. There are two grounds for termination: Just Cause and Authorized Cause.

Just Causes include serious misconduct, willful disobedience, gross and habitual neglect of duties, fraud, and commission of a crime against the employer.
Authorized Causes include retrenchment, redundancy, closure of business, or illness that prevents the employee from performing duties.

For both types of termination, the employee must be given due process. This includes a written notice of termination, a chance to be heard, and a notice of decision.

Filing a Complaint with DOLE

Employees can file complaints with DOLE for unfair labor practices, wage non-payment, illegal dismissal, or other violations of the labor code. When DOLE receives a complaint, it may inspect the company. If DOLE finds violations, the company may face penalties, back pay claims, or even forced closure in extreme cases of non-compliance.

Republic Acts and Employee Protections

Republic Act No. 6727 (Wage Rationalization Act): This act ensures employees receive the minimum wage, which is updated periodically.
Republic Act No. 7877 (Anti-Sexual Harassment Act of 1995): This protects employees from sexual harassment in the workplace.
Republic Act No. 9710 (Magna Carta of Women): Ensures gender equality in all aspects of employment.
Republic Act No. 11058 (Occupational Safety and Health Standards Act): Mandates safe working conditions and imposes fines for non-compliance.
Presidential Decree No. 1096 (National Building Code): Includes the requirement of a Fire Safety Inspection Certificate (FSIC) to ensure compliance with fire safety standards.

Mandated Government Benefits and Optional Benefits

Employers must provide employees with several government-mandated benefits, including:

Social Security System (SSS): A social insurance program that provides retirement, disability, and maternity benefits.
PhilHealth: Provides healthcare benefits to employees and their dependents.
Pag-IBIG Fund: A government-run savings program that offers affordable housing loans.

Many companies also offer optional benefits such as private health insurance and retirement plans to attract and retain talent.

Is Assistance Available?

Understanding labor laws in the Philippines is crucial for both employers and employees. The Labor Code ensures a fair and equitable workplace, offering protections that benefit both parties. Expats looking to work in the Philippines should familiarize themselves with work permits and visa requirements. Employers, on the other hand, must stay compliant with regulations on employment terms, holidays, and benefits to avoid costly penalties and maintain a healthy workforce.

Contact us today to schedule an initial consultation with our HR and Labor Code experts for you existing or future company through any of the following channels below: