Employee benefits in the Philippines are perks provided in addition to an employee’s basic salary, serving as indirect compensation for their services. Common examples include leave credits, medical and dental insurance, and meal allowances. While many benefits are legally mandated, companies have the flexibility to offer additional perks as a way to attract and retain top talent.
The types of benefits offered may vary based on factors such as the nature of the job, employee demographics, and the size of the organization. Strategically crafting an employee benefits package that aligns with both legal requirements and your employees' needs is key to ensuring their well-being and satisfaction.
This guide will provide you with a detailed overview of the employee benefits policy in the Philippines, helping you navigate the essentials when bringing Filipino employees into your organization.
Compensation Laws
The Department of Labor and Employment (DOLE) regulates employee benefits and compensation in the Philippines, guided by the Labor Code, which aims to protect the rights and welfare of Filipino workers. Employers must comply with several key regulations when employing workers from the Philippines, including:
Working Hours: Employees should not work more than 8 hours per day. A 1-hour lunch break must be provided, though in certain cases, a shorter break (no less than 20 minutes) is allowed, such as for:
Non-manual work
Work in establishments operating 16 hours per day
Urgent tasks involving machinery or equipment
Work with perishable goods
Additionally, a 5 to 20-minute coffee break may be offered, which counts toward working hours. Standard working hours are typically from 8 AM to 5 PM.
Night Shift Pay: Employees working night shifts, between 10 PM and 6 AM, are entitled to an additional 10% of their basic pay for each hour worked.
Overtime and Holiday Pay: Overtime is compensated at 25% above the hourly rate on regular workdays. If overtime falls on a rest day or a special non-working holiday, employees are entitled to an extra 30% of their hourly rate. However, employees cannot offset missed hours by working overtime on a later day, as overtime pay is higher than regular rates.
Additionally, the Republic of the Philippines has implemented social welfare laws to ensure employee protection, including:
Pag-IBIG Fund (Republic Act No. 9679) – A national savings and housing fund.
National Health Insurance Act (Republic Act No. 10606) – Providing healthcare coverage through PhilHealth.
Social Security Act (Republic Act No. 11199) – Covering pension and social security benefits.
Employee Benefits Program
The Department of Labor and Employment (DOLE) actively monitors businesses to ensure that employees receive the benefits mandated by law. Non-compliance can lead to legal actions that may significantly impact your operations. Your employee benefits package should comprehensively cover various aspects, including:
Salary: Ensure accurate and timely payment of basic wages.
Overtime Pay: Adhere to regulations for extra work hours.
Leave Entitlements: Include vacation, sick leave, and service incentives.
Severance Pay: Provide appropriate compensation for terminations.
Social Security: Comply with contributions to social welfare programs.
Guaranteed Benefits
Understanding the mandatory benefits for employees in the Philippines is an essential first step to ensure your company stays compliant with local labor laws. Here are some key points to consider:
Leave Benefits
In the Philippines, employees are entitled to a range of leave benefits to support their personal and family needs. Here’s a concise breakdown of the key leave entitlements:
Leave Type
Details
Service Incentive Leave
5 days annually, applicable for vacation or sick leave.
Vacation Leave
15 days per year.
Sick Leave
15 days per year.
Regular Holidays
12 days annually.
Special Non-Working Days
6 days annually.
Maternity Leave
105 days paid leave. Additional 15 days for single mothers. 60 days for miscarriage.
Paternity Leave
7 days paid leave for the first four deliveries of a legitimate spouse.
Parent Leave for Solo Parents
7 days for solo parents with at least one year of service.
Special Leave Benefits for Women (Magna Carta Of Women Act, RA No. 9710)
2 months full pay for gynecological surgery, if conditions are met (6 months service, prior notice, certified surgery).
Leave for Victims of Violence Against Women and Their Children (RA No. 9262)
Up to 10 days paid leave for medical and legal concerns.
Leave Type
Details
Service Incentive Leave
5 days annually, applicable for vacation or sick leave
Vacation Leave
15 days per year
Sick Leave
15 days per year
Regular Holidays
12 days annually
Special Non-Working Days
6 days annually
Maternity Leave
105 days paid leave. Additional 15 days for single mothers. 60 days for miscarriage
Paternity Leave
7 days paid leave for the first four deliveries of a legitimate spouse
Parent Leave for Solo Parents
7 days for solo parents with at least one year of service
Special Leave Benefits for Women (Magna Carta Of Women Act, RA No. 9710)
2 months full pay for gynecological surgery, if conditions are met (6 months service, prior notice, certified surgery)
Leave for Victims of Violence Against Women and Their Children (RA No. 9262)
Up to 10 days paid leave for medical and legal concerns
Social Security Contributions
The Social Security System (SSS) in the Philippines provides essential financial support across various life stages, including maternity, sickness, disability, retirement, funeral, and death benefits. It also offers loans for salaries, housing, business, and education to qualified members.
Contributions: Both employees and employers contribute to the SSS. Employee contributions range from PHP 135 to PHP 1,125, while employers contribute between PHP 265 and PHP 2,155, depending on income level
Retirement Pension: Insured members are eligible for a pension upon retirement, offering a stable income in their later years
Disability Allowances: Monthly or lump sum allowances are provided to members with disabilities, supporting their financial needs
Maternity Benefits: New mothers receive cash benefits for each day they are unable to work following childbirth or miscarriage, ensuring support during recovery
Death Benefits: Cash benefits are allocated to the beneficiaries of deceased members, providing financial assistance during a difficult time
Funeral Grant: A funeral grant of PHP 20,000 is given to cover burial expenses for the insured member, helping to ease the financial burden on the family
Pag-IBIG Loans and Contribution
The Home Development Mutual Fund (HDMF), better known in the Philippines as PAG-IBIG, is a national savings program designed to assist citizens with affordable housing and financial support. Here’s what you need to know.
Contribution Rates: Employees contribute 1% if their monthly salary is PHP 1,500 or less, and 2% if it’s above PHP 1,500. Employers contribute a flat 2% rate, regardless of the employee's salary
Housing Loans: PAG-IBIG offers competitive interest rates for housing loans. Members can choose from fixed rates that range from 5.75% for a one-year fixing to 10% for a 30-year fixing, based on how long they want the property’s rate to be fixed
Calamity Loans: Members affected by natural disasters can access calamity loans up to 80% of their Total Accumulated Value (TAV), with an interest rate of 5.95% per annum
Multi-Purpose Loans: Members can also apply for short-term multi-purpose loans, up to 80% of their TAV, with an interest rate of 10.5% per annum
PAG-IBIG’s contributions are tax-exempt and offer annual dividends. If a member decides to terminate their membership, they can refund their contributions in full.
Philhealth Coverage
The Philippine Health Insurance Corporation (PhilHealth) provides comprehensive medical coverage for citizens, funded through contributions from both employers and employees. This government-controlled, tax-exempt insurance ensures access to essential healthcare services. Here’s a snapshot of what PhilHealth offers:
Hospitalization Subsidy: Covers a portion of hospitalization expenses, reducing out-of-pocket costs based on the total amount incurred
Inpatient Benefits: Offers coverage for hospital stays when admitted to a PhilHealth-accredited facility, ensuring access to quality care
Outpatient Benefits: Includes coverage for day surgeries, hemodialysis, radiotherapy, and other outpatient procedures, making healthcare more accessible
Z Benefits: Provides specialized treatment for severe conditions like cancer, ensuring comprehensive support for high-cost treatments
SDG-Related Benefits: Addresses specific health needs aligned with Sustainable Development Goals, including packages for malaria, HIV/AIDS, and more
13th Month Pay
In the Philippines, the 13th-month pay is a significant benefit that boosts employee morale and financial well-being. This additional pay is equivalent to 1/12 of an employee's basic annual salary and is typically disbursed in December. Here’s what you need to know:
Timing: As per Presidential Decree No. 851, the 13th-month pay must be provided on or before December 24 each year. Some employers opt to split this benefit into two payments, with one portion given mid-year and the other in December
Calculation: To determine the 13th-month pay, use the formula:
Total Basic Salary Earned During the Year ÷ 12 Months = 13th-Month Pay
Tax Implications: The 13th-month pay is tax-exempt up to PHP 90,000. Any amount exceeding this threshold may be subject to taxation under the Tax Reform for Acceleration and Inclusion (TRAIN) law. Employees earning below PHP 90,000 receive their full 13th-month pay without deductions
Difference from Christmas Bonus: Unlike the optional Christmas bonus, the 13th-month pay is a mandatory benefit stipulated by law. It’s important to note that this pay is not part of regular wages and should not include payroll deductions, premiums, or overtime payments
Proration: For employees who have not completed a full year with the company, the 13th-month pay is prorated based on the number of months worked
Supplemental Benefits
Employers in the Philippines have the opportunity to enhance their employee compensation packages by offering additional benefits beyond what is legally required. While not mandated by law, these extra perks can be tailored to align with company roles and can significantly boost employee satisfaction and retention.
1. Group Life Insurance
Group Life Insurance in the Philippines provides essential coverage for employees, ensuring financial protection in cases of accidents, serious illnesses, or disabilities. Employers often partner with private insurance companies to tailor the coverage to fit their business needs and employee roles. Here’s a breakdown of what you can expect:
Coverage: Typically includes protection for death, hospitalization, permanent and total disability, critical illness, and work-related accidents
Funding: Both employees and employers contribute a portion of the monthly salary to fund the insurance, ensuring comprehensive coverage and shared responsibility
2. Health and Dental Coverage
Private Medical Insurance in the Philippines offers employees an added layer of medical coverage, complementing their overall benefits package. This insurance helps ensure employees receive high-quality care, supporting their health and performance. Here’s what you need to know:
Coverage: Private medical insurance provides access to a network of hospitals, clinics, and doctors, giving employees options for comprehensive care
Contributions: Monthly premiums are shared between the company and employees. Employees can often add dependents to the plan for an extra fee
Benefits: The insurance typically includes free consultations with accredited doctors, discounted hospital fees, and financial aid during medical emergencies
3. Christmas Bonus
In the Philippines, December isn’t just a month of wrapping up the year, it’s a time filled with festive cheer and celebration, especially with Christmas at its heart. For many companies, it’s also an opportunity to express appreciation and reward their employees for their hard work throughout the year.
One popular way to do this is through Christmas bonuses. This monetary benefit, usually given at the end of the year, is often equivalent to 1/12 of the employee’s annual salary. For those who have been with the company for less than a year, this bonus is prorated based on their length of service. To distinguish it from the mandatory 13th-month pay, some companies choose to distribute Christmas bonuses at a different time or split it into two parts.
In addition to the Christmas bonus, many employers offer various allowances as part of their compensation package. These allowances can cover meals, clothing, medical expenses, and more. A particularly popular allowance in the Philippines is the quarterly rice subsidy. Given the cultural significance of rice as a staple food, this benefit reflects the company’s commitment to supporting employees' everyday needs and appreciating their contributions.
4. Allowances
One of the most culturally significant allowances is the quarterly rice subsidy. Since rice is a staple in Filipino households, this benefit is highly valued by employees. It reflects the company’s understanding of local culture and commitment to supporting their workforce's daily needs.
Employee Benefits for Expatriates
The Philippines, with its inviting tropical climate, is a popular destination for expatriates looking to live and work there. To help make their transition easier and to encourage foreign investment, the government has set up various perks for expatriates.
While expatriates receive the same benefits as local employees, many employers go the extra mile by offering additional support tailored to help them adjust. These perks can include housing assistance, transportation allowances, and cultural orientation programs.
Private Health Care: Comprehensive medical coverage to ensure access to quality healthcare
Life Insurance: Coverage for the employee, and potentially their spouse or children
Bonuses: Performance bonuses, loyalty bonuses, and other financial incentives
Allowances: Meal, clothing, and other allowances to support their daily needs
Retirement Benefits: Plans to secure their financial future while working abroad
Tax for Employee Benefits
In the Philippines, while standard employee benefits are subject to income and withholding tax, certain additional benefits, known as De Minimis Benefits, are exempt from taxation. These benefits are considered minor but add value to the employee's overall compensation package. They are designed to provide small but meaningful perks without impacting the employee's tax obligations. De Minimis Benefits typically include:
Gift Rewards: Small tokens of appreciation or holiday gifts
Meal Allowances: Subsidies or allowances provided for meals
Rice Subsidies: Regular allowances to support the purchase of rice, a staple food in the Philippines
Unused Leave Credits Converted to Cash: Payment for leave credits that were not used
Medical Allowance: Funds allocated for medical expenses
Uniform Allowance: Support for the purchase or maintenance of work uniforms
Restrictions
When planning benefits and compensation packages for employees in the Philippines, it’s essential to adhere to the framework established by the Labor Code. This framework ensures that all legal requirements are met and that employees receive the necessary benefits. Key Points to Consider:
Registered Entity Requirement: To comply with local regulations and offer benefits in line with the Labor Code, having a registered entity within the Philippines is crucial. This registration ensures that the company is recognized under Philippine law and can properly manage payroll, benefits, and other employment obligations
For Foreign Companies: Foreign businesses looking to hire workers in the Philippines can address this requirement by partnering with Professional Employer Organizations (PEOs) or Employer of Record (EOR) solutions. These partnerships provide a streamlined approach to compliance, allowing companies to:
Manage employee benefits and compensation according to local regulations
Handle payroll, taxes, and other administrative tasks efficiently
Ensure that all statutory benefits and additional perks are properly administered
How can Glints help you?
Expanding your business in Southeast Asia brings legal challenges, especially around hiring and managing local talent. Glints offers HR as a Service, helping you compliantly onboard and manage employees with the right benefits. We handle HR functions so you can focus on growth.