Agile Talent Hub of Southeast Asia

The Philippines, one of Southeast Asia’s most dynamic economies, is home to a growing and competitive labour force. As of mid 2025, over 50 million Filipinos are actively participating in the workforce, supported by high English proficiency, a strong service culture, and an expanding digital economy. These strengths continue to position the Philippines as a preferred destination for regional hubs, outsourcing operations, and global service delivery.

Operating a business in the Philippines requires familiarity with local employment regulations, including wage standards, statutory benefits, social contributions, and termination rules. The country’s labour framework is governed by the Labour Code of the Philippines and various administrative issuances from regulatory agencies.

This country book serves as a practical guide for employers, whether entering the Philippine market or expanding their presence, by providing up-to-date information on employment compliance, statutory obligations, and HR best practices for 2025.

Maximum Working Week

Employees must receive a weekly rest period of at least 24 consecutive hours after six consecutive days of work. If they work on their rest day, they are entitled to a 30% premium on their basic wage. The standard working hours are up to eight (8) hours per day and should not exceed 48 hours per week without overtime. If a worker exceeds eight hours in a day, they are entitled to overtime pay with an additional premium. Employees must also be given one rest day per week and at least one hour for a meal break.

Leave Types

Service Incentive Leave (SIL)
Employees who have worked for at least one year are entitled to five (5) days of paid leave per year. If unused, this leave can be converted to cash.

Special Leave Benefits under Philippine Labor Laws

• Maternity Leave
• Paternity Leave
• Parental Leave for Solo Parents
• Special Leave for Women
• Leave for Victims of Violence Against Women and Their Children

Holiday Pay: Regular Holidays and Special Non-Working Holidays

On a regular holiday, if the employee does not work, they shall be paid 100% of their wage for that day, provided they are present or on paid leave on the day immediately preceding the holiday.

On a special non-working holiday, the “no work, no pay” rule applies. If the employee works on such a holiday, they are entitled to an additional 30% of their daily wage for the first eight hours.

Payroll & Payment:

Workers typically receive their pay twice a month, with a maximum interval of sixteen (16) days, or at least once every two weeks. Even upon an employee’s request, it is illegal for employers in the Philippines to pay salaries using promissory notes, vouchers, coupons, tokens, tickets, chits, or any other form of payment aside from legal currency.

Employers are also prohibited from impeding or interfering with an employee’s right to dispose of their wages. They cannot require employees to use a specific store or service owned by the employer or any other party, nor may they coerce or compel employees to purchase goods, commodities, or property from anyone.

Overtime Pay:

For work beyond eight (8) hours on ordinary working days: Additional 25% of the hourly rate.

For work beyond eight (8) hours on rest days, special days, or regular holidays: Additional 30% of the hourly rate on those days.

Premium Pay:

This benefit applies to all employees except government employees, whether employed by the National Government or any of its political subdivisions, including those employed in government-owned and/or controlled corporations with original charters or created under special laws.

• Workers who are not required or permitted to work on special days are not entitled to any compensation. However, this is without prejudice to any voluntary practice or provisions in a Collective Bargaining Agreement (CBA) that provide for payment of wages and other benefits for unworked special days.
• Additional compensation is granted for work performed within eight (8) hours on non-working days, such as rest days and special days.

Night Shift Allowance:

Employees are entitled to Night Shift Differential (NSD) pay of 10% of their regular wage for each hour of work performed between 10.00pm and 6.00am.

Thirteenth Month Pay:

Employers must provide thirteenth month pay to all rank-and-file employees who have worked for at least one month during the calendar year. This must be paid no later than December 24 of each year.

Retirement Pay:

Employees who have worked for the company for at least five (5) years and are at least sixty (60) years old, but not more than sixty-five (65), are eligible for retirement.

The minimum retirement pay shall be equivalent to one-half (1/2) month’s salary for every year of service. A fraction of at least six (6) months shall be considered as one (1) full year.

Income Tax – Withholding Tax on Compensation

Withholding tax on compensation refers to the income tax deducted by the employer from the salaries, wages, and other forms of remuneration paid to employees for services rendered under an employer-employee relationship. This tax is withheld at source and remitted to the Bureau of Internal Revenue (BIR) in accordance with the National Internal Revenue Code (NIRC) and applicable laws.

Compensation includes all earnings from employment unless specifically exempted by law, such as those earned by minimum wage earners.

The amount of tax withheld from an employee’s income is calculated using the BIR-prescribed withholding tax table, which reflects the graduated income tax rates and income brackets applicable for 2025.

Statutory Benefits / Contributions

Social Security System (SSS)
Under the new SSS law, both the contribution rate and the Minimum and Maximum Salary Credits (MSC) are increased periodically to ensure the sustainability of the SSS Fund. This guarantees that the system remains financially sound and capable of providing long-term benefits.

2025 Contribution Schedule:

• The maximum MSC for calculating Social Security premiums and benefits is ₱20,000. Contributions over this amount go to the Provident Fund, up to the ₱35,000 MSC cap.
• The minimum MSC for Overseas Filipino Workers (OFWs) is ₱8,000, or as set by the SSS Commission.
• Members earning below the minimum MSC or above the maximum MSC must contribute based on the prescribed minimum or maximum MSC, respectively.

Pag-IBIG (Home Development Mutual Fund)
As of February 2024, contributions are based on a Maximum Fund Salary (MFS) of ₱10,000.

PhilHealth (Philippine Health Insurance Corporation)
For 2025, the premium rate is 5% of the member’s basic monthly salary, shared equally between employer and employee.

Termination for Misconduct (Art. 297):

An employer may terminate an employee for just causes, such as serious misconduct, willful disobedience of lawful work-related orders, gross and habitual neglect of duties, fraud, or a willful breach of trust. Termination is also justified if the employee commits a crime against the employer, their immediate family, or authorized representatives. Other offenses similar or analogous to these are also valid grounds for dismissal.

Termination Due to Business Reasons (Art. 298):

Employers may terminate employees for authorized causes, including the installation of labor-saving devices, redundancy, retrenchment to prevent losses, or closure or cessation of business operations (provided it is not intended to circumvent the law). In such cases, the employer must provide prior written notice to both the employee and the Department of Labor and Employment (DOLE) at least one month in advance.

Termination for Health Reasons (Art. 299):

An employer may terminate the services of an employee who has been found to be suffering from a disease and whose continued employment is prohibited by law or is prejudicial to the health of the employee or their co-workers. A competent public health authority must certify the condition.

In the Philippines, public holidays are categorised into regular holidays and special (non-working) days. It’s essential for employers to distinguish between the two, as each type affects how employees are compensated.

Regular Holidays
These are nationwide holidays established either by law or tradition, often tied to historical or religious significance. Employees are entitled to full pay on these days, regardless of whether they report to work.

Special (Non-Working) Holidays
These holidays are typically declared for specific events, cultural celebrations, or by local authorities. Payment on these days depends on the employer’s discretion or internal policies, and different pay rules apply if employees are required to work.

Regular Holidays (2025)

Special (Non-Working) Holidays (2025)

Please find our Philippines office address below:

Suite 25D 2nd Floor II Building 191,
Salcedo St., Legaspi Village,
Makati City, Philippines

Email: info@linkcompliance.com