Guide to Philippines Labor Laws for US Businesses

When US companies hire in the Philippines, they need to understand, and even more importantly, comply with the Philippines' Labor Laws. Here, we’ll provide you with a detailed overview of the fundamental employment regulations in the country.

We’ll cover the fundamentals of hiring and managing employees in the Philippines, including minimum wages, working hours, mandatory benefits (like 13th-month pay), termination procedures and other relevant regulations.

By the end, you should have a solid grasp of what laws and guidelines apply when you employ people in the Philippines.

Philippine Labor Laws: An Overview

The primary legislation governing employment in the Philippines is the Labor Code of the Philippines, established in 1974 under Presidential Decree No. 442.¹ This comprehensive code outlines all major aspects of employment to assure the fair treatment of workers in the private sector. This includes everything from hiring and wages to working conditions and benefits.

If employers don’t adhere to these laws, the consequences can be extreme. Along with steep fines, employers also risk prison time.

Importantly, Philippine labor laws apply to virtually all employees working in the country, regardless of industry. That means there is no distinction based on a company’s foreign or local status. So, if you’re an American who hires workers in the Philippines, you’re still bound by the Labor Code and related statutes.

One notable element of Philippine law is the lack of at-will employment (as practiced in the US). In turn, employers can’t dismiss employees without legal cause and due process.

We will discuss the specific requirements for termination in a moment, but this fundamental difference means US employers must have legitimate reasons and follow proper procedures when ending an employee’s contract in the Philippines.

Working Hours and Minimum Wage

As per the Philippines Labor Code, the standard work schedule is generally eight hours per day (about 40 hours per week), as it is in most other countries.

Any work beyond those 40 hours is classified as overtime, and it must be compensated at a premium rate. Generally, this is at least 25% above the regular pay rate for the extra hours. Further, employees are also entitled to a rest period of at least 24 consecutive hours each week.²

Philippine law also provides for paid public holidays. On official regular holidays, employees must either be given the day off with pay or, if they do work, receive double pay (200% of their normal rate) for that day.

The government also designates special non-working holidays on certain dates; on those days, it is generally “no work, no pay” (employers may choose to pay employees as an extra benefit, but it’s not legally required).

These provisions are meant to ensure workers receive fair compensation for their overtime and holiday work, a big contributing factor to reasonable working conditions.

In terms of minimum wage, the Philippines doesn’t have a single nationwide rate. Instead, Regional Tripartite Wages and Productivity Boards (RTWPBs) set minimum wage levels for each region.

When they do so, they account for factors such as the:

• Local cost of living
• Industry
• Economic conditions

Let’s use Metro Manila (National Capital Region) as an example. There, the minimum wage for non-agricultural workers was recently increased to ₱695 per day as of July 2025.³

On the other hand, some regions that are less developed have lower minimum wages. For example, in the Bangsamoro Autonomous Region (BARMM), the daily minimum wage can be as low as about ₱366.⁴

All employers must also pay at least the applicable regional minimum wage to their employees. If they don’t, this can mean serious penalties, and employees can file complaints for wage violations, too.

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Mandatory Benefits and Leave Policies

The Labor Code and related laws mandate several employee benefits that employers must provide. One of the most notable is the 13th-month pay: an annual bonus equivalent to one-twelfth of an employee’s total basic salary for the year.

Employers are required to pay this bonus on or before December 24 each year. This benefit has been mandatory since 1975 under Presidential Decree No. 851 and is considered a cornerstone of Philippine labor standards.⁵

In practice, an employee who worked a full calendar year would receive one extra month’s pay. Those who didn’t work a full year receive a prorated amount based on the number of months of employment.

All full-time employees who have been with a company for at least one year are entitled to at least five days of paid Service Incentive Leave (SIL) annually, too. They might use this time for vacation or sick days (at the employee’s discretion), and any unused SIL at the end of the year may be converted to cash.⁶

Five days is a minimum, but the law ensures every employee has at least a baseline amount of paid time off. Beyond that, many employers choose to voluntarily offer more generous vacation or sick leave.

Philippine law entitles female employees to lengthy maternity leave under Philippine law, too. Mothers can take 105 days of paid maternity leave for childbirth, with the option to extend for an additional 30 days of unpaid leave if they choose.

Single mothers classified as “solo parents” get an additional 15 days of paid leave on top of the 105 days under the Solo Parents’ Welfare Act.⁷

In the unfortunate event of a miscarriage or emergency termination of pregnancy, a female employee is provided 60 days of paid leave. For fathers, the law provides paternity leave of seven days with full pay, applicable for the first four children of the married employee.

These generous leave benefits reflect the Philippines’ emphasis on protecting workers during momentous life events. Employers should plan for these absences and can’t penalize employees for using their entitled leave.

Aside from leave and bonus pay, employers must also enroll their employees in mandatory government benefit programs.

This includes making contributions to the:

• Social Security System (SSS) for pension benefits
• Philippine Health Insurance Corporation (PhilHealth) for health coverage
• Home Development Mutual Fund (commonly known as Pag-IBIG Fund) for housing and savings benefits

Under various laws, both employer and employee share the cost of these contributions.

For example, as of 2025, the PhilHealth insurance contribution is set at 5% of the employee’s salary (with the cost split equally between employer and employee). SSS and Pag-IBIG contributions are likewise divided between employer and worker according to set rates.⁸

By law, employers must register their employees for these programs and remit the required contributions regularly, so that workers have access to social security, healthcare, and other financial benefits.

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Termination of Employment

Ending employment in the Philippines is more regulated than in the United States because at-will employment doesn’t apply. An employer can terminate only for reasons defined by law and must follow strict procedures.⁹

The Labor Code recognizes “just causes,” such as serious misconduct (theft, fraud or violence), willful disobedience, habitual neglect of duties, or breach of trust. If one of these occurs, the employer may terminate, as long as they observe due process.

There are also “authorized causes” unrelated to employee fault.

A few examples of this include:

• Redundancy
• Retrenchment due to financial losses
• Closure of business
• A serious illness certified as incurable within six months

Terminations for these reasons require at least 30 days’ written notice to both the employee and the Department of Labor and Employment (DOLE).

As for just cause terminations, the procedure requires two notices: one that explains the grounds with evidence and gives the employee a chance to respond (normally within five days) and another that finalizes the termination.

If dismissal proceeds, a second notice formally ends employment. If you skip these steps, the termination can be deemed illegal. Skipping these steps can render the termination illegal.

Employees dismissed for authorized causes are entitled to separation pay, typically one-half month’s salary per year of service, or in some cases one month per year. If the dismissal is just cause (such as theft), no separation pay is required.

Wrongful dismissal (without valid cause or due process) can lead to reinstatement with back pay or damages, along with regulatory penalties that aren’t worth risking.

Under Article 288 of the Labor Code, you may even be found criminally liable in the event of certain violations. As such, employers need to keep careful records, follow the mandated steps, and seek legal counsel when handling terminations.¹⁰

Other Labor Laws and Regulations

Aside from the Labor Code itself, several other statutes form part of the Philippines’ labor laws.

Under the Anti-Age Discrimination in Employment Act (RA 10911), employers are prohibited from making age-based decisions in hiring, promotion, training, or termination. As such, employers can’t impose age limits in job ads or force retirement based solely on age, except in limited cases like senior executive roles or physically demanding jobs.¹¹

The Safe Spaces Act (RA 11313), or “Bawal Bastos” law, expands workplace protections against sexual harassment.

Under this law, employers must implement policies, complaint procedures, and preventive measures. Both the employer and the harasser can be found liable if they failed to act.¹²

The Occupational Safety and Health (OSH) Law (RA 11058) requires safe working conditions. This includes things like proper equipment, training, and medical support. Noncompliance can lead to daily fines of ₱10,000–₱20,000 until issues are corrected, and harsher penalties come with serious accidents.¹³

Workers also have the right to unionize and engage in collective bargaining. Employers may need to negotiate a Collective Bargaining Agreement (CBA) covering wages, hours, and conditions, usually lasting up to five years.

Throughout this period, terms are binding, and retaliation against union activity or refusal to bargain in good faith can result in legal sanctions.¹⁴

Hiring Contractors vs. Employees in the Philippines

Many foreign companies hire Filipinos as independent contractors rather than employees. This is legal, but misclassification is a grave legal risk.

Contractors, who typically sign a service or freelance agreement, aren’t entitled to employee benefits such as minimum wage, 13th-month pay, SSS/PhilHealth contributions, or leave. However, labeling someone a “contractor” doesn’t mean you’re exempt from labor laws if the relationship operates like traditional employment.

Authorities assess the actual work setup. If a contractor works exclusively for your company, follows your instructions and schedule, uses your tools, and is integrated like staff, they may be deemed an employee. Misclassification is treated as labor fraud and can result in back wages, unpaid benefits, missed contributions, and fines.

For US businesses, the safest approach is to ensure contractors operate independently. This means contractors have multiple clients and control how they deliver work.

Otherwise, if someone performs ongoing duties under your direction, it’s better to hire them as an employee. This might be done through your own entity or an employer-of-record service. Either way, clear agreements and local legal advice when uncertain are important as you move forward.

In the long run, structuring work relationships correctly safeguards your company from compliance risks and lays the foundation for a legally sound presence in the Philippines.

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Sources:

1. Labor Code of the Philippines
2. Labor Code of the Philippines
3. Metro Manila Minimum Wage | Sprout
4. Bangsamoro Autonomous Region Minimum Wage | NewsInfo
5. 13th-Month-Pay
6. Service Incentive Leave
7. Philippines Maternity Law
8. PhilHealth Insurance Contribution | PhilStar
9. Termination of Employment
10. Article 288 of the Labor Code
11. Anti-Age Discrimination in Employment Act
12. Bawal Bastos Law
13. The Occupational Safety and Health (OSH) Law
14. Collective Bargaining Agreement (CBA)