Employment in the Philippines
The Labor Code of the Philippines governs employment law in the Philippines and covers the following key aspects:
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The Labor Standards (prescribes the conditions of employment that both employers and employees have to abide by, such as types of employment, working hours, minimum wage, mandatory benefits, holidays, rest days, and employment rights)
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Human Resources Development & Management (stipulates provisions on local and overseas employment as well as employment of foreign nationals)
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Labor relations (concerned with employer-employee relationship on termination of employment and the rights and duties of both parties in union formation, collective bargaining, and labor strikes)
Labor Standards in the Philippines
I. Types of Employment
In the Philippines, there are five types of employment, mostly determined by the nature of activities that employees perform. The employer is required to establish the terms and conditions under the employment contract, which is subject to limitations under the Labor Code.
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Regular/Permanent Employment
Regular or Permanent Employment is when an employee performs activities that are necessary or desirable to the activities, business, or trade of the employer. Regular employees enjoy the benefit of tenure and cannot be terminated for causes other than those provided by law and only after due process. Majority of businesses and companies in the Philippines require their new employees to undergo probationary employment for a maximum of six (6) months to evaluate their skills and performance and determine if they are capable to meet the reasonable standards to become permanent employees.
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Casual Employment
Casual Employment is when an employee performs work that is usually not necessary or primarily related to the employer’s activities, business, or trade. Therefore, the period of employment must be made clear to the employee at the time they started rendering service.
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However, when an employee have rendered service for at least one (1) year in the same company, whether continuous or not, shall be considered regular employees with respect to the activities they perform and will continue rendering service while such activities exist in the company.
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Term/Fixed-Term Employment
Term or Fixed-Term Employment is a type of employment in the Philippines that is not determined by the activities that employees are required to perform but by the commencement and termination of the employment contract. A fixed-term employee can only render services within the set period of time stipulated in the employment contract and the employer must terminate his/her employment after such period expires.
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Fixed-term employment in the Philippines is subject to the following guidelines:
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Be voluntarily agreed upon by the parties without coercion or improper pressure to the employee.
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The employer and employee dealt with each other on more or less equal terms with no dominance exercised by the former over the latter.
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Project Employment
Project Employment is when an employee is hired for a specific project and the duration of employment is defined by the scope of work and/or length of the project. A project employee can acquire the status of a permanent employee if he or she continuously rehired to undertake other projects for the company or the tasks they perform are necessary and indispensable to the usual operations of the company.
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Seasonal Employment
Seasonal Employment is when an employment contract is only for a certain time or season of the year. This is common practice in service industries, such as but not limited to Retail, Food and Beverage, and Hospitality to increase manpower and cover the labor demand during peak seasons.
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II. Minimum Wages
In the Philippines, minimum wage rates vary per region and are prescribed by the Department of Labor-National Wages and Productivity Commission (DOLE-NWPC). Click the link to check the most recent wage order for all regions.
III. Mandatory Employee Benefits
Under the Philippine Labor Code, employees in the private sector are granted six (6) basic mandatory benefits, which are as follows:
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Social Security System (SSS) – the social insurance program for employees in the private sector, which provides employees and their families protection from disability, illness, old age, and death.
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Philippine National Health Corporation (PhilHealth) – the Philippine health insurance program, which provides employees with a practical means of paying for adequate medical care.
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Home Development Mutual Fund (Pag-IBIG Fund) – A housing loan program, which offers flexible housing loans to private employees.
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13th Month Pay – a mandatory salary bonus equivalent to an employee’s one (1) month salary, which must be given not later than December 24 every year.
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Service Incentive Leave – employees who have rendered at least one (1) year of service is entitled to a yearly service incentive of five (5) days with pay.
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Meal and Rest Periods – a meal period of not less than one (1) hour and rest periods of short duration in the morning and afternoon that should be included in the hours worked.
IV. Working Hours
Normal Work Hours
An employee’s normal hours at work must not exceed eight (8) hours a day. This working hours shall include:
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the whole duration when an employee is required to be on duty and/or to be at a prescribed workplace;
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the whole duration when an employee is permitted to work; and
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rest periods of short duration during working hours.
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Night Shift Differential Pay
Employee performing work between 10:00 PM and 6:00 AM must be paid a night shift premium of not less than 10% of their regular wage for each hour of work performed.
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Overtime Work
Work performed beyond the normal working hours must be paid an additional compensation equivalent to an employee’s regular wage plus at least 25% thereof. Employees who work beyond 8 hours on a holiday or rest day shall also be paid an additional compensation equivalent to the rate of the first 8 hours plus at least 30% thereof.
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Undertime Not Offset by Overtime
Undertime work on a normal work day shall not be offset by overtime work on any other work day. However, the Philippine labor laws discourage the offset because the hourly rate of overtime is higher than the hours missed when an employee works for less than 8 hours.​ In addition, permission given to an employee to go on leave for a day in a regular work week shall not exempt the employer from paying the additional compensation required for the overtime work done.
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Emergency Overtime Work
An employee may be required to perform emergency overtime work under any of the following cases:
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when the country is at war or when any other national or local emergency has been declared by the National Assembly or the Chief Executive
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when it is necessary to prevent loss of life or property in cases of imminent danger to public safety due to actual or impending emergencies in the locality caused by serious accidents, fire, flood, typhoon, earthquake, epidemic or any other disaster
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when there is urgent work to be performed on machines, installations or equipment, in order to avoid serious loss or damage to the employer or some other causes of similar nature
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when the work is necessary to prevent loss or damage to perishable goods
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where the completion or continuation of the work started before the eighth hour is necessary to prevent serious obstruction or prejudice to the business or operations of the employer
V. Other Employee Mandatory Rights and Benefits
Right to Weekly Rest Days
Employees have a right to a weekly rest period of not less than 24 consecutive hours after every 6 consecutive normal work days.
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Right to Holiday Pay
An employee shall be paid his regular daily wage during regular holidays, except in retail and service establishments regularly employing less than 10 workers. The employee may be required to work on a holiday but shall be paid a compensation equivalent to twice their regular rate.
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Right to Separation Pay
Employees dismissed from work due to business closure, reduction of costs or other reasons that are beyond their control should be granted separation pay equivalent to one (1) month salary or at least one (1) month salary for every year of service in the company.
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Service Charges
All service charges collected by hotels, restaurants, and similar establishments shall be distributed at the rate of 85% for all covered employees and 15% for management. The share of the employees shall be equally distributed among them.
In case the service charge is abolished, the share of the covered employees shall be integrated into their salary.