In the Philippines, when it comes to employment, one of the first things people ask is about employee benefits or also known as compensation and benefits. This reflects a company’s value for its employees.
Whether you’re a business owner hiring an employee, an HR professional refining your organizational or company policy, or a job seeker evaluating an offer, it is important to understand the compensation and benefits plan in the Philippines, along with the legal obligations that come with it.
In this article, we’ll give you a guide regarding the compensation and benefits, along with the legal basis behind each of these benefits so you will be able to know your rights or responsibilities are backed by Philippine law.
What is Compensation and Benefits?
In human resource management, compensation and benefits refer to the rewards, both monetary and non-monetary, provided to employees in exchange for their service.
For a monetary compensation package, this includes wages, salaries, bonuses, commissions, and any direct financial payments that an employee receives. The employer uses the compensation to attract top talent candidates and improve staff retention.
On the other hand, non-monetary benefits include non-cash rewards like health insurance, paid leaves, government contributions, retirement plans, allowances, and other non-direct cash payments. These benefits are used to motivate employees to improve their performance.
Together, compensation and benefits don’t only include your monthly salary, but perhaps it is the total package that an employee will receive from the employer in return for their service.
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Common Mandatory Compensation and Benefits in the Philippines
The Department of Labor and Employment (DOLE) is the primary government agency that regulates labor laws backed by the Labor Code of the Philippines as the legal foundation. It is important that employers must be aware and stay fully compliant with these mandates.
Here are the following common mandatory employee benefits and compensation set by the Philippine law:
Basic Salary and Wages
This is the regular payment for the work done by the employee. Salary and wage are different from each other. Wages are typically based on the number of hours worked or on a daily rate basis. It is often associated with manual labor, like in the retail or food service industry. This is often given weekly or bi-weekly. They are entitled to receive at least the daily minimum wage set by the government.
On the other hand, salaries are a fixed amount paid regularly, whether bi-monthly or monthly. Typically, it is associated with professionals or salaried positions.
Overtime Pay
According to Article 87 of the Philippine Labor Code, any work performed beyond eight (8) hours per day must be compensated with overtime pay of 25% of the hourly rate during regular working days and 30% during holidays and rest days.
Night Shift Differential (NSD)
This is a 10% premium added to the regular wage for each hour of work done between 10 PM to 6 AM in accordance with Article 86 of the Labor Code of the Philippines.
13th Month Pay
All employers are required to pay their employees a 13th-month pay following Presidential Decree No. 851. All rank-and-file employees are entitled to receive a 13th-month pay, of which one twelfth (1/12) of the basic salary of an employee within a calendar year, not later than December 24 of every year.
Leave Benefits
Service Incentive Leave (SIL): Employees who have rendered at least one (1) year of service are entitled to five (5) days of paid Service Incentive Leave. This can be used for sick or vacation leave.
Maternity Leave: Under Republic Act No. 11210 or the Expanded Maternity Leave, female employees are entitled to 105 days of paid maternity leave for every instance of live birth, with an option of extending for 30 days more, but without pay. However, in cases such as miscarriage, emergency termination of pregnancy, or stillbirth, the paid maternity leave is 60 days only.
Paternity Leave: Under Republic Act No. 8187, or the Paternity Leave Act of 1997, married male employees may file a paid paternity leave for seven days for the first four deliveries of their legitimate spouse.
Parental Leave for Solo Parents: Under the Republic Act 8972, also known as the “Solo Parents’ Welfare Act of 2000”, solo parents are entitled to seven (7) days leave every year who have rendered service for at least one (1) year.
Special Leave for Women: Under Section 18 of the Republic Act No. 9710, also known as the “The Magna Carta Act of Women”, female employees are entitled with a leave benefits of two (2) months with full pay based on gross monthly compensation for women employees who undergo surgery caused by gynecological disorders, provided that they have rendered continuous aggregate employment service of at least six (6) months for the last twelve (12) months.
Statutory Contributions (SSS, PhilHealth, Pag-IBIG)
Social Security System (SSS): This is a social insurance program that provides benefits for retirement, sickness, maternity, disability, and death.
Philippine Health Insurance Corporation (PHILHEALTH): This is the national health insurance program that provides coverage for hospitalization and other medical services.
Home Development Mutual Fund (Pag-IBIG): This is a provident savings system and a housing finance program that allows employees to save for the future and apply for housing loans.
Separation Pay
This is in case of the dismissal or termination of an employee through authorized causes such as redundancy or retrenchment under Articles 298 & 299 of the Labor Code of the Philippines.
Common Non-Mandatory Compensation and Benefits in the Philippines
Aside from the mandatory benefits, many companies offer competitive employee compensation and benefits package that goes above and beyond. These are the voluntary, non-statutory benefits that an employer chooses to offer to attract and retain the best talent. These offerings are often what distinguishes a company in the eyes of a potential hire.
Private Health Maintenance Organization (HMO) Coverage
This is perhaps the most sought-after benefit in the Philippines. While PhilHealth provides basic coverage, an HMO plan gives employees access to a wide network of doctors and hospitals without the hassle of paying out-of-pocket, providing a greater sense of security.
Performance Bonuses and Incentives
Companies often offer bonuses tied to individual, team, or company performance. This could be a yearly bonus, a quarterly incentive, or a commission structure for sales roles.
Allowances
These can range from transportation and meal allowances to communication and internet subsidies, especially for employees who work remotely.
Retirement Plans
Beyond the mandatory SSS pension, many companies offer their own private retirement or provident fund to provide additional financial security for employees’ golden years.
Paid Time Off
Offering more than the minimum five days of Service Incentive Leave is a huge draw. Companies that provide more vacation and sick leave days demonstrate a commitment to work-life balance.
Wellness and Development Programs
These benefits programs can include gym memberships, mental health support, professional development courses and training, and tuition reimbursement. They show that an employer is invested in the holistic growth of their people.
Why an Employer of Record (EOR) is Your Best Strategic Partner for Philippine Expansion
Expanding a business in the Philippines presents an attractive opportunity to tap into a highly skilled workforce, but it also comes with the significant challenge of navigating a complex and detailed legal framework for employee compensation and benefits. To legally hire and manage employees in the country without establishing a local entity, companies can leverage an Employer of Record (EOR) service provider.
An EOR acts as a legal employer on your behalf, handling all aspects of payroll, tax withholding, and mandatory benefits administration, including SSS, PhilHealth, and Pag-IBIG contributions, as well as the crucial 13th-month pay. This strategic partnership mitigates legal risks by ensuring full compliance with the Philippine Labor Code, while also simplifying administrative tasks. Moreover, an EOR frees you from the bureaucratic burden of international expansion, enabling you to focus on managing your team and growing your business efficiently and securely.
Final Thoughts
Understanding compensation and benefits in the Philippines is essential for both employees and employers. From basic salary to 13th month pay, government contributions, and optional perks, each component reflects a company’s integrity and commitment to its people.
However, with laws, regulations, and employee expectations constantly evolving, managing all these can be overwhelming, especially for startups or foreign companies unfamiliar with local policies. That’s where EOR service providers come in. Tele HR Solutions simplify the process, ensure compliance, and let you focus on what matters most.
Whether you’re developing an HR strategy or planning your next career move, use this guide to make informed and empowered decisions.