Outsourcing to the Philippines is no longer just a cost-cutting strategy — it’s a smart growth move. With highly skilled English-speaking professionals, strong cultural alignment with Western markets, and competitive labor costs, the Philippines remains one of the top destinations for remote staffing.
But here’s the challenge:
How do you hire Filipino employees legally without setting up a local company?
The answer is simple — Employer of Record (EOR) in the Philippines.
In this comprehensive 2026 guide, we’ll break down everything you need to know about using an Employer of Record in the Philippines, how it works, how much it costs, and when it makes sense for your business.
Table of Contents
What Is an Employer of Record (EOR)?
An Employer of Record (EOR) is a third-party company that legally employs workers on your behalf in another country.
If you’re hiring in the Philippines, the EOR:
- Becomes the legal employer of your Filipino staff
- Handles payroll processing
- Registers and remits SSS, PhilHealth, and Pag-IBIG contributions
- Withholds and remits income taxes to the BIR
- Issues with compliant employment contracts
- Ensures compliance with Philippine labor laws
- Manages statutory benefits like 13th-month pay
You, on the other hand:
- Control the employee’s day-to-day work
- Manage performance and deliverables
- Set compensation and responsibilities
In short, the EOR handles legal employment compliance, while you manage the business side.
You Might Also Be Interested: Why Philippines Is One Of The Best Outsourcing Destinations In The World?
Why Businesses Use an Employer of Record in the Philippines
1. No Need to Incorporate Immediately
Setting up a 100% foreign-owned corporation in the Philippines requires:
- Registration with the Securities and Exchange Commission (SEC)
- Bureau of Internal Revenue (BIR) registration
- Local government permits
- Ongoing annual filings and compliance
If you’re only hiring 1–5 remote staff, that setup may be unnecessary.
An Employer of Record lets you hire legally without incorporating locally.
If later you decide to scale or open operations, you can transition to setting up a corporation through firms like Davao Accountants, which specializes in Philippine incorporation and compliance services.
2. Full Compliance with Philippine Labor Laws
Philippine labor law is employee-protective. Employers must comply with:
- Mandatory 13th-month pay
- Statutory contributions (SSS, PhilHealth, Pag-IBIG)
- Leave entitlements
- Proper termination procedures
- Separation pay rules
Non-compliance can lead to penalties and labor disputes.
A reputable EOR ensures:
✔ Proper employment contracts
✔ Correct payroll computation
✔ Timely government remittances
✔ Protection against labor compliance risks
3. Faster Hiring Timeline
Incorporation can take weeks (or longer, depending on documentation and foreign ownership structures).
With an EOR:
- You can onboard a Filipino employee within days
- No need to open a Philippine bank account
- No need for a local corporate secretary initially
This speed is critical for startups and scaling companies.
How Employer of Record Works in the Philippines (Step-by-Step)
Here’s how the process typically unfolds:
Step 1: Candidate Selection
You source your own candidate or work with a recruitment partner such as Smartual Philippines, which provides recruitment, payroll, and EOR solutions.
Step 2: Employment Offer
You agree on:
- Salary
- Job role
- Benefits
- Start date
The EOR drafts a compliant Philippine employment contract.
Step 3: Legal Employment Setup
The EOR:
- Registers the employee with SSS, PhilHealth, and Pag-IBIG
- Sets up payroll records
- Ensures BIR registration
Step 4: Monthly Payroll & Compliance
Each month, the EOR:
- Computes gross-to-net salary
- Withholds income tax
- Remits statutory contributions
- Issues payslips
- Manages mandatory 13th-month pay accrual
You simply pay one consolidated invoice covering:
- Employee salary
- Employer contributions
- EOR service fee
Employer of Record vs Direct Hiring vs Incorporation
Let’s compare:
| Option | Best For | Compliance Responsibility | Setup Cost | Speed |
|---|---|---|---|---|
| Freelancer | Short-term projects | Contractor risk | Low | Fast |
| Employer of Record | 1–20 employees | EOR handles compliance | Moderate | Very fast |
| Incorporation | Long-term operations | Your company | Higher | Slower |
If you plan to hire 1–10 employees, EOR is usually the most practical starting point.
If you plan to build a large Philippine operation, incorporation may eventually make more sense.
How Much Does an Employer of Record Cost in the Philippines?
While pricing varies, typical EOR fees range between:
- USD 150 – USD 350 per employee per month
This fee covers:
- Payroll processing
- Statutory filings
- Government remittances
- Employment compliance management
- HR documentation
When compared to:
- Legal fees for incorporation
- Annual corporate secretary fees
- Accounting and tax compliance costs
EOR is often more cost-efficient in the early stages.
For a detailed breakdown of full compliance costs when incorporating, see Davao Accountants’ guide to registering a 100% foreign-owned corporation in the Philippines.
Common Questions About EOR in the Philippines
Is EOR Legal in the Philippines?
Yes — as long as the structure complies with Philippine labor laws. The EOR must be properly registered and capable of legally employing staff.
Can I Control My Employee?
Yes. You manage day-to-day tasks. The EOR is only the legal employer of record.
What About 13th-Month Pay?
The Philippines mandates 13th-month pay equivalent to one month’s salary per year. The EOR handles accrual and payment.
Can I Transition From EOR to My Own Corporation?
Absolutely. Many companies start with EOR and later transition to incorporating a 100% foreign-owned corporation.
When that time comes, firms like Davao Accountants can handle:
- SEC registration
- BIR registration
- Business permits
- Corporate secretary services
- Ongoing accounting compliance
When Should You Choose an Employer of Record?
An EOR in the Philippines is ideal if:
- You want to test the market
- You’re hiring your first Filipino employee
- You don’t want to manage Philippine compliance
- You want fast onboarding
- You prefer predictable monthly costs
It may not be ideal if:
- You’re building a 50+ employee operation
- You require a physical office
- You want direct corporate control over Philippine contracts
Why the Philippines Remains a Top Destination for EOR Hiring
The Philippines continues to dominate the outsourcing landscape due to:
- Strong English proficiency
- Western cultural alignment
- Deep BPO experience
- Competitive compensation structures
- Skilled professionals in accounting, IT, marketing, customer service, and legal support
Many global companies begin by hiring Filipino virtual assistants — but later realize they need compliant employment structures.
That’s where Employer of Record becomes critical.
Final Thoughts: Is Employer of Record in the Philippines Worth It in 2026?
For startups, digital agencies, SaaS companies, eCommerce brands, and professional firms, the answer is often yes.
An Employer of Record in the Philippines allows you to:
- Hire legally
- Reduce compliance risks
- Avoid complex incorporation
- Scale quickly
- Focus on growing your business
As your Philippine team grows, you can later evaluate whether to incorporate locally or continue using an EOR.
Either way, understanding your options early can save you time, money, and legal exposure.
If you’re serious about hiring in the Philippines, start with compliance — not shortcuts.
