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Labor Law and Employment

How to hire an independent contractor in the Philippines?

  1. Understand the labor laws in the contractor’s country ( DO 174 series of 2017).

  2. Determine if your business has to report to IRS or withhold tax on payments made to independent contractors.

  3. Have foreign contractors complete IRS Form W-8BEN.

  4. Learn the nuances of local tax laws related to independent contractors.

  5. Prepare a well defined contractor agreement that meets legal requirements of all countries involved.

  6. Set a pay scheme to the foreign contractor.


   Other things to consider in hiring a contractor include;

  1. Study their references;

  2. Interview carefully use video conferencing if necessary;

  3. Get everything in writing;

  4. Keep records of payments made to foreign contractors;

  5. Keep communication open;

  6. Have a recruitment procedure to find qualified workers;

  7. Monitor the work done by a contractor, there are tools to monitor remote workers such as Upwork, Hubstaff, and Xero.

What are the grounds for terminating an employee?

An employee may be terminated based on any of the following causes, to wit:

1. Just Causes:


          a. Termination by the Employer (Art. 297[282] of the Labor Code)

                 i. Serious misconduct or willful disobedience by the employee of the lawful orders of his                       employer or representative in connection with his work;

                ii. Gross and habitual neglect by the employee of his duties;

                iii. Fraud or willful breach by the employee of the trust reposed in him by his employer or                    duly authorized representative;

                iv. Commission of a crime or offense by the employee against the person of his employer                    or any immediate member of his family or his duly authorized representatives; and

                v. Other causes analogous to the foregoing.


         b. Prohibited Activities (Art. 297(a) [264(a)] of the Labor Code)

                 i. Union officers who knowingly participate in an illegal.

                ii. Any employee, union officer or ordinary member who knowingly participates in the                          commission of illegal acts during a strike, whether legal or illegal.


          c. National Interest Cases (Art. 278g [263g] of the Labor Code)

                 i. Strikers who violate orders, prohibitions and/or injunctions issued by the DOLE                                     Secretary or the NLRC.


           d. Union Security Clause (Art. 259e [248e] of the Labor Code) – employees who violate the                    union  security agreement in the CBA, such as failure to join the union, or to maintain his                   membership in good standing therein, or commits an act of disloyalty against the union.

          e. Just causes under prevailing jurisprudence

                    i. Violation of Company Rules and Regulations or Code of Conduct or Code of Discipline.

                   ii. Theft of property owned by a co-employee.

                   iii. Incompetence, inefficiency or ineptitude.

                   iv. Failure to attain work quota.

                   v. Failure to comply with weight standards of employer.

                   vi. Attitude problem.


2. Authorized Causes:

            a. Installation of labor-saving devices;

            b. Redundancy;

            c. Closure or cessation of business operations not due to serious business losses or financial                reverses;

            d. Closure or cessation of business operations due to serious business losses or financial                      reverses;

            e. An employee who has been found to be suffering from any disease and whose continued              employment is prohibited by law or is prejudicial to his health as well as to the health of his                co-employees.

What are the mandatory benefits of regular employees?

1. Social Security System (SSS). The benefits include:

              a. maternity pay

              b. sickness pay

              c. pensions

              d. disability benefits

              e. salary loans

              f. life insurance

              g. funeral grants​​

2. Health Insurance (PhilHealth)

3. Home Development Mutual Fund (HDMF)

4. Working hours – a maximum of eight hours a day, excluding an hour’s lunch break.

5. Weekly rest day - 24 consecutive hours of rest after six consecutive working days.

6. Public Holidays

7. Minimum wage

8. Night shifts differentials - to the workers working between 10pm and 6am and must not be less than 10% of the worker's regular salary.

9. Overtime Pay - 25% of their average hourly rate.

10. Premium Pay - for working on their rest days or special holidays.

                    a. If it’s their rest day or special day, 30% of their daily salary.

                    b. If it’s on a special day that is also their rest day, they get 50% extra payment

                    c. If it’s on a regular holiday that is also a rest day, the employee gets a total of 260%.

11. 13-month pay entitlement

12. Service incentive leave - five days of paid leave to every employee who has worked for at least one year.

13. Sick leave - at least 90% of their average daily wage if they get hospitalized or incapacitated at home for at least three days.

14. Maternity and paternity leave

15. Solo parent leave

16. Leave for victims of gender violence - female workers who are the victims of violence are entitled to ten days of paid leave.

17. Special leave for gynecological surgery

18. Bereavement Leave

19. Retirement benefit

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