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UPDATED JUL 6, 2026💡 Everything you need to know to hire and manage employees in the Philippines through Toku. Toku handles payroll processing, tax withholding, social contributions, and statutory compliance. This guide covers what you need to plan costs and manage your team.
At a Glance
| Item | Detail |
|---|---|
| Currency | Philippine Peso (PHP) |
| Payroll cycle | Semi-monthly. Toku runs two payrolls per month in the Philippines. |
| Estimated employer costs on top of salary | Approximately 10-15% (contribution caps reduce the percentage at higher salaries), plus mandatory 13th month pay |
| Onboarding lead time | 7-10 business days |
| Standard working week | 8 hours per day, up to 48 hours over 6 days |
| Probation period | Up to 6 months (statutory maximum) |
| Annual leave | 5 days Service Incentive Leave after 1 year (most employers offer more) |
| 13th month salary | Required, paid by December 24 |
| Minimum notice on termination | 30 days for business-related (authorized cause) terminations; formal due process for cause-based terminations |
Onboarding a New Hire
Plan for 7-10 business days between submitting a new hire and their start date. Before day one, Toku completes SSS, PhilHealth, and Pag-IBIG registration. Your new hire just needs to provide their TIN (tax identification number).
Submit your new hire through the Toku platform and we take it from there: local employment agreement, statutory registrations, and payroll setup. See Onboard Contributors as a Client Admin in Toku for the step-by-step process, and the Country Readiness Live Tracker for lead times across all countries.
Employer Costs
On top of gross salary, employers in the Philippines pay the following:
| Cost | Rate | Notes |
|---|---|---|
| SSS (Social Security) | Approximately 10% of the Monthly Salary Credit | Salary credit capped at PHP 35,000 per month; includes retirement, disability, maternity, sickness, and unemployment coverage |
| SSS Employees' Compensation | PHP 10-30 per month | Workplace injury coverage |
| PhilHealth (health insurance) | 2.5% of monthly basic salary | Salary capped at PHP 100,000 per month |
| Pag-IBIG (housing fund) | 2% of monthly salary | Salary capped at PHP 10,000 per month |
| 13th month pay | One month of basic salary per year | Mandatory for all rank-and-file employees; prorated from start date and paid by December 24 |
As a rule of thumb, total cost of employment is roughly 110-115% of gross salary. Because SSS, PhilHealth, and Pag-IBIG contributions are capped, the percentage falls toward the lower end at higher salaries. The mandatory 13th month pay adds roughly one twelfth of annual basic salary and is prorated for employees who start mid-year.
Employees pay their own SSS share (approximately 5%, capped), PhilHealth (2.5%, capped), Pag-IBIG (2%, capped), and progressive income tax of 0-35% (annual income up to PHP 250,000 is tax-free, and the first PHP 90,000 of 13th month pay and bonuses is tax-exempt). These are withheld from gross salary, not charged on top. Toku calculates and remits all of the above.
Compensation & Payroll
Toku runs two payrolls per month in the Philippines (on the 15th and at month-end), and employees receive an itemized payslip each cycle. Minimum wages are set regionally: the Metro Manila daily rate is PHP 695 as of early July 2026, rising to PHP 755 on July 19, 2026, with other regions ranging from about PHP 337 to PHP 658 per day. The 13th month pay, equal to total basic salary for the year divided by 12, is paid no later than December 24 and prorated from the employee's start date. Salaries are paid in PHP.
Employment Contracts & Probation
- Toku issues a compliant local employment agreement for every hire, covering position, duties, compensation, benefits, hours, and termination grounds.
- Employment types are regular (indefinite), fixed-term (project or seasonal), and probationary. Regular employment is the default.
- Fixed-term contracts must genuinely relate to a specific project or seasonal need; otherwise courts can reclassify them as regular employment.
- Probation can last up to 6 months (the statutory maximum). The standards for passing probation must be communicated at the start, and an employee kept on beyond probation automatically becomes regular.
Working Hours
The standard workday is 8 hours, with a maximum standard week of 48 hours over six days and at least one rest day per week. Employees get a 60-minute unpaid meal break daily. Overtime and premium pay are set by statute: 125% of the hourly rate for weekday overtime, 130% for work on a rest day or special non-working day, 200% of the daily rate for work on a regular holiday, and a 10% night differential for hours between 10 PM and 6 AM. Compressed workweeks are allowed with employee consent, as long as weekly hours stay within 48.
Leave Entitlements
| Leave | Entitlement | Who pays |
|---|---|---|
| Service Incentive Leave | 5 days per year after 1 year of service, usable as vacation, sick, or personal leave | Employer |
| Maternity leave | 105 days at full average daily salary credit (120 days for solo parents), plus an optional 30 days unpaid | SSS (government) |
| Paternity leave | 7 days (married fathers, first four children) | Employer |
| Solo parent leave | 7 days per year after 6 months of service | Employer |
| Special leave for women (gynecological surgery) | Up to 60 days | Employer |
| Violence against women leave | 10 days | Employer |
There is no separate statutory sick leave: the 5-day Service Incentive Leave covers it, and unused days must be paid out in cash at year-end. Most employers offer additional vacation and sick leave by policy, and maternity pay is funded by SSS rather than the employer.
Public Holidays (2026)
The Philippines observes 12 regular holidays and 8 special non-working days in 2026. Work on a regular holiday is paid at 200% of the daily rate; work on a special non-working day carries a 30% premium, and special non-working days are otherwise unpaid unless company policy says otherwise.
Regular holidays
| Date | Holiday |
|---|---|
| January 1 | New Year's Day |
| March 20 | Eid al-Fitr |
| April 2 | Maundy Thursday |
| April 3 | Good Friday |
| April 9 | Araw ng Kagitingan (Day of Valor) |
| May 1 | Labor Day |
| May 27 | Eid al-Adha |
| June 12 | Independence Day |
| August 31 | National Heroes Day |
| November 30 | Bonifacio Day |
| December 25 | Christmas Day |
| December 30 | Rizal Day |
Special non-working days
| Date | Holiday |
|---|---|
| February 17 | Chinese New Year |
| April 4 | Black Saturday |
| August 21 | Ninoy Aquino Day |
| November 1 | All Saints' Day |
| November 2 | All Souls' Day |
| December 8 | Feast of the Immaculate Conception |
| December 24 | Christmas Eve |
| December 31 | Last Day of the Year |
Benefits: Required vs. Common Extras
Statutory (included in employer costs above): SSS coverage (retirement, disability, death, maternity, sickness, and unemployment benefits), PhilHealth hospitalization and outpatient coverage, Pag-IBIG housing fund savings and loans, and 13th month pay.
Toku offers fully sponsored international health coverage through Remote Health. See Remote Health, Your Global Insurance Plan for coverage details and enrollment.
Common extras in the Philippine market include HMO health coverage, life and accident insurance, rice or meal allowances, transportation allowances, additional vacation and sick leave, and performance bonuses. Some small allowances are tax-exempt within de minimis limits; Toku can advise on the cost impact of any benefits you want to add.
Ending Employment
The Philippines is a strongly employee-protective jurisdiction: there is no at-will employment, every termination needs a valid legal ground plus strict due process, and mistakes can lead to reinstatement orders with back pay. Involve Toku before taking any steps. For the process, see How to Terminate an Employee or Contractor.
| Scenario | Notice |
|---|---|
| Authorized cause (redundancy, retrenchment, closure) | 30 days' written notice to the employee and the labor authority |
| Just cause (serious misconduct, fraud, gross neglect) | No fixed notice period, but a formal two-notice due process with a chance to respond is mandatory |
Severance applies to authorized cause terminations: one month's pay per year of service for redundancy (minimum one month), or half a month's pay per year of service for retrenchment, closure, or disease (minimum one month). Six months or more of service counts as a full year. Final pay also includes prorated 13th month pay and accrued unused leave. No severance is owed for valid just cause terminations.
Hiring Someone from Overseas?
Foreign nationals need an Alien Employment Permit (AEP) from the labor department plus a work visa, most commonly the 9(g) Pre-Arranged Employment Visa. The AEP typically takes 2-4 weeks and the 9(g) visa one to three months, with short-term permit options available while the visa is processed. Talk to Toku before extending an offer to a candidate who needs sponsorship.
Last verified July 2026. This guide is for general information and doesn't constitute legal or tax advice. Your Toku account manager can confirm specifics for your situation.