Cost of Hiring Employees in the Philippines

If you are planning to hire in the Philippines, you will need to budget for more than the salary you agree with your candidate. Local requirements, including employer contributions and 13th-month pay for eligible employees, add to what you spend each year.

For example, a PHP 35,000 monthly salary can require a budget of about PHP 42,500 once those costs are included. Below, we break down that calculation and explain how to determine the real cost of hiring an employee in the Philippines.

How salary packages are structured in the Philippines

Most Philippine salary offers have two parts:

Gross pay = basic pay + allowances

Basic pay is important because most statutory calculations use it. PhilHealth premiums, 13th-month pay, overtime, and holiday pay are all based on basic pay, not on the total package.

Allowances are paid in addition to basic pay. Employers often include them deliberately, because the BIR treats certain small benefits, called de minimis benefits, as tax-free up to set ceilings. Adding these allowances does not increase the cost for employers, but your employees get to keep more of their salary.

Three common de minimis benefits in the Philippines are:

Used together, these three let you pay about PHP 3,500 a month tax-free, once the yearly and semester amounts are averaged over 12 months.

The table below shows the same PHP 35,000 package structured two ways:

The employee takes home about PHP 600 more each month, and your monthly cost falls by about PHP 380. The trade-off is a smaller 13th-month payment. 13th-month pay is based on basic pay, so the employee receives PHP 31,500 in December instead of PHP 35,000.

If we talk about salary, candidates often negotiate in take-home pay. If you agree to PHP 35,000 net, the gross salary has to be higher, because the employee's contributions and withholding tax are deducted from gross. Your employer contributions are then calculated on that gross salary. Our Philippines salary calculator shows the difference.

To decide what a role should pay in the first place, see our salary benchmarks, which list pay by role and experience.

Statutory costs on top of salary

In addition to gross salary, employers also need to take into account other costs mandated by Philippine labor law. You will pay four statutory contributions each month, plus 13th-month pay once a year.

Each of these is calculated on a different base.

Sources: SSS contribution guidance, PhilHealth's premium advisory, and DOLE's 13th-month guidance.

Payroll Components that Influence Cost

Besides monthly salary, you also need to take into account other costs mandated by Philippine labor law. These include social contributions, 13th month bonus, overtime pay and night differential, and other benefits. 

Here are other payroll components that can influence your hiring cost:

Structuring compensation around de minimis limits lets you support your team financially without adding to their taxable income or your own withholding obligations. 

Monthly employment budgets at three salary levels

Salaries for employees can be different depending on their base salary, shift schedule, and overtime. In turn, this influences the total employer contributions for SSS, PhilHealth, and Pag-IBIG. 

The examples below assume the whole salary is basic pay and the employee qualifies for 13th-month pay. They do not include allowances, overtime, night work, private benefits, or service fees. Amounts are in Philippine pesos.

Amounts are in Philippine pesos. Contribution bases and rates were checked on September 17, 2026.

Up to PHP 35,000, the additional cost is between 21% and 22% of salary. Above PHP 35,000, the SSS contribution no longer increases.

From there, each extra PHP 1,000 of basic salary adds about PHP 108 to your cost: PHP 25 for PhilHealth and PHP 83 for 13th-month pay. Above PHP 100,000, PhilHealth is also capped, so 13th-month pay is the only cost that keeps increasing.

The law requires 13th-month pay for rank-and-file employees only. Managers are not legally entitled to it, but many employers include it in managers' contracts because candidates expect it.

Annual cost of a PHP 35,000 hire

The 13th-month line in the table above is a monthly provision for a payment made once a year. For the PHP 35,000 example, a full year with no salary change costs:

That is about USD 8,160.

13th-month pay must be paid on or before 24 December. Even if you budget for it monthly, you pay it as a lump sum, so December payroll is almost double a normal month.

Employees who join partway through the year, or who take unpaid leave, receive a prorated amount based on the basic salary they earned.

Costs beyond statutory contributions

Night shifts, overtime, and holiday work

If you hire for a support role that covers US office hours, your employee will work overnight in the Philippines. Covered employees earn a night shift differential of at least 10% for hours worked between 10 p.m. and 6 a.m.

For example, 40 night hours at an hourly rate of PHP 200 adds PHP 800 a month (40 × PHP 200 × 10%).

Overtime on an ordinary working day is paid at 125% of the hourly rate or more. Work on a regular holiday is paid at 200%. DOLE's statutory benefits handbook explains who is covered and how each rate is calculated.

Night differential and overtime increase the employee's pay, but they are not part of every contribution base. PhilHealth excludes them from monthly basic salary. DOLE also excludes them from 13th-month pay, unless they have become part of basic salary through an agreement, company policy, or established practice.

Private health cover and other benefits

Most professional and BPO employers in the Philippines offer private health cover through an HMO, and candidates compare plans when choosing between offers.

Note that the HMO premiums are unrelated to PhilHealth contributions, so you will need a quote from a provider to budget for them.

Furthermore, by law, employees get five days of service incentive leave after one year of service. In reality, many employers offer more than that as an additional incentive.  Paid leave does not add to your cost, because the monthly salary already covers it. You only pay extra if you bring in someone to cover the work.

Equipment and software

A laptop is a one-time cost, usually paid before the employee starts. If you use any specific software or tools for work, that is usually a monthly subscription. For instance, offering access to different AI tools such as ChatGPT, Claude etc is becoming more and more common. 

As an employer, you should take those into account.  

Recruitment, payroll, and EOR fees

A recruitment fee is a one-time cost, separate from the ongoing cost of employing someone. If you have already found your candidate, you will not pay one.

If you have a Philippine entity, you will either run payroll yourself or use a payroll provider in the Philippines. If you do not have an entity, you can hire through an employer of record in the Philippines, which charges a service fee on top of the employment cost.

RecruitGo charges 10% of the monthly employer cost, with a minimum of USD 49.99 and a maximum of USD 250 per employee. Using the examples above:

The USD 250 maximum applies once the monthly employer cost exceeds USD 2,500, or about PHP 156,000. Our EOR cost examples for remote hires in the Philippines compare this with flat-fee providers.

Retirement and separation pay

The monthly figures above do not include retirement pay or separation pay.

Retirement pay is required by law for employees who retire at 60 or older with at least five years of service. The minimum is 22.5 days of pay for each year of service.

Separation pay is due when you end someone's employment for an authorized cause. For redundancy, the amount is one month of pay per year of service.

For retrenchment or closure, the amount is half a month per year of service, with a minimum of one month. No separation pay is due when an employee is dismissed for just cause.

Currency conversion

If you agree the salary in pesos but budget in dollars, your cost will change with the exchange rate. In the 90 days to mid-September 2026, the rate moved between about PHP 60.6 and PHP 62.9 to the dollar.

For the PHP 35,000 example, that is a difference of about USD 25 a month. Bank transfer and conversion fees are extra.

How RecruitGo manages your Philippines hires

With RecruitGo, you can hire in the Philippines without setting up a company there. We employ the person on your behalf and take care of the contract, payroll, and government contributions. You manage their work, and your hire can start in as little as three business days.

We can also arrange the extras you want to offer, such as private health cover or a laptop, so everything is handled in one place.

You can discuss your needs with our team by filling out the form below.