Staff Leasing in the Philippines – Comprehensive Guide

Staff leasing in the Philippines is a popular outsourcing model where you partner with a third-party provider to hire and manage employees on your behalf. These employees are hired and placed on the leasing company’s payroll, which handles all human resources (HR) functions such as payroll administration, taxes, benefits, compliance, and risk management. This allows you to expand your operations and focus on your company’s core operations. 

In this article, we will explore how staff leasing works, common roles that you can outsource, and pros and cons of leasing staff in the Philippines. We will also recommend other outsourcing models as an alternative staff leasing. 

How Does Staff Leasing Work in the Philippines?

Staff leasing (sometimes known as employee leasing or contract staffing) is an outsourcing model where a company hires employees through a third-party provider (often through a Professional Employment Organization). In the Philippines, this model is used by both local and international companies to scale teams efficiently, reduce administrative burden, and ensure compliance with Philippine labor regulations. 

So, how does it work? The third-party provider acts as the legal employer of your staff. This means, they will handle HR administration, payroll, and labor law compliance for your Filipino staff. You will be co-employing your staff together and manage their team performance and daily tasks. 

Here is an overview of you (as a client company) and your provider’s role in managing Filipino employees: 

Common Industries and Roles for Leasing Staff in the Philippines

Roles that you can outsource to a staff leasing agency cover a broad spectrum of functions. It often involves jobs or tasks that are scalable and can be done remotely. Here are most commonly outsourced roles in the Philippines: 

• IT and Tech Roles: software developers, IT support staff, system/server administrators, programmers, web designers, animators.
• Back-office and Administrative Roles: administrative assistants, personal/virtual assistants, data entry operators, accountants, payroll accountants, project managers.
• Creative and Digital Marketing: graphic designers, content writers, video editors, social media and SEO specialists, digital marketers. 
• Specialized Services: medical transcriptionists, legal transcriptionists, registered nurses, engineers (mechanical, structural, electronics, design), recruiters, debt collectors.
• Customer Support and Call Centers: call center agents and customer service representatives especially within the BPO sector. 

Pros and Cons of Staff Leasing in the Philippines

By partnering with a staff leasing provider, you can delegate key HR functions while maintaining direct supervision over your employees. However, staff leasing may also present some challenges that can be a deal breaker to some. This includes communication gaps, dependency with providers, and potential impact on your company culture. 

Advantages of a Staff Leasing

• Lower overhead cost: thanks to the Philippine’s low cost of living and favorable foreign exchange rates, leasing staff in the Philippines is more affordable than hiring for the same role in the West. You can save on setting up your inhouse HR team, recruitment, training, and even office space. 
• Access to skilled and talented staff: Staff leasing companies have large pools of skilled, educated, English-speaking Filipino professionals, enabling quick hiring of qualified employees for various roles in IT, digital marketing, customer service, and more. 
• Legal and regulatory compliance: Providers are experts in Philippine labor laws, managing all statutory contributions and employee protections, reducing your legal risks when hiring Filipino remote staff. 
• Flexibility: You can scale your workforce up or down as your market dictates. You can increase your staff during peak season and scale down when needed. 

Limitations of Staff Leasing

• Communication challenges: Indirect employment relationships may cause communication gaps or delays between you, your staff provider, and employees.
• Less direct control over employees: though you manage your employee’s daily work, the staff leasing provider is the legal employer. You would need to coordinate with them in case of disciplinary actions or termination instead of communicating directly with your employees. 
• Potential impact on company culture: Outsourcing HR functions may create misalignment between your leased employees and your company’s culture or values, possibly affecting morale unless addressed proactively. 

So, When is the Best Time to Lease Staff in the Philippines?

Leasing staff can be a great strategy to enter the Philippine market rapidly. Many startups and SMEs (small-medium enterprises) engage with staffing agencies to scale operations quickly instead of traditional hiring. New companies can benefit from staff leasing, especially if they don’t have their own HR team to manage hiring. 

Because of its flexibility, staff leasing is also ideal if you have short-term projects or need staff to meet seasonal demands (e.g. retail, IT projects, marketing campaigns, etc). You can hire skilled workers on a “as per needed” basis. You can also lease staff if you’re piloting new roles, functions, or business lines to test operational setups before committing to direct hires. 

Considerations When Leasing Staff in the Philippines

Understanding Regional Cost of Leasing Staff

One critical aspect often overlooked is understanding regional cost differences in leasing staff. Urban centers like Manila, Makati, and Quezon City naturally command higher wages due to their cost of living. However, developing cities such as Davao, Dumaguete, Iloilo, and Cagayan de Oro offer similarly skilled talent at operational costs that can be 30-40% lower. Leveraging these regional differences can maximize your outsourcing budget and improve your team size and output quality.

Evaluate the Provider’s Incentive Systems and Business Stability

When selecting a staff leasing company, consider how they motivate their workforce and ensure consistent quality. Innovative providers may utilize incentive programs, such as a “BPO Rewards” system, to recognize and reward top-performing employees across partner companies. Moreover, assessing a provider’s business stability is crucial. Watch out for companies with fluctuating growth or those working without legal business registration, which can pose significant risks to your operations and trust.

Align Values and Goals for a Long-Term Partnership

Staff leasing is a strategic partnership so choose a provider whose corporate values, mission, and vision align with your own. Companies with clear long-term goals and structured HR processes are better positioned to support your business as it grows. This alignment fosters a sustainable collaboration built on trust and mutual commitment.

Alternatives to Staff Leasing in the Philippines

While staff leasing is a popular workforce solution, there are options available depending on your needs and long-term strategy. These alternatives offer varying degrees of flexibility, risk, and resource investment. 

Establishing a Legal Entity in the Philippines

Establishing a legal entity in the Philippines is a common alternative to staff leasing. It involves formally registering your business with the Securities and Exchange Commission (SEC). Once incorporated, you are authorized to hire employees directly under your legal entity and fully comply with local labor laws and tax regulations. 

Having a legal entity allows you to establish a stronger legal presence and build a formal HR function. However, setting up an entity in the Philippines requires more time, capital investment, and administrative effort compared to staff leasing. This makes it suitable for companies with long-term commitments to the Philippine market. 

Engaging with an Employer of Record in the Philippines

To quickly hire employees in the Philippines, you can also engage with an Employer of Record (EOR) without setting a legal entity. Like staff leasing, the EOR acts as the legal employer of your Filipino staff and handles key HR tasks for your company. But instead of co-employment, the EOR provider assumes all employment-related responsibilities. 

With this arrangement, you are offloading the complexities of Philippine labor laws, tax regulations, and benefits administration to the EOR. That way, you can enter the Philippine market rapidly with minimal upfront cost, and even hire foreign nationals in the country. Many companies engage with a Philippine EOR to “test the waters” before establishing their own legal entity. 

RecruitGo helps you expand your business globally with our EOR in the Philippines. As your staff’s legal employer, we will handle onboarding, payroll, benefits, and compliance with local labor laws so you can focus on your core business operations. 

Start building your remote team in the Philippines with RecruitGo! Talk to our experts by filling out the form below.

Frequently asked questions

Staff leasing differs from traditional hiring primarily on who is the legal employer of your staff. You enter a co-employment arrangement with the staffing agency and they will take care of HR tasks in your company. Traditionally, these are handled internally by your own company’s HR team to hire, onboard, and manage payroll for your staff. 

The staff leasing provider is responsible for handling recruitment. After an initial consultation, the provider’s recruitment team sources, screens, and tests candidates to match your criteria. This includes background checks, skills and English proficiency tests, and interviews by the provider’s HR team. 

Once qualified candidates are shortlisted, you can conduct final interviews and select employees from the roster. It’s only after you give the approval that  the leased employee officially joins and starts working under your direction.

Yes, leased employees in the Philippines can work remotely under staff leasing arrangements. Remote work, including work-from-home (WFH), is a recognized and regulated practice in the country, especially following the telecommuting law (Republic Act 11165) and its implementing guidelines. 

Yes, you can convert leased employees to regular employees in the Philippines. You must hire your leased employees directly and issue an employment contract. 

Leased employees receive the same benefits and protections as any type of employee in the Philippines. They are entitled to minimum wage, social security benefits (SSS, PhilHealth, Pag-IBIG), 13th month pay, leave benefits, overtime premiums, night differentials, and security tenure protections.