Hiring in the Philippines starts with choosing the employment arrangement: a genuine contractor, your own local entity or an Employer of Record. Compare who employs the person, who manages the work and the full cost before proceeding.
The quick answer
There are three ways an Australian business can engage someone in the Philippines:
- Engage them as a contractor. Suits genuine short-term or project work. Carries real compliance risk if used for an ongoing full-time role.
- Set up your own Philippine entity. You employ people directly and take on the local administration. Compare the setup and ongoing costs against your hiring plans.
- Use an Employer of Record or managed staffing provider. The local provider employs the person under the agreed arrangement, while you direct the day-to-day work.
Why you cannot simply add them to your payroll
Hiring someone who works in the Philippines requires you to address Philippine employment, payroll and tax requirements. Paying from an Australian bank account does not settle those obligations. Confirm which requirements apply to the proposed arrangement with qualified local advisers.
A local entity or an Employer of Record can provide the employment arrangement and payroll administration. Confirm the provider’s role and your responsibilities in the agreement.
Option one: engaging a contractor
Where contracting works well
- Short-term or clearly defined project work with an end point
- A genuinely independent specialist who has their own tools, sets their own methods, and works for multiple clients
- One-off deliverables, such as a single set of drawings or a defined piece of design work
- Testing an idea before committing to a permanent role
If that describes your situation, a contractor arrangement can be perfectly sensible.
Where it becomes a problem
Calling someone a contractor does not determine their legal status. The actual working arrangement matters. Have an adviser familiar with Philippine employment law assess an ongoing, closely directed role before you engage the person as a contractor.
Beyond the compliance exposure, there are practical drawbacks:
- No exclusivity. A genuine contractor can work for anyone, including businesses like yours.
- Limited control. The more you direct their hours and methods, the more the arrangement looks like employment.
- Contract terms. Agree confidentiality, ownership of work, permitted data use and a process for resolving disputes.
- Continuity. Agree availability, notice and handover requirements before the work starts.
Use contracting where the person is genuinely independent and the arrangement suits the work. Assess the terms and working relationship before deciding.
Option two: setting up your own Philippine entity
You can establish a Philippine entity to employ people directly, subject to the applicable registration and employment requirements.
The trade-off is everything that comes with it: registration and capital requirements, local directors and compliance obligations, a local payroll function, tax filings, HR administration and ongoing accounting. It takes months rather than days, and it does not stop once you are set up.
There is no single headcount at which an entity becomes the best option. Compare setup, payroll, HR, accounting and ongoing compliance costs with the size and duration of your planned team.
Option three: Employer of Record
An Employer of Record, or EOR, is a local company that becomes the legal employer of your chosen person on paper, while you direct their day-to-day work.
The EOR handles:
- A compliant Philippine employment contract
- Payroll, including tax withholding
- Statutory contributions (SSS, PhilHealth and Pag-IBIG)
- 13th month pay and statutory leave entitlements
- Local HR administration
You choose who to hire, set their tasks and priorities, and manage their performance. In practice it feels like having an employee, because functionally you do. Onboarding through a local EOR is usually measured in days rather than months.
Compare the EOR management fee separately from salary, statutory costs, deposits and any other charges. Inclusions vary between providers. See Lynk’s current EOR fee and inclusions and request a quote for your candidate.
Lynk Global offers this directly through our Employer of Record service, which suits businesses who have already found their person and need compliant employment set up around them.
What it actually costs to employ someone properly
Compare the full employment cost with a contractor quote only after confirming that the contractor arrangement is appropriate for the work.
Here is what a compliant Philippine employer pays on top of salary in 2026:
- SSS (Social Security System): 15% of the monthly salary credit in total, split 10% employer and 5% employee, applied to a salary credit ranging from PHP 5,000 to PHP 35,000.
- PhilHealth: 5% of monthly basic salary, split equally between employer and employee, on income between a PHP 10,000 floor and a PHP 100,000 ceiling.
- Pag-IBIG: For salaries of PHP 10,000 or more, the mandatory contribution is PHP 200 each per month for employer and employee. The maximum salary used for this calculation increased to PHP 10,000 in February 2024. See the official Pag-IBIG update.
- 13th month pay: a statutory entitlement equal to one twelfth of the employee's total basic salary for the calendar year, payable to rank-and-file employees by 24 December.
The employer’s total cost depends on salary, statutory contribution ceilings and the employee’s entitlements. Ask for an itemised calculation rather than applying one percentage to every role.
If you want to see what that looks like as a single monthly figure for a specific role, our pricing guide sets out indicative costs with salary, employment and support included.
The options compared
- Contractor. Independently delivered work under an agreed scope. Assess classification, tax, availability, confidentiality and ownership of work.
- Own entity. Direct employment with local setup and ongoing payroll, HR and compliance responsibilities.
- Employer of Record. Local employment and payroll support for a person you have chosen. Confirm requirements, timing and responsibilities before setting a start date.
- Managed offshore staffing. Compliant employment plus recruitment, office, equipment, IT and local HR. Best for ongoing roles where retention matters.
How to choose
A simple way to decide:
- One-off project with a clear end date, and the person genuinely works independently: contractor.
- Ongoing full-time role, you have already identified the person: Employer of Record.
- Ongoing full-time role, you need help finding the right person and want them properly supported: managed offshore staffing.
- A long-term team where you want to manage local employment directly: compare an entity with provider costs.
What you need to get started
Less than most people expect. To brief a role, you need a short description of the work, the software and experience required, the working hours you want covered, and who in your business will manage the person. A few bullet points are genuinely enough to begin. Everything else, the contract, payroll, contributions and onboarding, is handled for you.