Why do you need an EOR in setting up your first remote team in the Philippines?
Whether you’re a startup aspiring to go big one day or you're already an established corporate behemoth in your local economy, having your brand become recognized internationally has crossed your mind once or twice. But before you can tick that off your business plan, going international has its long list of perks, but also comes with potential challenges and risks. Compliance risks, high costs of setup and termination, and managing employees—are just some of the pitfalls your business could encounter with global expansion.
Don't fret, expanding your business internationally to the Philippines or any country of your choice has never been easier with the help of an Employer of Record (EOR). An EOR is a company or organization that acts as a third service provider for all legal and human resources functions on behalf of the client organization.
There are many ways an EOR could assist you in traversing the global industry. The common functions and responsibilities of EORs include the following but are not limited to:
● Arranging employee visas and work permits
● Onboarding employees
● In charge of timekeeping and compensation packages
● Payroll processing in local currencies
● Preparing centralized processing of invoices
● Researching the recipient country’s labor laws
● Maintaining compliance with local employment, labor, and tax laws
● Informing the client of the necessary notice requirements, termination guidelines, etc.
● Serving as a liaison between government authorities and the client
Foreign subsidiaries are not needed
Having the luxury to avoid the hassle of opening and registering as a local entity overseas is the best advantage in employing EORs. EORs are legal corporations, having already been established and licensed in such countries, and are ready to take on duties on behalf of your organization. This cushions your business if you find it hard to navigate the local market, minimizing the risks of having to withdraw from that country and incurring huge losses. With an EOR, you can immediately start hiring talents without having to wait for long periods of business registration that could take several months or longer.
Cost-effective and time-saving
Time is money, and when you decide to hire an EOR to globally hire people, you’re not just saving yourself precious time, it’s also the best bang for your buck. EORs allow you to pay them either a flat fee or a variable percentage of your employee’s salary. A flat fee means a single annual or monthly fee for every employee. On the other hand, variable pricing suggests that your bill is going to depend on the amount of money you pay your employees.
It is also worth mentioning that you’re having professionals take over your legal and HR matters. You have more time to invest in your core business processes, and you won’t be subjecting yourself to the hassle of registering your business traditionally.
Maintaining legal compliance and mitigating risks
All countries have different labor laws and regulations, and taking your business overseas means that you’re going to have to comply with those legalities. EORs can assist you in making sure you’re complying with all necessary laws with their in-depth knowledge of employment and tax laws. They are also knowledgeable in the involved regulatory bodies of such countries, so you’re always up-to-date on trends and local news.
Going international would also require you to maneuver the ever-shifting local market, and without an EOR, you risk employment-related disputes such as wrongful termination or discrimination. With their services that can be tailored to suit your needs, EORs specialize in keeping your business protected from non-compliance.
Proactive in managing employee regulations
Hiring employees in the Philippines means that you and your company are adhering to the employment regulations of the country. These include the following:
● Maximum working hours
Most office-based jobs in the Philippines only allow employees to work no more than eight hours per day, excluding a law-mandated one-hour daily lunch break, for a maximum work week of 48 hours long.
A 25% on top of an employee's hourly pay is added if an employee works beyond eight (8) hours a day, and 30% during rest days, regular, and special holidays.
● Minimum wage
The minimum wage in the Philippines differs on the type of work you do and the respective region. In the National Capital Region (NCR) where Manila or the capital of the Philippines is located, the minimum wage rate ranges from PHP 533 - PHP 570 for the non-agriculture sector.
● National holiday pays
The Philippines has over fourteen (14) regular national holidays and four (4) "special non-working" days. During regular holidays, employees are entitled to be paid their normal daily rate even if they did not work on those days. This is doubled if they get required to report during regular holidays.
● Vacation and sick leaves
In the Philippine Labor Code, when an employee has rendered a year of continuous service, they become entitled to five (5) days of paid leave per year which they may use for vacation or sick leave. This is known as Service Incentive Leave or SIL. It should be noted that it is the company's discretion whether they would offer additional paid time off for their employees. Most of companies though offer 15 to 22 days of paid leave per year.
● Mandatory government remittances
Employers also pay for government-mandated employee benefits of their employees such as the Social Security System (SSS), the Philippine Health Insurance Corporation (PhilHealth), and the Home Development Mutual Fund or also known as the Pag-IBIG Fund. These benefits cover Filipino employees under the age of 60 with a monthly income of more than PHP 1,000 regardless of whether they are working for Philippine-based or foreign-based companies and are working locally or abroad. The government-mandated benefits ensure that employees have access to social security benefits, health insurance, and affordable house financing. These government contributions are automatically deducted from the salary of employees and employers are required to remit these payments to the respective government funds to avoid penalties.
● 13th-month pay
Employees that have rendered service for at least one (1) month for their employer are entitled to a statutory monetary benefit called 13th-month pay. This is an extra one month’s worth of salary of an employee and should be paid on or before December 24 of each year. The 13th-month pay can be paid either in one lump sum or in two installments—in May and December.
Brings in talented and diverse professionals
EORs empower your business by widening your talent pool of professionals with expertise that cannot be found through traditional means or location-based skills or professions. For example, the Philippines is home to thousands of Certified Public Accountants (CPAs) and qualified accounting specialists among other Asian countries. Not to mention that the Philippines is an ideal global outsourcing destination to begin with. With a reliable Philippine-based EOR, you can leverage your international business plan by outsourcing your accounting and financial needs to the Philippines.
Taking the initiative to expand globally is one step closer to reaching new target markets and talents. Let an EOR provide you with end-to-end solutions for your various legal and employee obligations.
Do more with UpStaff Remote
Just like how EORs can help your business in processing legal and employment requirements internationally, UpStaff can aid you in giving your dream remote team of accountants. UpStaff specializes in providing companies and businesses with an excellent offshore team in the Philippines that can execute various accounting and administrative tasks. Contact us directly at firstname.lastname@example.org and let's start connecting you with the right people.