PHILIPPINELabor Laws

Labor law system that respects worker protection

The Philippines imposes a legal system that protects workers quite generously. In other words, unlike the labor laws of Singapore and Malaysia, the Labor Code of the Philippines (Labor Code of the Philippines, Presidential Decree No. 442; hereinafter referred to as the "Labor Code") as the basic labor law system of the Philippines applies to all workers irrespective of the wage classification, and cases where fixed-term employment (i.e., employment is automatically terminated based on a fixed period) is permitted are strictly limited.

Distinctive features that also respect worker protection include the fact that companies are allowed to dismiss workers only on the grounds defined by law and the fact that companies are obligated to participate in various social security programs.

Partial adoption of common law system

The legal system of the Philippines is operated under statues enforced by the president and the Congress, and it could be said that its labor law system is also based on the civil law system. However, the Philippines also partially adopts the common law system that succeeds U.S. laws, and when the strict application of laws works to the disadvantage of workers, adjustments may be made from the perspective of common law or equity law. In addition to the various statues, rules based on case-by-case judgments may also be legally binding.

*Overview of Common Law and Civil Law
Common Law is a legal system mainly in use in the UK and in nations formerly part of the British Empire (the USA, Canada, Australia, New Zealand, etc.), which emphasizes decisions based upon traditions, customs, and precedent.
On the other hand, civil law developed on the European continent in nations, such as France and Germany, and as a legal system compared to common law, civil law places emphasis on statutes. Japan uses a civil law legal system.

Social security programs

As described above, social security in the Philippines is more generous to workers in comparison to other countries and can be broadly classified into the Social Security System (SSS), Philippine Health Insurance Corp (PhilHealth), and the Home Development Mutual Fund (HDMF). Companies are required to cover all workers (including probationary workers) of a certain age or younger and who have fixed incomes under all of the foregoing social security programs. It should be noted that, when a company fails to pay the premiums of the foregoing security system programs, in addition to paying interest in arrears up to the commencement of the payment of premiums, the company may also be subject to fines or the representative of the company may be sentenced to imprisonment.

Termination of employment contract

Statutory regulations regarding the dismissal of workers in the Philippines are strongly in favor of workers, and Japanese companies should take note that companies are unable to dismiss workers other than based on the grounds prescribed under the Labor Code.

Meanwhile, as a general rule, workers may at any time terminate their employment contract by giving a one-month prior notice, and workers may also terminate the labor contract (leave the company) without requiring any prior notice when the company commits a criminal act or in certain other cases.

Overseas temporary staffing business

In the Philippines, as is well known, it is popular for Filipinos to move overseas and work away from home, and it is said that the income from overseas labor accounts for 10% of GDP. Under these circumstances, overseas temporary staffing business for supporting Filipinos to work away from home is being conducted domestically. This business is a regulated business category, and only corporations in which 75% or more of the capital is owned/controlled by a Filipino can conduct this business after acquiring a permit from the authorities.

Visas

In the Philippines, when a foreign national is to work for six months or longer, the person is required to acquire visas, specifically, the alien employment permit issued by the Department of Labor and Employment (DOLE) and the prearranged employee visa under the Philippine Immigration Act. Meanwhile, a foreign national whose employment period does not exceed six months is only required to acquire a special work permit issued by the Bureau of Immigration.

With respect to this point, a prearranged employee visa is issued to foreign nationals who have entered into an employment contract in the Philippines in advance. Normally, foreign nationals with a prearranged employee visa may stay in the Philippines for two years, and this visa may be renewed any number of times so as long as the visa requirements are satisfied. In addition, there is a temporary visitor's visa that is issued to foreign nationals who have not entered into an employment contract in the Philippines in advance that allows them to stay in the Philippines for up to 59 days, and a treaty trader or treaty investor visa for foreign nationals who intend to carry out substantial trade or make substantial investments in the Philippines.

Generally, it could be said that there is not much difficulty in obtaining these visas and work permits so as long as the necessary papers are prepared.

Overview of labor-related statues

The labor law system in the Philippines is the Labor Code enacted in 1974, and the Labor Code prescribes the basic matters related to all aspects of employment as indicated below.

• Recruitment and Placement of Workers (Article 13 to Article 39)
• Working Conditions and Rest Periods (Article 82 to Article 96)
• Wages (Article 97 to Article 129)
• Occupational Health and Safety, Social Security (Article 162 to Article 217)
• Labor Organizations, Collective Bargaining, and Strikes (Article 240 to Article 292)
• Termination of Employment (Article 293 to Article 302)

Labor Code of the Philippines

An overview of the Labor Code as the core law that regulates employment contract-related matters in the Philippines is as follows.

1. Applicable scope

   The Labor Code applies to all workers, including agricultural workers. Moreover, the term "worker" is defined as being any member of the labor force, whether employed or unemployed.

   The provisions of the Labor Code concerning hours of work, weekly rest periods, holidays, service incentive leaves and service charges (Book Three- Conditions of Employment，Title I- Working Conditions and Rest Periods) shall not apply to government employees, managerial employees, field personnel, members of the family of the employer who are dependent on him for support, domestic helpers, persons in the personal service of another, and workers who are paid by results as determined by the Secretary of Labor in appropriate regulations. (Article 82 of the Labor Code)

2. Classification of form of employment

   In the Philippines, there are the following forms of employment: (i) regular employment, (ii) casual employment, (iii) project employment, (iv) seasonal employment, and (v) fixed-term employment. While the overview of these forms of employment is as follows, (i) regular employment is generally used. Among the above, regarding (v) fixed-term employment, abuse of the scheme has become prevalent, and a number of companies are repeatedly terminating and re-employing employees within the six-month probation period; this has become a social issue called the ENDO (end-of-contract) issue. The issue has been discussed in Congress, and a bill to stop the scheme was overturned by the former president. However, the current administration is discussing the issue which the president hopes to amend, rewrite, and fine-tune the said bill.

   Form of employment

   Overview

   (i) Regular Employment

   Employment is deemed regular when an employee has been engaged to perform activities, which are usually necessary in the usual business or trade of the employer, and the employment is not based on a specific project and is not of a seasonal nature. An employment period is not set.

   (ii) Casual Employment

   Employment that does not correspond to regular employment; provided, however, that any employment in which the employee has rendered at least 1 year of service, whether such service is continuous or broken, shall be deemed regular employment.

   (iii) Project Employment

   Employment in which the job description is linked to a specific project, and the employment period will expire pursuant to the termination of the project.

   (iv) Seasonal Employment

   Employment in which an employee is originally scheduled to work during a specific period (season) during a year, and the employment period will expire pursuant to the termination of such period.

   (v)Fixed-term Employment

   Employment in which the commencement date of employment and the termination date of employment are determined prior to the establishment of an employment relationship. Fixed-term employment is strictly regulated to prevent companies from using this system as an excuse for readily dismissing workers, and the adoption of this system requires that the employment period was genuinely agreed upon voluntarily, and that the terms of agreement are fair.

   In addition, the form of contractor or subcontractor is acknowledged under Article 106 of the Labor Code. In other words, this is a form of employment where a company (employer) enters into a contract with another person for the performance of the employer's work, and such other person (contractor) or subcontractor (if any) causes its workers (workers of the contractor or the subcontractor) to perform work for the employer. In the foregoing case, workers of the contractor or the subcontractor will receive the payment of wages in accordance with the provisions of the Labor Code. In the event that the foregoing wages are not paid, the employer will be jointly and severally liable with its contractor or subcontractor.

   Meanwhile, even in cases where an employer takes on the form of contractor or subcontractor, if the contractor or subcontractor does not have substantial capital, equipment, work premises, etc., and the work to be performed by the workers is directly related to the principal business of the employer, the contractor or subcontractor in the foregoing case is considered merely an agent of the employer, and the employer will be responsible for the workers in the same manner and extent as if such workers were directly employed by the employer (prohibition of labor-only contracting).

3. Probationary Employment

   The Labor Code additionally prescribes matters related to probationary employment (Article 296 of the Labor Code).

   Probationary employment is acknowledged for a period that does not exceed six months from the date that the worker started working. During this period, the company may terminate the employment relationship based on ordinary grounds for dismissal or when the probationary worker fails to qualify as a regular employee in accordance with specific standards made known by the employer to the employee at the time of engagement. However, the company is required to specify the details of the specific standards to the employee at the time of commencing probationary employment by indicating such specific standards in a contract, work rules, or other documents. If the foregoing specific standards are not specified in the foregoing documents, the company is not allowed to terminate the employment relationship and must switch to a regular employment after the termination of probationary employment. Furthermore, when an employee continues to perform work beyond probationary employment, it will be deemed that the employee has been recruited as a regular employee, and the company may not dismiss that employee unless there are statutory grounds for dismissal.

   Thus, it would be desirable for companies to describe the specific standards in a contract, work rules, or other documents, and explain such specific standards to employees at the time of engagement.

4. Hours of work system

   The Labor Code additionally prescribes matters related to the hours of work (Article 82 to Article 90 of the Labor Code).

   Foremost, the hours of work must not exceed eight hours a day, and in addition to granting a short rest break during work hours, the company must also grant a meal break of no less than 60 minutes outside of hours of work.

   Furthermore, the company must grant workers a rest period of not less than 24 consecutive hours at least once every seven days (Article 91 of the Labor Code).

5. Leave system

   The statutory annual paid leave in the Philippines is referred to as a service incentive leave and granted to workers who have rendered at least one year of service (Article 95 of the Labor Code). The number of days of service incentive leave is five days per year, irrespective of the years of service. However, the service incentive leave does not apply to the following workers.

   • Workers who are already enjoying the service incentive leave
   • Workers enjoying vacation leave with pay of at least five days
   • Workers who are employed by a company that is regularly employing fewer than ten employees
   
   

   A maternity leave of 105 days is granted to pregnant female workers, which can be allocated freely by an individual before or after the date of delivery but shall not exceed 105 days in aggregate. They are also entitled to an option to have an additional 30-day maternity leave without pay.

   If the female employee qualifies as a solo parent under the Solo Parents’ Welfare Act of 2000 (Republic Act No. 8972), the employee shall have an additional 15 days with full pay.

   In addition, paternity leave, parental leave for solo parents, special leave benefits for women and leave for victims of violence against women and their children are offered as a part of the annual paid leave system.

6. Social security programs

   In the Philippines, social security can be broadly classified into the Social Security System (SSS), Philippine Health Insurance Corp (PhilHealth), and the Home Development Mutual Fund (HDMF), and companies are required to cover all workers (including probationary workers) of a certain age or younger and who have fixed incomes under all of the foregoing social security programs.

   It should be noted that, under applicable laws and ordinances, when a company fails to pay the premiums of the foregoing security system programs, in addition to paying interest in arrears up to the commencement of the payment of premiums, the company may also be subject to fines or the representative of the company may be sentenced to imprisonment.

   
   

   Social Security System (SSS)

   An overview of the current SSS is prescribed under the Social Security Act of 2018 (Republic Act No. 11199), and the key items are as follows.

   Item

   Overview

   Coverage

   All workers (employees) not over 60 years of age and self-employed persons, professionals, et al. (including domestic workers who have rendered service for at least 1 year). Spouses of workers who devote full time to managing the household and family affairs and Filipinos recruited by a foreign company for employment abroad may be covered on a voluntary basis.

   Monthly pension

   The monthly pension is the highest among the following amounts. However, the minimum monthly pension shall be 1,200 pesos for workers with at least 10 years of service, and the minimum monthly pension shall be 2,400 pesos for workers with at least 20 years of service:
   (i)Sum of 300 pesos + 20% of average monthly wage + 2% of average monthly wage of each year of service in excess of 10 years for workers with at least 10 years of service
   (ii)40% of average monthly wages
   (iii)1,000 pesos; provided, however that the minimum monthly pension shall be 60 months’ worth of monthly pension

   Rate of contribution, etc.

   Based on the standard amount prescribed for each range of the amount of monthly wages, the prescribed social security rate (13% for 2021 and will be gradually increased up to 15% by 2025) is paid both by the company and employee at the prescribed rate [*]. Also, 10 pesos is additionally borne as the employees compensation (fixed amount; provided, however, that this is 30 pesos when the standard amount is a monthly amount of 15,000 pesos or more) only by the company.

   Retirement benefits

   A worker who has paid at least 120 monthly contributions up to retirement and who (i) has reached the age of 60 years and is already separated from employment or (ii) has reached the age of 65 years is entitled to the foregoing monthly pension. A worker also has the option to receive the first 18 monthly pensions in a lump sum discounted at a preferential rate of interest. Moreover, a worker who is 60 years of age or older and who does not qualify for the foregoing pension benefit is also entitled to a lump-sum benefit equal to the total contributions paid in cases where the person is separated from employment and is not continuing payment of contributions.

   Death benefits

   Upon the death of a worker who has paid at least 36 monthly contributions, the spouse and children, as primary beneficiaries, are entitled to receive the foregoing monthly pension. If the worker has no primary beneficiaries, the parents or other designated persons, as secondary beneficiaries, are entitled to receive a lump-sum benefit equivalent to 36 months’ worth of the foregoing monthly pension. In addition to the above, cash or cash equivalents corresponding to 20,000–40,000 pesos are paid as funeral allowance.

   Permanent disability benefits

   Upon the permanent total disability of a worker who has paid at least 36 monthly contributions prior to the certification of such disability, the person is entitled to receive the foregoing monthly pension. However, payment of the monthly pension will be suspended when the worker is reemployed, recovers from the disability, or fails to undergo annual medical examinations.

   Dependents' pension

   Where death benefits, permanent disability benefits, or retirement pensions is payable, if a worker has an unmarried child (dependent who is under 21 years of age) conceived on or before the date of the contingency, a dependents’ pension of 10% of the monthly pension or 250 pesos, whichever is higher, shall also be paid for each child; provided, however, that the number of children who may receive a dependents’ pension shall not exceed 5 children.

   Sickness benefits

   When a member who as paid at least 3 monthly contributions in the 12-month period immediately preceding the sickness or injury is hospitalized for 4 days or longer due to such sickness or injury, a sickness benefit of up to 120 days per year will be paid.

   Maternity leave benefits

   A female worker who has paid at least 3 monthly contributions in the 12-month period immediately preceding her childbirth or miscarriage is entitled to receive maternity leave benefits for 105 days (60 days in case of caesarean delivery) under certain conditions.
   *Refer to the following:
   https://www.sss.gov.ph/sss/appmanager/pages.jsp?page=ssbenefits
   

   The SSS has issued Circular No. 2022-033, dated December 13, 2022, prescribing the new schedule of social security contributions effective January 2023.

   Note that a pension system operated by the Government Service Insurance System (GSIS) is separately available for government workers.

   
   

   PhilHealth (health insurance)

   The overview of the current PhilHealth system is prescribed under the National Health Insurance Act of 2013 (Republic Act No. 10606), and the key items are as follows.

   1. (ⅰ) Coverage

      PhilHealth covers government workers, employees of private companies, self-employed persons, domestic helpers, and immigrants and persons of dual nationality. Basically, PhilHealth covers nearly all workers in the Philippines, including dependents. Companies in the private sector are obligated to participate in PhilHealth.

   2. (ⅱ) Rate of contribution, etc.

      As for the amount of the contribution, a standard monthly amount is prescribed for each range of the actual amount of the monthly wage of each worker at the prescribed rate of the contribution and is borne by both the company (50%) and the worker (50%) (in 2021, the rate of the contribution is 3.5%: monthly premium is 350 pesos when the amount of monthly wage is below 10,000 pesos, 350.00–2,449.99 pesos when the amount of the monthly wage is more than 10,000 pesos or more and below 70,000 pesos, and 2,450 pesos when the amount of the monthly wage is 70,000 pesos or more). The contribution to be paid by workers is automatically deducted from their wages on a monthly basis.

      As mandated by the Universal Health Care Act, the premium contributions increased to 4.5% in 2023.

   3. (ⅲ) Insurance benefits

      Generally, there are the following four main types of insurance benefits, and workers are entitled to these benefits, if they have paid, within the 12-month period prior to the first day of confinement, the monthly contribution for the immediate three months preceding the date of confinement and at least six months of contributions prior to the said immediate three months (nine months of contributions in total).

      • Inpatient hospital care (room and board, drug costs, inspection costs and medical examination costs, inpatient education packages, etc.)
      • Outpatient care (drug costs, inspection costs and medical examination costs, personal preventive services, etc.)
      • Emergency transfer services
      • Other services that are deemed necessary

   　　A rate of these insurance benefits is set for each type of case.¹

   
   

   HDMF (Home Development Mutual Fund)

   HDMF is also known as Pag-IBIG, and the overview of the current HDMF is prescribed under the Home Development Fund Law of 2009 (Republic Act No. 9679). The key items are as follows.

   1. (ⅰ) Coverage

      Statutory participants of the foregoing SSS and PhilHealth are also obligated to participate in HDMF. In other words, HDMF applies to nearly all workers in the Philippines (excluding workers who are older than 60 years of age and domestic helpers whose monthly wages are less than 1,000 pesos).

   2. (ⅱ) Rate of contribution

      As the rate of contribution of HDMF, a standard amount is also prescribed for each range of the actual amount of the monthly wages of each worker, and the contribution is to be borne by both the worker and the company. The rate of contribution is 1% for workers whose monthly wages do not exceed 1,500 pesos and is 2% for workers whose monthly wages exceed 1,500 pesos, and the rate of contribution of the company is uniformly 2% of the monthly wages of each worker. The contribution to be paid by workers is automatically deducted from their wages on a monthly basis.

   3. (ⅲ) Benefits

      Workers participating in HDMF can take out housing loans (upon purchasing a home or renovating a home), multipurpose loans or loans at the time of disaster pursuant to prescribed conditions. In addition, workers are entitled to a refund of contributions on the condition of having paid at least 240 monthly contributions.

   4. Upon the death of a worker participating in HDMF, the heir is entitled to receive the refund of contributions, as well as the payment of death benefits.²

7. Agreement between Japan and the Philippines regarding social security

   Because resident officers of companies dispatched to the other country between Japan and the Philippines have been obligated from the past to participate in the social security programs of both countries, there were the following problems: specifically, (i) companies were required to make duplicate payments of insurance premiums, and (ii) in cases where the dispatch period is short, the insurance premiums would not be refunded. Thus, in order to resolve these problems, Japan and the Philippines concluded an agreement regarding social security in November 2015.³

   According to this agreement, in order to resolve the problem of duplicate payment of (ⅰ) above, a company is now forced to participate in the social security program of only the country that dispatched the employee when the duration of stay in the other country is five years or less and is forced to participate in the social security program of only the country to which the employee was dispatched when the duration of stay in the other country exceeds five years.Moreover, in order to resolve the problem of no refunding of insurance premiums of (ii) above, the period of insurance can now be totaled between the two countries.

8. Right to strike by workers

   In the Philippines, the right to strike by workers employed by a private company is prescribed under the Labor Code, and the term "strike" is defined as "any temporary stoppage of work by the concerted action of employees as a result of an industrial or labor dispute" (Article 219 of the Labor Code). Meanwhile, according the foregoing provision, a labor dispute refers to any controversy concerning the terms and conditions of employment, and only labor unions and other legitimate labor organizations are permitted to lawfully go on strike. Furthermore, because only labor unions are allowed to submit a strike notice and pass a resolution regarding the strike, workers who are not a member of a labor union may not participate in a strike.

   Only two types of strikes are permitted; specifically, so-called economic strikes that arise from the deadlock of collective bargaining, and strikes resulting from the company's unfair practice listed in Article 259 of the Labor Code. In order to have a valid strike, the labor union must submit a prior notice to the National Conciliation Mediation Board (NCMB), and wait for 15 days or 30 days (cooling off period) according to the purpose of the strike, excluding cases where the labor union does not have the right of representation regarding exclusive collective bargaining. Moreover, during the cooling off period, the labor union is required to undergo mediation before the NCMB, obtain a secret ballot for the strike, and officially notify the results of the voting to the NCMB and the company at least seven days before the commencement of the intended strike. In addition, certain disputes to be resolved by mandatory or voluntary arbitration may not be used as grounds for going on strike.

9. Overseas temporary staffing business

   As described above, in the Philippines, overseas temporary staffing business for supporting Filipinos to work overseas away from home is being actively conducted.

   This business of dispatching workers from the Philippines to other countries is a regulated business category, and the solicitation of workers and the dispatch of workers to overseas employers require a business permit or the approval of the Philippine Overseas Employment Administration (POEA). This approval is granted only to corporations, partnerships, or organizations in which 75% or more of the capital is owned/controlled by a Filipino. The minimum amount of capital of the employer or the overseas temporary staffing business of seaman is 5 million pesos (Revised POEA Rules and Regulations Governing the Recruitment and Employment of Land-Based Overseas Filipino Workers - 2016 and Revised POEA Rules and Regulations Governing the Recruitment and Employment of Filipino Seafarers - 2016)

   If a company becomes involved in this temporary staffing business without obtaining the official approval from POEA, the company may be subject to criminal punishment on grounds of violating the Migrant Workers Act. Furthermore, the company in violation will also bear civil liability against the workers that were solicited and dispatched by the company. When the violator is a corporation, the party that will bear criminal liability will be (a) the individual who has control over the corporation or is operating, managing and supervising the corporation, and (b) the worker in charge of the corporation or the agent.

Companies are not legally obligated to formulate work rules (employee handbook, etc.) regarding the substantial requirements and procedures related to working conditions (hours of work, rest breaks, holidays and pay during holidays, various leaves as welfare, minimum wage, and method of paying salaries) and dismissal of workers prescribed under the Labor Code and its enforcement regulations or other related laws and ordinances, and the Labor Code does not even prescribe any required entries. From a practical perspective, companies often prepare work rules only upon deeming that specific rules are necessary for regulating the activities of workers and managing labor-management relations.

Nevertheless, the Occupation Safety and Health Law (R.A. 11058, hereinafter referred to as the OSH Law) and its implementing rules and regulations (DOLE Department Order 198-18) requires that covered workplaces must have a health and safety program, including the following policies, guidelines or information:⁴

1. Statement of commitment to comply with OSH requirements
2. General Safety and health, including drug-free workplace;
3. Human Immunodeficiency Virus (HIV) and Acquired Immune Deficiency Syndrome (AIDS)/tuberculosis/hepatitis prevention and control;
4. Company or project details;
5. Composition and duties of the safety and health committee;
6. Occupational safety and health personnel and facilities;
7. Safety and health promotion, training and education;
8. Conduct of toolbox meetings;
9. Accident/incident/illness investigation, recording and reporting;
10. Provision and use of PPE;
11. Provision of safety signage;
12. Dust control and management, and regulations on activities such as building of temporary structures, and lifting and operation of electrical, mechanical, communications systems and other equipment;
13. Provision of workers’ welfare facilities;
14. Emergency preparedness and response plan;
15. Waste management system; and
16. Prohibited acts and penalties for violations.

Moreover, companies are legally obligated to prescribe individual rules regarding the following matters pursuant to the provisions of special laws and rules of relevant authorities.

(1) Sexual harassment (Republic Act No. 7877 or the Anti-Sexual Harassment Act and Republic Act No. 11313 or the Safe Spaces Act;)

(2) Breast feeding (Commonwealth Act No. 10028 or the Rooming-in and Breast-feeding Act and DOLE Department Order No. 143-11)

Wages

Under the Labor Code, the term "wage" means the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis or other method of calculating the same, which is payable by an employer to an employer under a written or unwritten contract employment for work done or to be done or for services rendered or to be rendered (Article 97(f) of the Labor Code).

Even when expressly requested by an employee, the employer may not pay the wages by means of promissory notes, tickets, coupons, or any object other than legal tender, but the payment of wages by check is allowed in certain cases (Article 102 of the Labor Code).

The employer must pay the wages at least once every two weeks or twice a month at intervals not exceeding 16 days. Wages to be paid for work that cannot be completed in two weeks must be paid in proportion to the amount of work completed at intervals not exceeding 16 days (Article 103 of the Labor Code).

In addition, service charges are sometimes collected at hotels and restaurants, and the Labor Code prescribes that 100% should be distributed to workers (Article 96 of the Labor Code).

Thirteenth-Month Pay

In the Philippines, there are no general legal provisions related to so-called bonuses, and companies are not obligated to pay bonuses. Meanwhile, all companies are obligated to pay Thirteenth-Month Pay based on the 13th-Month Pay Law (Presidential Decree No. 851) and other related laws and ordinances.

In other words, all companies must pay Thirteenth-Month Pay to all workers (employees) (companies are not legally required to pay other bonuses, etc.). Thirteenth-Month Pay is the system of paying 1/12 of the total amount of 12 months' worth of basic salary that was actually paid to rank-and-file employees who have worked for at least one month within a calendar year. Thirteenth-Month Pay also needs to be paid to employees who resigned midway during the year according to the number of months that they worked. As a general rule, this payment needs to be made before December 24 of each year.

Retirement benefits

According to Article 302 of the Labor Code, in the absence of a retirement plan or agreement related to the retirement benefits of employees in the company, an employee who is 60 years of age or older but not beyond 65 years of age (compulsory retirement age) who has served at least five years for the company is entitled to receive retirement benefits upon retiring from the company. The amount of retirement benefits is equivalent to at least 1/2 of the monthly wage for each year of service, and a service period of six months or longer is calculated as one whole year. For instance, the amount of retirement benefits of a worker who has served 30 years for the company will be 15 months' worth of wages.

Overtime pay

An employer is required to pay overtime pay when the hours of work of a day exceed eight hours, and the amount of overtime pay to be paid differs depending on whether the overtime work was performed on a weekday or on a holiday/rest day. In the case of the former, the employer is required to pay additional compensation equivalent to the regular wage (cash payment including various allowances; hereinafter the same) plus at least 25% of such regular wage, and in the case of the latter, the employer is required to pay additional compensation equivalent to the regular wage plus at least 30% of such regular wage. Furthermore, the Labor Code prescribes that under-time work on any particular day may not be offset by overtime work on any other day.

For night shift work (10 PM to 6 AM of the following morning), the employer is required to additionally pay a night shift differential of not less than 10% of the regular wage.

In addition, the company may request that employees perform emergency overtime work in any of the following cases; provided, however, that the company is required to also pay prescribed overtime pay in these cases:

1. When the country is at war, or when any other national or local emergency has been declared
2. When it is necessary to prevent loss of life or property or in case of imminent danger to public safety due to serious accidents or calamities
3. When there is urgent work to be performed on machines or equipment in order to avoid serious loss or damage
4. When the work is necessary to prevent loss or damage to perishable goods
5. Where the continuation of work started before the eighth hour is necessary to prevent serious obstruction to the business of the company

Compensation for holiday work or the like is granted as follows.

Minimum wage system

In the Philippines, minimum wage standards are established based on region and business category (agriculture or non-agriculture). The minimum wage standards (daily amount) as of February 2023 in the key regions are as follows.⁵

Overview

As mentioned, the Philippines imposes a legal system that protects workers quite generously, and the Labor Code applies to all workers irrespective of the wage classification. Statutory regulations regarding the dismissal of workers in the Philippines are strongly in favor of workers, and companies are allowed to dismiss workers only when there is just cause (that is, grounds for dismissal on the part of workers) or authorized cause (that is, grounds for dismissal on the part of companies) prescribed under the Labor Code. In other words, while the laws of the Philippines are influenced by U.S. laws, the Labor Code adopts its own system, and Japanese companies should take note that at-will employment, which is allowed in the U.S., is not permitted in the Philippines.

One distinctive feature of the statutory regulations regarding the dismissal of workers in the Philippines is that, as described below, just cause (grounds for dismissal on the part of workers) and authorized cause (grounds for dismissal on the part of companies) are separately prescribed under the Labor Code, and separate dismissal procedures are prescribed for each of these causes.

Another distinctive feature of the laws of the Philippines is that, while just cause that corresponds to punitive dismissal under the laws of Japan and authorized cause that corresponds to dismissal for the purpose of reorganization under the laws of Japan are prescribed under the Labor Code, the Labor Code does not specify matters regarding ordinary dismissal as represented by dismissal due to poor performance. With respect to this point, because it is extremely difficult (maybe even impossible) to dismiss a worker due to poor performance, Japanese companies need to pay close attention upon dismissing a worker based on ordinary dismissal.

Any dismissal that is not based on the foregoing just cause or authorized cause is deemed an illegal dismissal and will be nullified, and the company will be obligated to reinstate the dismissed worker, pay unpaid wages and allowances, and compensate any damage suffered by the dismissed worker.

Moreover, if the company does not dismiss a worker pursuant to the following dismissal procedures, even though the dismissal itself would most likely be deemed valid (on the condition that there is an actual just cause or authorized cause), dismissal procedures must be followed carefully because the company will be liable for nominal damages against the worker. While the amount of nominal damages will be determined by giving comprehensive consideration to various circumstances, courts and labor tribunals often award an amount between 30,000 pesos and 50,000 pesos as nominal damages.

Termination by workers

Foremost, as a general rule, a worker may at any time terminate the employment contract by giving a one-month prior notice. If a worker fails to give such one-month notice, the company may seek damages against the worker.

Moreover, in the following cases, a worker may terminate the employment contract (or leave the company) without requiring any prior notice to the company:

1. Serious insult by the company on the honor and personality of the worker
2. Inhuman and unbearable treatment accorded the worker by the company
3. Commission of a crime or offense by the company against the worker or his/her family
4. Other causes analogous to any of the foregoing

Grounds for termination (dismissal) by companies

In the Philippines, the company may dismiss a worker only when there is just cause or authorized cause prescribed under the Labor Code.

Foremost, Article 297 of the Labor Code prescribes as follows regarding just cause. This provision mainly prescribes grounds that correspond to the grounds for punitive dismissal under the laws of Japan.

1. Serious misconduct or willful disobedience by the worker of the lawful orders of the employer in connection with assigned work
   (Minor violations do not constitute just cause for dismissing a worker, the misconduct by the worker needs to be of a serious nature, and the worker needs to be ruled unfit to continue working for the employer. For instance, this includes sexual harassment or violence in the workplace or repeated inappropriate remarks or verbal abuse of the supervisor.)
2. Gross or habitual neglect by the worker of assigned duties
   (The neglect must be gross or habitual, and a single or sporadic occurrence of such neglect does not constitute grounds for dismissal. For instance, if a worker is late for work just once, it is unlikely that such lateness will correspond to just cause for dismissing that worker, but if a worker who is habitually late subsequently takes an unscheduled absence for nearly one month without formal permission, it is likely that such act will correspond to just cause for dismissing that worker.)
3. Fraud or willful breach by the worker of the trust reposed in the person by the company or duly authorized representative
   (In order to correspond to just cause, the worker needs to be of a position of trust and confidence, and it is likely that managerial staff, cashiers, auditors, property custodians, and other employees who handle the company's assets and properties on a daily basis correspond to the foregoing position.)
4. Commission of a crime or offense by the worker against the employer or any immediate family member or duly authorized representative
5. Other causes analogous to the foregoing

Next, Articles 298 and 299 of the Labor Code prescribe as follows regarding authorized cause. The items (1) through (4) below mainly prescribe the grounds that correspond to the grounds for dismissal for the purpose of reorganization under the laws of Japan.

1. Installation of labor-saving devices
2. Redundancy
   (In order for redundancy to be acknowledged as grounds for dismissal, the company must adequately prove the existence of redundant positions, and the company is also required to demonstrate that the redundant positions and the worker to be dismissed were decided based on fair and reasonable standards.)
3. Retrenchment to prevent losses
   (The fact that downsizing or retrenchment is required to prevent losses must be proved based on evidence such the company's audited financial statements. Moreover, the anticipated losses must not be superficial and must be substantial, and must also be realistically or reasonably imminent.)
4. Closing or cessation of operation
5. Continued employment of a worker who is suffering from a disease is prohibited by law or is prejudicial to the worker's health or his/her co-employees
   (When a company is to dismiss a worker on grounds of the foregoing disease, the company is required to obtain a certificate from a medical institution to the effect that the disease has not been cured even after proper medical treatment for a period of six months.)

As described above, it should be noted that companies may dismiss workers only based on the grounds described above, and ordinary dismissal is extremely difficult.

Dismissal procedures based on just cause

When a company is to dismiss a worker based on the foregoing just cause, the company must foremost provide a written notice to the worker regarding how the dismissal procedures will be implemented and the grounds of such dismissal procedures (notice for granting an opportunity for explanation). After giving the foregoing notice, the company must offer an opportunity of hearing to the worker. Here, if the worker requires the assistance of legal counsel, the company must provide an opportunity of such assistance.

If the company decides to continue with the dismissal procedures even after the hearing, the company must once again send a document regarding such decision (notice of final decision).

It should be noted that companies are obligated to send the two types of notices described above.

Dismissal procedures based on authorized cause

When a company is to dismiss a worker based on the foregoing authorized cause, the company must notify the worker, as well as notify DOLE, as least one month in advance. Here, the company must also notify when the dismissal based on authorized cause will be carried out.

Moreover, in all cases where a worker is dismissed based on authorized cause, the person is entitled to receive the payment of dismissal allowance. The amount of dismissal allowance is, as a general rule, equivalent to at least the worker's one month's pay for every year of service in the cases of installation of labor-saving devices and redundancy. Meanwhile, the amount of dismissal allowance is equivalent to the worker's 1/2 month's pay for every year of service in the cases of retrenchment to prevent losses, closing or cessation of operation and illness (however, in the case of closing or cessation of operation, there are judicial precedents that have ruled that the foregoing dismissal allowance is not required).

System related to employment of foreign nationals in the Philippines

In the Philippines, a foreign national who is to work for six months or longer is required to acquire an Alien Employment Permit (AEP) issued by the Department of Labor and Employment (DOLE). Moreover, as described later, it should be noted that a foreign national to reside in the Philippines to work is required to acquire a prearranged employee visa in addition to AEP.

AEP is a permit that is issued to the applicant or the applicant's company after it is acknowledged that the foreign national's job description is related to work that is difficult for a Filipino worker to perform, and the applicant possesses the ability and will to perform one's job description at the time of application. AEP is valid for one year or more and five years or less, and a foreign national who works in the Philippines for six months or longer without permission will be subject to a fine of 10,000 pesos per year.

Meanwhile, a foreign national whose employment period does not exceed 6 months is required to acquire a Special Work Permit (SWP) issued by the Bureau of Immigration. SWP is valid for three months and may be extended only once. When a foreign national working based on SWP wishes to extend one's working period, the person is required to file an application for AEP with DOLE at least 21 business days before the expiration date of SWP.

Classification of visas

Visas in the Philippines are prescribed under the Philippine Immigration Act (The Philippine Immigration Act of 1940, Commonwealth Act No. 613) and related provisions, and the classification and overview of visas are as follows. Note that, as described above, because a foreign national who wishes to enter the Philippines to work is required to acquire a prearranged employee visa under Article 9(g) of the Philippine Immigration Act in addition to AEP, acquisition of the prearranged employee visa will be described in detail in the latter half.

(1) Classification of visas, overview, and acquisition requirements

While there are primarily 14 types of visas in the Philippines, only those related to work and business are listed.

(2) Prearranged Employee Visa

A prearranged employee visa is issued to foreign nationals who have entered into an employment contract in the Philippines in advance. Pre-arranged employee visa is valid for an initial period of one, two, or three years, and extension of this period up to five years in the aggregate is also permitted. This visa may be renewed any number of times so as long as the visa requirements are satisfied.

A foreign national who wishes to work in the Philippines with this visa must have a specific employment contract irrespective of the form of compensation, and as in the case of acquiring the AEP, the applicant's job description must be a position of top management or chief financial officer or a proficient engineer requiring sophisticated skills that cannot be substituted by a Filipino worker. The applicant is also obligated to explain how the job description will contribute to the national interests of the Philippines.

A spouse and unmarried children under the age of 21 to accompany the applicant may also be included in a prearranged employee visa of the principal holder.

Because the Philippine Embassy, Tokyo, Japan is not accepting applications for a prearranged employee visa, an application for a prearranged employee visa needs to be filed according to the following procedures.

The applicant needs to foremost apply for a temporary visitor's visa explained in the foregoing table with the Philippine Embassy and acquire the temporary visitor's visa. After entering the Philippines, the applicant needs to subsequently apply for a prearranged employee visa with the Bureau of Immigration jointly with the applicant's company and thereby switch the temporary visitor's visa to a prearranged employee visa. The switch to a prearranged employee visa will be performed after the applicant is interviewed by the Bureau of Immigration, and the Bureau of Immigration approves the switch.

While it previously took up to six months to acquire a prearranged employee visa, from June 2016 onward, it now normally takes only two to three months, and the length of the visa procedures has been shortened.

The main documents required when applying for a prearranged employee visa are as follows.

1. (ⅰ)Joint letter request addressed to the Commissioner from applicant and the petitioner
2. (ⅱ)Duly accomplished Consolidated General Application Form (CGAF) for Nonimmigrant Visa
3. (ⅲ)Photocopy of passport bio-page and latest admission with valid authorized stay
4. (ⅳ)Photocopy of Employment Contract, Secretary’s Certificate of Election, Appointment or Assignment of applicant, or equivalent document with details of exact compensation, duration of employment, and comprehensive description of the nature and scope of the applicant’s position in the company
5. (ⅴ)Photocopy of petitioner’s latest Income Tax Return (ITR) with the corresponding proof of payment (official receipt, bank teller’s validation slip, Bureau of Internal Revenue’s (BIR) eFPS payment details’ printout, or other similar evidence)
6. (ⅵ)For corporations or partnerships, photocopy of Certificate of Registration issued by the Securities and Exchange Commission (SEC), articles of incorporation, and General Information Sheet (GIS) for the current year stamped received by the SEC
7. (ⅶ)For single proprietorships, photocopies of Certificate of Registration of Business Name with the Department of Trade and Industry (DTI) and mayor’s permit
8. (ⅷ)Photocopy of Alien Employment Permit (AEP) issued by the Department of Labor and Employment (DOLE) and actual publication of the applicant’s approved AEP or in the absence thereof, a Certificate of Publication issued by the Publisher
9. (ⅸ)Notarized Certification of number of foreign and Filipino employees from the petitioning company
10. (ⅹ)Special Temporary Permit for an applicant practicing a regulated profession under the Professional Regulation Commission (PRC)
11. (ⅺ)Bureau of Immigration’s (BI) Clearance Certificate
12. (ⅻ)Original or certified true copy of Bureau of Quarantine Medical Clearance, if applicant is a national of any of the countries listed under Annex “A” of Immigration Operations Order No. SBM-14-059-A who arrived in the Philippines on or after June 2014.⁶