Hiring Employees 101: Government Mandated Benefits 2 years ago

If you are a startup and eventually decide to hire employees—as an employer, you will have to comply with the labor laws. 

According to the Labor Code of the Philippines, employees are entitled to receive financial benefits, which include overtime pay, minimum wage, and 13th-month pay. Within one month or thirty (30) days of starting employment, each employee must be registered to receive statutory benefits through their company. 

That may seem like an additional cost to your business, but here are important things to keep in mind– from considering the number of employees you should hire to avoiding future contract violations.

Minimum Wage

The minimum wage rate differs depending on the location of the business and the decision of the Regional Tripartite Wages and Productivity Board. For NCR, the minimum wage is Php 570 for non-agricultural workers and Php 533 for agricultural jobs.

Overtime Pay

Employees who work for more thanthan six (6) days, forty (48) hours per week, or eight (8) hours per day (excluding lunch breaks) — are entitled to 25% overtime pay on regular work days and 30% of the hourly rate on regular and extraordinary holidays on top of the basic rate.

13th Month Pay

A rank-and-file employee is entitled to receive their 13th month's salary by December 24 of each year, and it must at least be equivalent to 1/12 of their annual basic income. Instead of the usual lump sum payment, employers have the option to disburse it in two settlements: one in June and another in December.

Statutory Benefits

As required by the law, an employer must also register and pay monthly contributions on behalf of their employees to the following government agencies:

Social Security System (SSS) (Republic Act 11199)

This aims to protect its members from unforeseen contingencies that could cause them to lose their income or become financially incapacitated. This covers an employee's disability pension, retirement benefits, funeral benefits, sickness allowances, loans, and additional benefits. 

To better understand this, read Republic Act 11199.To compute your SSS monthly contribution, you may check the SSS Contribution Table 2021

PhilHealth (Republic Act 10606)

This ensures that all your employees will have enough coverage through health insurance to help them with hospitalization bills and other healthcare needs.

Each employer pays and shares (50%) of the total monthly premiums. 

PAG-IBIG Fund (Republic Act 9679)

This offers Filipinos the chance to buy a home with simple payment plans that may be taken directly out of their salary each month–ensuring enough housing for fund participants through a successful savings plan.

Regardless of the employee's monthly salary, the employer contribution is set at 2%, and the employee share is 1%.

Leave Benefits

Every year, Filipino employees are given five (5) paid service incentive days at a minimum that can be used for paid sick leave, vacation, or both. Some employers may add to this depending on what they have agreed with the employee. Note that leave benefits may be converted to cash if unused by the end of the calendar year

In addition to the aforementioned, the following apply only in special situations but are still essential to note.

• Paternity Leave: Seven (7) working days of paid leave for his spouse's first four pregnancies.
• Maternity Leave: One hundred five (105) working days of paid leave and sixty (60) days of paid absence in the event of livebirth, miscarriage, or cesarean section, regardless of whether they are married.
• Solo Parent: Any single parent who has worked for the company for at least a year is entitled to seven (7) working days with full pay and fifteen (15) additional days of paid leave for single mothers.
• Leave for Gynecological Surgery: This provides special leave benefits for women, including two (2) months of full payment depending on her gross monthly income after surgery for the gynecological disease. 
• Leave for Victims of Violence Against Women and Their Children (Republic Act 9262): Employees who are victims of violence are eligible for up to ten (10) days of paid leave. It will cover the days the employee needs to tend to any legal and medical concerns. If the leave benefit is not used, it cannot be converted to cash. You may check Anti-VAWC Law for more reference

As an entrepreneur, apart from looking after your business—maintaining employee satisfaction and top talent should also be high on your priority list. Knowing these things does not require any law degree, but understanding them reduces the risk of conflict with your employees, and subsequently any potential lawsuits. 

Read more about the Labor Code of the Philippines and check Digest.ph for other resources to help your startup.