Paying Remote Workers in the Philippines: A Guide for Corporations
Foreign corporations have been aware for many years of the value of hiring skilled Filipinos to perform remote work. Traditionally, those have been employee roles in the BPO and call center industry, but now many Filipinos are offering their services as independent contractors using their experience gained as employees.
Part of this trend is due to the lack of professional growth opportunities inside the country, and a desire by workers to operate outside of uncertain employee roles. This fact can be a real advantage for foreign companies that are in the process of building remote teams or need representatives in the Asia Pacific region.
Why Hire Remote Workers in the Philippines?
There are a number of sound reasons to hire remote contractors in the Philippines, even though they may be located quite a distance from your home office. Here are a few benefits of hiring Filipinos:
- Strong work ethic and values, loyal when well-treated
- Accustomed to long-distance communication across time zones and working off-hours
- Skill sets that are useful for remote work (IT, customer service, accounting, virtual assistant, etc.)
- Good command of spoken and written English by most educated workers
- Cost-effective compensation levels
What is the Average Salary in the Philippines?
The amount of compensation to pay your worker is a real factor when hiring remote contractors abroad. When you are trying to figure out what to pay a remote contractor in the Philippines it is helpful to see what salaried employees are making in the same position inside the country. The Philippines is still a developing economy, and so salary levels will reflect those conditions.
You will have to take into account that contractors will need to pay their own health insurance and social contributions out of any compensation that you offer, and will also take care of their own tax withholding and payment.
Here is a sample of annual salary levels for potential remote work roles in US dollars:
- Call Center: $7,500
- IT Manager: $32,000
- Software Developer: $17,000
- Accountant: $8,500
- Engineer: $9500
- CPA: $15,000
As you can see, these salary levels are relatively low compared to most developed countries, even though training and education in the Philippines are excellent for most professions. This means that hiring contractors in the Philippines is a good value for foreign companies looking to access global talent.
How Do I Pay Remote Workers in the Philippines?
Once your company has recruited a remote worker and set up potential contract terms, the next step is to decide upon a payment method. There are several choices with varying levels of ease and security, and in most cases, it will be for your company to decide which one is best.
This method is simple and allows your new contractor to invoice you directly as they complete hours or projects. All the company has to do is remit payment to the Philippines. The problem with direct payment is there is no way to resolve disputes over quality or deadlines, and failing to pay even one invoice could discourage your contractor from future projects.
Payment and Invoice Method
If you are looking to hire multiple contractors, then a payment and invoice (P&I) service can be a good choice. The P&I provider will help set up the contracts, handle invoicing and oversee payment to make sure that all expectations are met. Often, the P&I service will charge the company a set amount per contractor, per month to handle all of the administrative and financial tasks, while you still manage the contractor’s work.
An even more complete solution is the use of an umbrella company that is already set up in the Philippines and can act as a fully verified third party in the contract relationship. The umbrella company will act as a local employer in many ways, from onboarding, establishing contract terms, invoicing the company and issuing a ‘payslip’ to the contactor with taxes withheld. This option gives both the contractor and hiring company the greatest assurance of both payment and performance.
What is the 13th Month Bonus and How is it applied?
One thing to be aware of when hiring a contractor in the Philippines is that many workers have become used to receiving a 13th month of salary as employees, which is paid as a bonus at the end of the year. When you hire a contractor, the law that requires this bonus is not mandatory as it is for employees, but you can still offer it if you wish.
This can be a good practice if you want to secure the loyalty and goodwill of your contractors, and it will show that you are aware of the benefit of a bonus for Filipinos during the holiday season.
What are the Risks and Obligations?
The obvious risk with hiring any overseas contractor is ensuring quality performance and project completion. This can be mitigated by setting clear project parameters and milestones, especially for new contractors that are less used to managing their own work schedule.
As with hiring a contractor in any country, one of the primary risks is that of misclassification, where your contractor is actually filling their role like an employee. To avoid this, it is important that your contractor invoice your company properly and conduct themselves as an independent business.
As a foreign company, your primary obligation is to pay the worker according to the contract terms to avoid any local dispute that might prevent future hiring opportunities. Using one of the third-party invoicing and payment methods mentioned will help in this regard.
How Does Contractor Taxation Help with Paying Remote Workers in the Philippines?
For companies that are looking to hire contractors in the Philippines, Contractor Taxation offers assistance with finding a P&I service or umbrella company that fits your needs. This takes all the guesswork and uncertainty out of hiring multiple contractors for your business, and gives you a single point of contact to ensure that both work and payment go smoothly.