The Philippines is one of the most popular places for Australian businesses to build offshore finance and admin teams, and one of the easiest to get wrong. The rules that protect the worker also protect you, but only if the structure is set up properly. Get it right and your liability is contained. Get it wrong and the law can treat your business as the direct employer of staff you thought were someone else's responsibility. This guide covers what an Australian owner needs to understand before hiring in the Philippines.
Published: June 2026
The single biggest compliance risk in Philippine hiring is labour-only contracting. Philippine labour law, through Articles 106 to 109 of the Labor Code and the rules in DOLE Department Order 174 (Series of 2017), draws a hard line between legitimate job contracting and merely supplying bodies.
The trap works like this. If you engage a local provider to supply staff, and that provider is not a genuine, properly capitalised, DOLE-registered contractor that controls the work, the arrangement can be ruled labour-only contracting. The consequence is severe: the principal can be deemed the direct employer of those workers, inheriting all the entitlements, contributions and back-pay obligations. The label on the contract does not save you. Philippine authorities look at substance.
This is why the structure of any offshore arrangement matters more than the brochure. A legitimate Employer of Record or contractor must be able to show it is the real employer, not a pass-through for manpower.
Under DOLE Department Order 174, a genuine contractor or Employer of Record should be able to demonstrate all of the following:
Note that genuine business-process outsourcing, IT-enabled and knowledge-process services are treated differently from bare manpower supply under DOLE's own clarification (Department Circular 01, Series of 2017). The principle still holds for any owner: insist your provider can prove it is a legitimate, capitalised, registered employer.
A Philippine employer must remit mandatory contributions and pay one mandated annual bonus. In a transparent offshore model you fund these, so know what they are.
Because the social contributions are capped, the percentage loading falls as salary rises. For a skilled role, budget for the statutory costs plus 13th month pay to add roughly 15 to 25 per cent above basic salary, before optional private health cover (HMO), which is close to expected for good staff. The full cost stack is broken down in our EOR pricing guide.
Owners often worry the staff member will be treated as an Australian employee. For a Filipino national, resident in the Philippines, performing work in the Philippines under a Philippine employment contract, that is generally not the case.
These points reduce the Australian-side exposure, but they do not remove the Philippine-side obligations, which is where the real compliance work sits. Confirm your own circumstances with a qualified adviser rather than relying on general guidance.
The practical version is short. Use a provider that can prove it is a genuinely capitalised, DOLE-registered employer with real control over the work, that funds statutory contributions and 13th month pay correctly, that has clean contracts assigning IP and meeting Department Order 174, and that has proper data controls. If a provider cannot evidence those, the cheap fee is not a saving. It is a deferred liability.
Scale Suite builds offshore finance and admin teams for Australian SMEs with senior CA oversight as part of our HR services.
Can an Australian company hire employees in the Philippines without a local entity?
Yes, through an Employer of Record that legally employs the staff on your behalf. The EOR holds the employment relationship and handles local compliance, so you do not need to register a Philippine company.
What is DOLE Department Order 174?
It is the Philippine rule (Series of 2017) implementing Articles 106 to 109 of the Labor Code, governing contracting and subcontracting. It bans labour-only contracting and sets registration and capital requirements for legitimate contractors.
What happens if an arrangement is found to be labour-only contracting?
The principal can be deemed the direct employer of the workers, becoming liable for their entitlements, statutory contributions and back pay. This is the core risk a properly structured EOR is designed to prevent.
What statutory costs does a Philippine employer pay?
SSS at 15 per cent of the salary credit (shared, employer pays more), PhilHealth at 5 per cent (split equally), Pag-IBIG at 2 per cent for the employer, all capped, plus mandatory 13th month pay equal to one twelfth of annual basic salary.
Do I have to pay Australian super for a Philippine employee?
Generally no. Superannuation guarantee does not apply to a non-resident who is paid to do work wholly outside Australia. Confirm your specific position with a qualified adviser.
Is the staff member covered by the Fair Work Act?
Generally not. A Filipino national working in the Philippines under a Philippine contract is usually governed by the Philippine Labor Code, because the Fair Work Act is largely territorial.
What is 13th month pay and when is it due?
It is a mandatory bonus equal to one twelfth of annual basic salary, payable to rank-and-file staff with at least one month of service, due by 24 December each year.
What about data privacy for offshore staff?
Offshore staff handling your data engage both the Philippine Data Privacy Act and Australian privacy obligations, including cross-border disclosure rules. Your provider should have documented data-handling controls.
Scale Suite is a Sydney-based provider of outsourced finance teams and fractional CFO services for Australian SMEs. We deliver weekly bookkeeping, payroll, BAS/IAS lodgement, cashflow reporting, management accounts, and strategic fractional CFO oversight, all as a fully embedded team that works inside your business.CA-qualified, Xero Certified, and registered BAS Agents, we replace fragmented bookkeepers and once-a-year accountants with one responsive finance function at a fraction of the cost of full-time hires. We serve growing businesses across Sydney, Melbourne, Brisbane, and Perth, with packages starting from $1,500 per month and no lock-in contracts.
We review and check this guide periodically. At the time of writing (June 2026), all information was current. Scale Suite is a registered BAS Agent, not a licensed tax advisor or financial advisor. This content is general information only and does not constitute professional tax, financial, or legal advice. Some details may change over time.
Scale Suite is a Sydney-based provider of outsourced finance and HR services for Australian SMEs. We deliver bookkeeping, financial reporting, payroll processing, fractional CFO support, recruitment, employee onboarding, people and culture support, and fractional HR oversight, all as a fully embedded team that works inside your business.
Employment Hero Gold Partner, CA-qualified, and Xero Certified, we replace fragmented finance and HR processes with one responsive, senior-level function at a fraction of the cost of full-time hires. We serve growing businesses across Sydney, Melbourne, Brisbane, and Perth, with packages starting from $1,500 per month and no lock-in contracts.
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