Employer’s Guide to Mandatory and Optional Benefits in the Philippines

If you’re a foreign company setting up operations or outsourcing talent in the Philippines, it’s important to understand local employment laws, especially those related to employee benefits. Filipino workers are entitled to both government-mandated benefits, requiring you to pay SSS, PhilHealth, and Pag-IBIG contributions. Additionally, providing optional benefits such as Health Maintenance Organization (HMO) coverage can greatly improve engagement, productivity, and retention.

Read more to learn what required and optional benefits you should include in your employee benefits package.

Understanding the Legal Framework for Employee Benefits

Employee benefits in the Philippines are governed primarily by the Philippines Labor Code and other related legislation. Additionally, contributions to statutory government agencies are required under specific laws:

• Social Security Act (Republic Act No. 11199) for SSS
• National Health Insurance Act (RA No. 11223) for PhilHealth
• Home Development Mutual Fund Law (RA No. 9679) for Pag-IBIG

Foreign companies hiring Filipino workers, directly or through a local entity, are legally required to comply with these mandates. Non-compliance can result in penalties, fines, or suspension of operations in the country.

Mandatory Employee Benefits: What the Law Requires

The key government-mandated benefits that all private-sector employers must provide include the following:

1. Social Security System (SSS)

A social insurance program that provides employees with protection against disability, sickness, maternity, retirement, and death. Both employer and employee share this contribution.

2. PhilHealth

This national health insurance program provides medical coverage and hospitalization benefits. Employers must contribute an equal share to the employee’s monthly premium.

3. Pag-IBIG Fund

This is a national savings program that also provides affordable housing loans. Employers must contribute at least 2% of the employee’s monthly salary.

4. 13th Month Pay

All rank-and-file employees who have worked at least one month during the calendar year are entitled to a 13th-month pay, equivalent to 1/12 of their annual basic salary, typically paid in December. 

Additional monthly pay, such as a 14th-month salary, is not required by law.

5. Service Incentive Leave (SIL)

Employees who have rendered at least one year of service are entitled to 5 days of paid leave annually, unless the company offers more.

6. Maternity and Paternity Leave

SSS covers maternity leave and grants up to 105 days of paid leave. Under current law, fathers are entitled to 7 days of paternity leave.

7. Holiday Pay, Night Shift Differential, and Overtime Pay

Employees must be compensated according to labor standards for working during holidays, at night, or beyond regular hours.

Optional Employee Benefits: Improve Employee Retention

While mandatory benefits ensure legal compliance, optional benefits can help your company stand out in a competitive labor market, especially in high-demand sectors like BPO, tech, and digital services.

A comprehensive benefits package can attract skilled professionals and improve your workforce’s engagement and retention. 

Popular optional benefits include:

• Health Maintenance Organization (HMO) coverage for employees and dependents. HMOs are among the most sought-after benefits in the Philippines, as they offer broader access to healthcare than PhilHealth alone. Employees value HMO coverage because it allows them to consult doctors, get lab tests, or receive treatment at private hospitals, often without out-of-pocket costs. 
• Performance or tenure-based bonuses
  Incentives that reward employees for hitting targets or staying with the company long-term.
• Flexible work hours or hybrid setups
  Allows employees to balance work and personal responsibilities better. This is particularly attractive to younger employees.
• Mental health and wellness programs
  Support services such as counseling, stress management, or wellness activities are ideal for employees in high-stress industries like the IT and BPO sectors.
• Additional paid time off (e.g., birthday leave, wellness leave)
  Extra leave options that promote rest and personal well-being.
• Training and professional development support
  Opportunities for upskilling through courses, workshops, or certifications.
• Company-sponsored meals or transportation allowances
  Helps ease daily living costs and improves overall employee satisfaction. Rice allowances are a popular benefit.
• Retirement benefits beyond SSS (e.g., provident funds or private retirement plans)
  It offers long-term financial security and encourages employee loyalty, making it a great choice if you’re seeking to retain skilled professionals.

How to Design a Competitive Benefits Package

Designing a locally competitive benefits package starts with understanding employee expectations in your sector. Here are some practical tips:

• Government-mandated benefits should always be included in your benefits package. Consider mentioning it in your job post’s benefits package to show your company’s legitimacy and legal compliance.
• Benchmark locally. Compare your offer with other companies in your industry and region.
• Balance cost and value. Optional benefits don’t have to be expensive. Flexible hours, recognition, and wellness perks can be cost-effective ways to boost engagement and retention.
• Support remote or hybrid teams. Especially for foreign employers hiring remotely, providing equipment or internet subsidies can go a long way.
• Customize your package to fit employee needs. Discover which benefits can best boost employee engagement and retention. Analyze your industry, consider employee demographics, and use feedback to optimize your benefits package.

OutTask’s Professional Services

Crafting an employee benefits package that complies with Philippine law and improves employee retention can be difficult. Fortunately, OutTask can handle the process for you, ensuring full compliance and retention of the best talent.

We help employers find and grow offshore talent in the Philippines while ensuring compliance with labor laws. Our services include:

• Employer of Record (being the employer on your behalf, so that all compliance requirements will be our responsibility)
• Payroll Management
• HR Services
• Training and Equipment Procurement
• Job Analysis and Candidate Vetting
• Compliance and Benefits Management

Final Thoughts

In the Philippines, offering employee benefits is a legal requirement that demonstrates you’re a legitimate employer. Including optional benefits is an invaluable way to boost employee engagement and retention, often more effective than simply increasing compensation. Carefully create an affordable yet effective benefits package to help you build and develop your Filipino workforce.

Are You Looking to Create a Benefits Package that Attracts and Retains the Best Filipino Professionals?

The Philippines offers an English-fluent workforce that is highly educated, tech-savvy, and cost-effective. At Out Task, we specialize in helping companies recruit top-tier Filipino talent while handling the complexities of HR, payroll, and local compliance.

Schedule a consultation with one of our experts:

• Contact us Here
• +1 9726344713
• Email us at: info@outtask.ph