persol hr data bank in apac philippines · an overview of the "labor code" as the core...

Labor Laws

March 2019

PERSOL HR DATA BANK in APAC

PHILIPPINES

　Dismissal of a worker in the Philippines requires one of the grounds for dismissal listed in its labor laws, such as when there is a serious misconduct by the employee, and an employer is not allowed to unilaterally dismiss its worker. Even in cases of downsizing, a company is obligated to pay a severance allowance in accordance with the cause and length of service of that worker.

　Philippines is adopting a policy that is relatively generous in employing foreigners, and the employment of workers from other countries with certain skills is well received.

introduction

*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 US, Canada, Australia, New Zealand, etc.), which emphasizes decisions based upon traditions, customs, and prece-dent.　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.

INDEX

1. Key points regarding employment law, standard business practice and customs, andemployment policy in recent year ···················································································································································· 2

1-1.　Labor law system that respects worker protection ······························································································· 21-2.　Partial adoption of common law system ····················································································································· 21-3.　Social security programs ························································································································································ 21-4.　Termination of employment contract ·························································································································· 31-5.　Overseas temporary staffing business ···························································································································· 31-6.　Visas, etc. ·························································································································································································· 3

2. Overview of basic labor laws of the Philippines ······································································································ 52-1.　Overview of labor-related statues ···································································································································· 52-2.　Labor Code of the Philippines ·········································································································································· 5

3. Requirement for Preparation of Rules of Employment and Procedures ····································· 12

4. Laws and regulations regarding workers’ salaries, wages, bonuses, overtime pay and anyother forms of compensation ································································································································································· 13

4-1.　Wages ·································································································································································································· 134-2.　The Thirteenth-Month Pay ················································································································································ 134-3.　Retirement benefits ··································································································································································· 144-4.　Overtime pay ················································································································································································· 144-5.　Minimum wage system ·························································································································································· 15

5. System and points to consider regarding dismissal in the Philippines ·········································· 165-1.　Overview ·························································································································································································· 165-2.　Termination by workers ························································································································································· 175-3.　Grounds for termination (dismissal) by companies ···························································································· 175-4.　Dismissal procedures based on just cause ·················································································································· 185-5.　Dismissal procedures based on authorized cause ·································································································· 19

6. Visas for Foreign Nationals ······························································································································································ 206-1.　System related to employment of foreigners in the Philippines ································································· 206-2.　Classification of visas ································································································································································ 20

About this document ······················································································································································································ 23About the information compiled in this document ············································································································ 23Contact information regarding this document ······················································································································ 23

Company profile ··································································································································································································· 24About PERSOL Research and Consulting ································································································································ 24About PERSOLKELLY Consulting ·············································································································································· 24

1. Key points regarding employment law, standard business practice and customs, and employment policy in recent year 2

1. Key points regarding employment law, standardbusiness practice and customs, and employment pol-icy in recent year

1-1.　Labor law system that respects worker protection

　The Philippines is imposing 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 basically 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 their workers

only based on grounds that are defined under laws, and the fact that companies are obligated to participate in various social

security programs.

1-2.　Partial adoption of common law system

　The legal system of the Philippines is basically operated under the 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 is also partially adopting

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.

1-3.　Social security programs

　As described above, the 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 a fixed income 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 for

arrears up to the commencement of payment of premiums, the company may also be subject to fines or the representative of

the company may be sentenced to imprisonment.

1-4.　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 1-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.

1-5.　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% in relation to 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 authorities.

1-6.　Visas, etc.

　 In the Philippines, when a foreigner is to work for 6 months or longer, he/she is required to acquire 2 types of 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 foreigner whose employment period does not exceed 6

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 foreigners who have entered into an employment contract

in the Philippines in advance. Normally, foreigners with a prearranged employee via may stay in the Philippines for 2 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 foreigners who have not entered into an employment contract in the Philippines in

advance which allows them to stay in the Philippines for up to 59 days, and a treaty trader or treaty investor visa for foreigners

who intend to carry out substantial trade or make substantial investment in the Philippines.


　Generally speaking, it could be said that it is relatively not difficult to acquire these visas and work permits so as long as the

necessary papers are prepared.

2. Overview of basic labor laws of the Philippines 5

2. Overview of basic labor laws of the Philippines

2-1.　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, Strikes, etc. (Article 240 to Article 292)

・Termination of Employment (Article 293 to Article 302), etc.

2-2.　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.

(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, the Diet is currently discussing to abolish this scheme because abuse of the scheme has become so 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 which is called "ENDO (end-of-contract)" issue.


　 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 its 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 employer

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

as 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 6 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 8 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 7

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 1 year of service (Article 95 of the Labor Code). The number of days of service incentive leave is

5 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 who are employed by a company that is regularly employing less than 10 employees

　・Workers who are employed by a company that is exempted from granting a service incentive leave in light of its viability or

financial condition

　A maternity leave is granted to pregnant female workers who have rendered services of at least 6 months for the last

12 months, and the period of maternity leave is 2 weeks prior to the expected date of delivery and 4 weeks after normal

delivery or abortion.

　 In addition, paternity leave, parental leave for solo parent, special leave benefits for women and the like 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 a fixed income 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 for arrears up to the commencement of payment

of premiums, the company may also be subject to fines or the representative of the company may be sentenced to

imprisonment.

(i) Social Security System (SSS)

　The overview of the current SSS is prescribed under the Social Security Act of 1997 (Republic Act No. 8282), and the

key items are as follows.

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

government workers.


(ii) 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.

　 (a) Coverage

　　　PhilHealth covers government workers, employees of private companies, self-employed persons, domestic helpers, as well as

immigrants and persons of dual nationality. Basically, PhilHealth covers nearly all workers in the Philippines, including their

dependents. Companies in the private sector are obligated to participate in PhilHealth.

　 (b) Rate of contribution, etc.

　　　As the rate of contribution, a standard monthly amount is prescribed for each range of the actual amount of monthly wage

of each worker (in 2018, 275 pesos when the amount of monthly wage is below 10,000 pesos, 275.02 - 1,099.99 pesos when

the amount of monthly wage is more than 10,000 pesos or more and below 40,000 pesos, 1,100 pesos when the amount of

monthly wage is 40,000 pesos or more), and 2.5% of the rate of contribution is borne by both the company (50%) and the

worker (50%). The contribution to be paid by workers is automatically deducted from their wage on a monthly basis.

　 (c) Insurance benefits

　　　Generally speaking, there are the following 4 main types of insurance benefits, and workers who have paid at least 3 monthly

contributions in the 6-month period immediately preceding their hospitalization are entitled to these benefits.

　　　・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 case1.

(iii) 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.

　 (a) Coverage

　　　Statutory participants of the foregoing SSS and PhilHealth are also obligated to participate in HDMF. In other words,

basically, HDMF applies to nearly all workers in the Philippines (excluding workers who are older than 60 years of age and

domestic helpers whose monthly wage is less than 1000 pesos).

　 (b) Rate of contribution

　　　As the rate of contribution of HDMF, a standard amount is also prescribed for each range of the actual amount of monthly

1.For specific details, refer to PhilHealth’s website (https://www.philhealth.gov.ph/benefits/).


wage 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 wage does not exceed 1500 pesos, and is 2% for workers whose monthly wage exceeds 1500

pesos, and the rate of contribution of the company is uniformly 2% of the monthly wage of each worker. The contribution to

be paid by workers is automatically deducted from their wage on a monthly basis.

　 (c) Benefits

　　　Workers participating in HDMF can take out a housing loan (upon purchasing a home or renovating a home), a

multi-purpose loan or a loan 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.

　　　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 benefits2.

(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 20153.

　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 company when the duration of stay in

the other country is 5 years or less, and is forced to participate in the social security program of only the country to which

the company was dispatched when the duration of stay in the other country exceeds 5 years. Moreover, in order to resolve

the problem of non-refund 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 with 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

2.For details, refer to HDMF’s website (http://www.pagibigfund.gov.ph/benpro.aspx).

3.For the entire text, refer to MOFA’s website (http://www.mofa.go.jp/mofaj/files/000112383.pdf ), etc.


go on 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 a right of representation regarding exclusive collective bargaining. Moreover, during the cooling off

period, the labor union is required to undergo mediation before NCMB, obtain a secret ballot for the strike, and officially

notify the results of the voting to NCMB and the company at least 7 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 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 Landbased 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 his/her agent.

3. Requirement for Preparation of Rules of Employment and Procedures 12

3. Requirement for Preparation of Rules of Employ-ment and Procedures

　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 break, 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, 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) Dangerous drugs (Commonwealth Act No. 9165 or the Comprehensive Dangerous Drugs Act, and DOLE Department Order

No. 53-03);

　 (2) Hepatitis B (DOLE Department Recommendation No. 05-10);

　 (3) HIV / AIDS (Commonwealth Act No. 8504 or the Philippine Aids Prevention and Control Act);

　 (4) Sexual harassment (Commonwealth Act No. 7877 or the Anti-Sexual Harassment Act);

　 (5) Tuberculosis (DOLE Department Recommendation); and

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

143-11)

4. Laws and regulations regarding workers’ salaries, wages, bonuses, overtime pay and any other forms of compensation 13

4. Laws and regulations regarding workers’ salaries,wages, bonuses, overtime pay and any other forms ofcompensation

4-1.　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 2 weeks or twice a month at intervals not exceeding 16 days. Wages

to be paid for work that cannot be completed in 2 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 85%

should be distributed to workers and 15% shall be distributed to the company (Article 96 of the Labor Code).

4-2.　The 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 "The 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 "The Thirteenth-Month Pay" to all workers (employees) (companies are not required

to pay other bonuses, etc.). "The 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 1 month within a calendar year.

"The 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.


4-3.　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 5 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 6 months or longer is calculated as 1 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.

4-4.　Overtime pay

　An employer is required to pay overtime pay when the hours of work of a day exceed 8 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 undertime 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 employees to 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; and

　 (5) where the continuation of work started before the 8th hour is necessary to prevent serious obstruction to the business of the

company.


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

4-5.　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 May 2018 in the key regions are as follows1.

1.For details, refer to the National Wages and Productivity Commission website: (http://www.nwpc.dole.gov.ph/statistics.html?technology=0).

5. System and points to consider regarding dismissal in the Philippines 16

5. System and points to consider regarding dismissalin the Philippines

5-1.　Overview

　As mentioned, the Philippines is imposing a legal system that protects workers relatively generously and the Labor Code

basically applies to all workers irrespective of the wage classification, etc. 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

a just cause (that is, grounds for dismissal on the part of workers) or an 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 is adopting 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 causes (grounds for dismissal on the part of workers) and authorized causes (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 a just cause which corresponds to punitive dismissal

under the laws of Japan and an authorized cause which 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, and be liable for paying unpaid wages and

allowances and compensating 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 taken 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.


5-2.　Termination by workers

　Foremost, as a general rule, a worker may at any time terminate his/her employment contract by giving a 1-month prior

notice. If a worker fails to give such 1-month notice, the company may seek damages against the worker.

　Moreover, in the following cases, a worker may terminate his/her 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; and

　 (4) other causes analogous to any of the foregoing.

5-3.　Grounds for termination (dismissal) by companies

　 In the Philippines, the company may dismiss a worker only when there is a just cause or an 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 his/her employer in connection with his/her work

(Minor violations do not constitute due cause for dismissing a worker, and 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 to his/her supervisor.)

　 (2) Gross or habitual neglect by the worker of his/her 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 due cause for

dismissing that worker, but if a worker who is habitually late subsequently takes an unscheduled absence for nearly 1 month

without formal permission, it is likely that such act will correspond to due cause for dismissing that worker.)

　 (3) Fraud or willful breach by the worker of the trust reposed in him/her by the company or duly authorized representative

(In order to correspond to this 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, Article 298 of the Labor Code prescribes as follows regarding "authorized cause". This provision mainly prescribes 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 under laws, 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 6

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.

5-4.　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 taken 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 2 types of notices described above.


5-5.　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 1 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, he/she 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 1/2 month pay

for every year of service in the cases of installation of labor-saving devices, redundancy and illness. Meanwhile, the amount

of dismissal allowance is equivalent to the worker’s 1 month pay for every year of service in the cases of retrenchment to

prevent losses and closing or cessation of operation (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).

6. Visas for Foreign Nationals 20

6. Visas for Foreign Nationals

6-1.　System related to employment of foreigners in the Philippines

　 In the Philippines, a foreigner who is to work for 6 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 foreigner 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 foreigner’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 1 year or more and 5 years or less, and a foreigner

who works in the Philippines for 6 months or longer without permission will be subject to a fine of 10,000 pesos per year.

　Meanwhile, a foreigner 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 3 months, and may be extended only once. When a foreigner

working based on SWP wishes to extend one’s working period, he/she is required to file an application for AEP with DOLE

at least 21 business days before the expiration date of SWP.

6-2.　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 foreigner 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.

(i) 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.1

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


(ii) Prearranged Employee Visa

　A prearranged employee visa is issued to foreigners who have entered into an employment contract in the Philippines in

advance. Normally, foreigners with a prearranged employee via may stay in the Philippines for 2 years, and extension of this

period up to 3 years is also permitted. This visa may be renewed any number of times so as long as the visa requirements

are satisfied.

　A foreigner who wishes to work in the Philippines with this visa must have a specific employment contract irrespective

of his/her form of compensation, and, as in the case of acquiring AEP, the applicant’s job description must be a position

such as 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 his/her 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 granted a prearranged

employee visa. However, the spouse and unmarried children are required to enter the Philippines within 6 months from

the day that the applicant’s visa is cleared.

　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 business 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 6 months to acquire a prearranged employee visa, from June 2016 onward, it now

normally takes only 2 to 3 months, and the length of visa procedures has been shortened.

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

　 (a) Visa application form (must be notarized)

　 (b) Letter request of applicant and applicant’s company

　 (c) Copy of applicant’s employment contract

　 (d) Copy of applicant’s curriculum vitae

　 (e) Copy of applicant’s passport

　 (f ) Copy of articles of incorporation, company registry issued by Securities and ExchangeCommission, and tax payment certificate

of applicant’s company

　 (g) Copy of Alien Employment Permit (AEP) issued by DOLE, or copy of application form of AEP with reception stamp of

DOLE

　 (h) Copy of business permit of local government

　 (i) Copy of annual report

　 (j) Copy of audited financial reports and tax returns

　 (k) Original newspaper clipping showing the publication of Alien Employment Permit (AEP) posted by DOLE

　 (l) Company’s written request to switch to a prearranged employee visa

　 (m) Company’s letter of commitment

About this document 23

About this document

About the information compiled in this document

The various data and commentary presented in this document has been compiled and written by One Asia Lawyers, based on

information released at the time of this document’s creation; its accuracy and completeness are not guaranteed. In addition,

One Asia Lawyers bears absolutely no responsibility for any damages incurred as a result of the use of the information in this

document.

●Author：One Asia Lawyers

●Writing date：June/2018

Contact information regarding this document

Persol Research & Consulting Co., Think Tank Headquarters

Overseen by the Persol HR Data Bank, APAC

E-mail:[email protected]

Tel.: +81-3-6385-6888

Company profile 24

Company profile

About PERSOL Research and Consulting

PERSOL Research and Consulting is the PERSOL Group’s think tank and consulting firm.

Through surveys and research, we uncover and clarify issues surrounding people and organizations in areas such as labor

markets, human resources development, new forms of employment, and working styles. We also work to investigate and

present solutions.

We provide solutions in areas including organizational and personnel consulting, people analytics, assessments, talent

management systems, human resources development, and employee training, based on the knowledge built up through our

survey and research activities.

We link these surveys, research, and solutions organically to help solve the various problems that arise in society and

corporations.

About PERSOLKELLY Consulting

PERSOLKELLY Consulting aspires to be a leading global human resource consulting and professional services organisation

committed to shape the future workforce by empowering individuals, organisations and societies.

To further align the corporate brand strategy, PERSOLKELLY Consulting is a rebrand of BTI Consultants in Asia and

Intelligence SMC in Hong Kong. These brands combine their vast experiences and knowledge in innovative talent

development, HR & Management advisory, organisational effectiveness and insights-driven HR solutions to achieve optimal

results for their clients in the regions.

Today, PERSOLKELLYConsulting is represented in 6 countries, includingHong Kong, India, Indonesia, Malaysia, Singapore

and China (operating under Intelligence Anchor Consulting). It is also in active collaboration with PERSOL Research and

Consulting in Japan.

PERSOLKELLY Consulting is an entity within the PERSOLKELLY company, a joint venture between PERSOL Group, and

Kelly Services, Inc, forming one of the largest recruitment companies in Asia Pacific.

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