Complying with Common Philippines Labour Laws: A Guide for Outsourcing
When a company starts to engage workers in different jurisdictions, it quickly becomes clear that the labour laws they might know inside-out in their country simply don’t apply overseas.
How can you be expected to understand local pay, working conditions, rights, and expectations when perhaps you’ve never even been to the country to which you’re outsourcing? You can’t be expected to, and that’s why it’s important to partner with a mature offshoring service provider with a proven track record of compliance.
Compliance is important; workers have rights, and if they aren’t granted, the worker may become disgruntled and leave, which impacts your business, or worse, they may attempt to sue your service provider, driving up costs.
‘Michelle understands the Philippines labour market & legislation. Yempo is a great employer, not a sweatshop.’ – Kirsten F, CEO, Accounting for Good
Below are common examples of labour matters businesses may encounter when outsourcing in the Philippines.
1. Severance and severance pay
Some countries have a very employer-focused labour code, and workers have few rights. The Philippines is not one of these, and any worker who is released “without cause” is entitled to severance payments. These are typically comprised of one month’s salary in lieu of notice, and one month’s salary for each year of service. In the Philippines, the payment is uncapped, so a worker with a 12 year-tenure can expect over a year’s worth of salary as severance payment if they are exited due to no fault of their own. It’s important that you understand how your service provider plans for these payments, to ensure released staff are paid fairly, ethically, and lawfully. Some companies implement unsavoury practices to avoid this expense; this is not the type of company you want your business associated with.
2. Hostile work environment
Employee protection is high in the Philippines, and an unhappy worker who resigns because they felt some aspect of their employment was unacceptable, can sue for constructive dismissal. This means they felt the environment was so unpleasant, they had no choice but to resign and are now without an income. Some service providers will subtly promote a hostile work environment to avoid high severance payments, but this usually backfires. If your offshore worker is not performing, has attendance problems, or any other issues that make you consider releasing them, talk to your offshore partner to understand lawful, fair exit options.
3. Attendance issues
From time-to-time, Yempo will instigate a light disciplinary action. For example, to address repeated attendance issues. Sometimes our client will consider this to be an excessive response, particularly if the worker is a high performer. In a highly regulated employee-centric system such as the Philippines, all companies must document their policies and then apply them consistently. Letting a high performer off the hook for an offense while others are disciplined, would likely result in a claim of discrimination. If your service provider’s actions seem harsh, chat to them about the reasoning.
‘Working with Yempo gives us peace of mind. An employer who fully understands local labour laws.’ – David D, MD, FiveP
4. Misconduct and Disciplinary Action
In the unlikely event your offshore worker does something astoundingly foolish which might be considered a sackable offense, it’s important to follow the lead of your offshore partner. Taking actions such as disabling access in anticipation of a worker being dismissed could be seen as constructive dismissal. Your offshore service provider must follow due process to afford the worker their right to defend themselves, and will talk you through options to limit your exposure. When entering into a relationship with an offshore service provider and offshore workers, it is vital that you ensure workers’ rights, salaries, and benefits are protected. Unethical service providers manipulate and exploit, and there is no place for them in your business practices.
5. Performance Issues
In some countries an underperforming employee can simply be fired or threatened with termination if their performance doesn’t improve. Neither of these are permitted in the Philippines; there are structured processes which must be followed to deal with a resource with quality or productivity issues. Similarly, making threats can backfire, as it leads the situation down the “hostile work environment” path mentioned above. It is vital that your offshore partner works with you during the probationary period to ensure performance is as required. Once probation is passed, performance management can be time consuming for all parties; ensure your partner has sound practices to minimize the impact on your business and your budget.
6. Leave Management
Workers in the Philippines are entitled to Planned and Unplanned leave according to either the minimum stipulated in the Labour Code, or in the Employer’s Company Handbook. They are also entitled to either take public holidays declared by the government, or an hourly uplift if they work on these holidays.
Your offshore provider should have sound methods to track and monitor leave management; a worker takes a leave day without declaring it is essentially committing payroll theft, an unsavoury situation in itself, as well as costing your time or money without benefit.
It’s important to understand your own requirements when it comes to public holidays in your country, and public holidays in the Philippines. Some offshore providers allow direct swapping of the holidays; the workers take your holidays off and work the Philippine holidays. This is however, completely illegal in the Philippines. Your provider should be able to offer you legitimate and ethical options which work for all parties.
Yempo: Your Partner for Peace of Mind in Outsourcing
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Book a quick chat with Michelle today, to know more about our best practices in providing offshore accounting and IT staff from the Philippines – or shoot us an email at [email protected]. We are happy to answer your questions!
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