Why Hire an Employer of Record from the Philippines?
Utilizing the services of an Employer of Record (EoR) from the Philippines enables a client or company to cost-effectively outsource their tax compliance, human resource management, salary compensation, benefits administration, and payroll processing to minimize legal and tax burdens from their enterprise.
Whether you are planning on expanding to the Philippines or just want to avail of low labor costs, an EoR is a cost-effective outsourcing model that you should consider. An EoR can help you strategize your market entry plans and/or lessen complexities associated with government compliance, tax schemes, and other regulations.
An EoR files all paperwork required for submission to the government under its own Tax Identification Numbers (TINs) to overtake tax compliance and labor-related regulations from the client. EoRs usually consist of Labor Relations Specialists who hold expertise in local labor laws and regulations as well as HR Consultants who are knowledgeable with best practices in organizational development and HR policy implementation.
EoRs are attractive business options for companies that:
- Seek to reduce labor costs by outsourcing back-office job functions
- Need assistance with tax, legal, employment, payroll, and government compliance in the Philippines
- Are looking to expand operations into the Philippines but intend to limit their initial commitment by exploring cost-effective alternatives on how to comply with government requirements
- Want to hire virtual employees from the Philippines without incorporating a new company or undergoing business licensing to establish a subsidiary company or branch office of their existing corporation abroad
Employer of Record vs Staff Leasing
Both EoR and Staff Leasing are convenient outsourcing models which handle employees for foreign companies. Although often confused with each other, they provide different services and hence cannot be considered the same.
An EoR serves as an employer who places a client’s employees on its payroll and handles their HR, compensation and benefits, tax, and employment contracts while they perform work for the client. For tax purposes, the EoR is considered as the primary employer and is legally responsible for all the employees’ labor and tax-related concerns.
Staff Leasing, on the other hand, is a co-employment arrangement where a client avails the services of a Staff Leasing provider to source, recruit, and monitor payroll and HR management of an offshore team of professionals that renders services for them. The Staff Leasing provider is a co-employer and cannot be held liable for the employees beyond the scope of their services.
If you are looking to outsource your entire recruitment, payroll, and HR functions to a third-party provider while still holding responsibility for tax and labor-related concerns, Staff Leasing is the ideal option. But if you want to minimize tax, labor, and legal obligations by delegating these responsibilities to a service provider, EoR will fit your specifications.
Benefits of Utilizing the Services of an EoR
Cost Savings on Salary Compensation
Salary rates in the Philippines are relatively cheaper compared to those of affluent countries like USA, UK, Australia, and Singapore. In the USA alone, the average monthly net salary (after tax) is US$3,022.89 (PhP164,282.98) while in the Philippines, the same is US$279.43 (PhP15,186.24). These comparative salary rates have a 90.76% difference, a significantly wide gap that helps a company save a huge amount of capital on salary compensation.
When you hire employees from another country, you are required to comply with that country’s labor laws and regulations. With an EoR, you can remove this obligation from your enterprise and obtain a trusted consultant who will handle all your filings, withholdings, and deadlines with the Philippine government.
Reduced Liabilities on Employees
The EoR will be recognized by the government as the legal employer and is thus required to overtake responsibility for the employees’ welfare. EoRs are knowledgeable with local laws and best practices in doing business in the Philippines so you can be assured that you are upholding fair labor practices and compensating your employees according to local industry standards.
Proper Administration of Insurance Coverage
As the legal employer of their client’s employees, EoRs make sure they are provided with government-mandated benefits such as health insurance, social insurance, and home loan insurance. They also guarantee that employees are covered for damages, such as those caused to property or other people, as well as workplace-related injuries or illnesses.
Employing the Services of an EoR
An EoR will allow you to free up time on essential business functions you lack the internal resources for. It will handle your offshore/virtual employees and assume legal responsibility for their tax and labor-related concerns, helping you save on labor costs and providing you with an excellent avenue for business expansion in the Philippines.
If you want to hire an EoR from the Philippines, our business consulting firm, Kittelson & Carpo Consulting, will assist you. Our HR Consultants, Payroll Professionals, Labor Relations Specialists, and Legal Experts will help you explore cost-effective solutions on how to get the full benefits of outsourcing in the Philippines. Give us a call today!