No. Employer of record infrastructure lets you employ Filipino talent through a licensed local entity that is not yours. You direct the work, the licensed partner runs the payroll, tax, and compliance. Your person is a full-time employee under Philippine labor law, with all the rights and protections that come with it.
This is not a workaround. It is a standard legal structure recognized by the Philippine government and used across the industry, from global platforms to specialists like APAC Talent Hub.
Employment & Compliance
Do you need a local entity in the Philippines to hire someone?
In short
No, you do not need a local entity to hire in the Philippines. You can employ compliantly through an employer of record from day one. Building your own entity generally needs around USD 200,000 in paid-up capital and months of setup, and only pays off at real scale.
Short answer: no. You can employ someone in the Philippines legally and properly without setting up your own entity. Here is how, when it makes sense, and when building your own entity is worth the setup cost.
The short answer
How compliant employment works without your own entity
When we employ someone for you through our infrastructure, here is what happens:
Their contract is written under Philippine labor law.
Their payroll runs through a licensed local entity, with proper tax withholding.
They receive the mandatory contributions: SSS (Social Security), PhilHealth (health insurance), Pag-IBIG (housing fund).
They receive thirteenth-month pay: one twelfth of annual salary, paid as a mandatory bonus.
Statutory leave, holiday pay, and exit process are all handled correctly.
The only thing that is not yours is the legal entity carrying the employment. Everything about the person, their role, their work, their team, is yours.
Their contract is written under Philippine labor law.
Their payroll runs through a licensed local entity, with proper tax withholding.
They receive the mandatory contributions: SSS (Social Security), PhilHealth (health insurance), Pag-IBIG (housing fund).
They receive thirteenth-month pay: one twelfth of annual salary, paid as a mandatory bonus.
Statutory leave, holiday pay, and exit process are all handled correctly.
The only thing that is not yours is the legal entity carrying the employment. Everything about the person, their role, their work, their team, is yours.
When your own entity makes sense
Setting up your own Philippine entity is the right move when:
You are hiring fifteen or more people locally.
You need a physical office presence.
You want direct control over employment policies beyond the standard.
You have strategic reasons to signal local presence.
You are building a business unit that will need Philippine tax residency.
The setup: up to 5 months, plus the paid-up capital requirement below. Ongoing costs of two to five thousand USD per month for accounting, compliance, and admin. And someone internally who understands Philippine corporate law.
For most companies hiring their first few in the Philippines, this is not worth it.
You are hiring fifteen or more people locally.
You need a physical office presence.
You want direct control over employment policies beyond the standard.
You have strategic reasons to signal local presence.
You are building a business unit that will need Philippine tax residency.
The setup: up to 5 months, plus the paid-up capital requirement below. Ongoing costs of two to five thousand USD per month for accounting, compliance, and admin. And someone internally who understands Philippine corporate law.
For most companies hiring their first few in the Philippines, this is not worth it.
What paid-up capital does a foreign-owned entity actually need?
Under the Philippine Foreign Investments Act, a domestic market enterprise that is more than 40 percent foreign-owned must have paid-in capital of at least USD 200,000. This is a statutory requirement, not a guideline, and it is confirmed by law firms and advisors across the market. It can be reduced to USD 100,000 where the enterprise involves advanced technology certified by the Department of Science and Technology, or directly employs at least 50 Filipino workers.
For a plain-English legal summary, see the Baker McKenzie Philippines quick reference guide. This capital requirement is the single biggest reason most companies start with employer of record infrastructure rather than their own entity: there is no capital to lock up.
For a plain-English legal summary, see the Baker McKenzie Philippines quick reference guide. This capital requirement is the single biggest reason most companies start with employer of record infrastructure rather than their own entity: there is no capital to lock up.
The cost comparison
Through employer of record infrastructure, the seat fee typically runs two hundred to six hundred USD per person per month, depending on provider and team size.
Through your own entity, monthly running costs are typically two to five thousand USD flat, regardless of team size up to a point.
If you are hiring one to eight people, employer of record infrastructure is almost always lower on total cost.
If you are hiring eight to fifteen, it depends on the specific rates.
Above fifteen, your own entity usually wins on unit economics.
This ignores time and setup risk. Entity setup of up to 5 months is time you could spend hiring. Companies that go straight to entity setup for a first hire often find themselves most of a year in with no one hired yet.
Through your own entity, monthly running costs are typically two to five thousand USD flat, regardless of team size up to a point.
If you are hiring one to eight people, employer of record infrastructure is almost always lower on total cost.
If you are hiring eight to fifteen, it depends on the specific rates.
Above fifteen, your own entity usually wins on unit economics.
This ignores time and setup risk. Entity setup of up to 5 months is time you could spend hiring. Companies that go straight to entity setup for a first hire often find themselves most of a year in with no one hired yet.
How to decide
Question one: how many people are you planning to hire in the Philippines in the next twelve months.
If the answer is one to five, use employer of record infrastructure. Do not overthink it.
If the answer is six to fifteen, still probably employer of record, but revisit at twelve to fifteen.
If the answer is fifteen plus, start thinking about your own entity, but consider starting with employer of record while you build.
As a rule of thumb: start with employer of record infrastructure for speed and flexibility, and revisit your own entity once you are hiring at a scale where the per-head economics tip in its favour.
If the answer is one to five, use employer of record infrastructure. Do not overthink it.
If the answer is six to fifteen, still probably employer of record, but revisit at twelve to fifteen.
If the answer is fifteen plus, start thinking about your own entity, but consider starting with employer of record while you build.
As a rule of thumb: start with employer of record infrastructure for speed and flexibility, and revisit your own entity once you are hiring at a scale where the per-head economics tip in its favour.
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