Employing Philippine Staff: What a Foreign Company Must Get Right

Foreign companies that want to employ Philippine staff must deal with two separate legal questions: who may work in the Philippines, and how workers may be hired. Under the Labor Code of the Philippines, any alien seeking admission to the country for employment, and any domestic or foreign employer who desires to engage an alien for employment in the Philippines, must obtain an employment permit from the Department of Labor. Hiring Filipino workers for overseas employment, on the other hand, is governed by recruitment rules that generally require going through licensed agencies rather than hiring directly.

The employment permit rule for foreign nationals

Article 39 of the Labor Code provides that any alien seeking admission to the Philippines for employment purposes, and any domestic or foreign employer who desires to engage an alien for employment in the Philippines, shall obtain an employment permit from the Department of Labor.

The permit may be issued to the nonresident alien or to the applicant employer. Before it is issued, there must be a determination of the non-availability of a person in the Philippines who is competent, able and willing at the time of application to perform the services for which the alien is desired. In other words, the employer must show that the role cannot be filled locally.

For an enterprise registered in preferred areas of investments, the employment permit may be issued upon the recommendation of the government agency charged with supervising that registered enterprise.

No transferring an alien employee without approval

Once an employment permit is issued, the alien cannot simply be moved to another role or employer. Under Article 40 of the Labor Code, after the issuance of an employment permit, the alien shall not transfer to another job or change his employer without prior approval of the Secretary of Labor.

Employers that already had nonresident foreign nationals on staff at the time the Code took effect were required to submit a list of those nationals to the Secretary of Labor within thirty (30) days, indicating their names, citizenship, foreign and local addresses, nature of employment and status of stay in the country. The Secretary then determines whether they are entitled to an employment permit.

Hiring Filipino workers for overseas employment

A common misconception is that a foreign company can simply hire Filipino staff directly. For overseas employment, the Omnibus Rules implementing the Labor Code state a ban on direct hiring: no employer may hire a Filipino worker for overseas employment except through the entities authorized by law, such as public employment offices, private recruitment entities, private employment agencies, and shipping or manning agents, or as authorized by the Secretary.

Direct hiring by members of the diplomatic service, officials and employees of international organizations, and such other employers as may be authorized by the Secretary is exempted. Such hirings are processed by the Overseas Employment Development Board.

This matters because recruitment and placement is a regulated activity. Under the Omnibus Rules, only Filipino citizens, or corporations, partnerships or entities at least seventy-five percent (75%) of the authorized and voting capital stock of which is owned and controlled by Filipino citizens, may participate in the recruitment and placement of workers, locally or overseas.

What a compliant hiring path looks like

For a foreign employer that needs Philippine-based talent, the practical sequence is:

1. Determine whether the worker will be based in the Philippines or overseas. The rules differ sharply between the two.
2. If the worker is a foreign national who will work in the Philippines, apply for an employment permit under Article 39, supported by a showing that no competent, able and willing person in the Philippines is available for the role.
3. If the worker is a Filipino being deployed overseas, engage an authorized recruiter or confirm that the hiring falls under an exempted category, since direct hiring is banned by the Omnibus Rules.
4. Observe post-issuance restrictions. Do not transfer an alien employee to another job or employer without prior approval of the Secretary of Labor.
5. Keep employment records and reportorial obligations current, since the Labor Code gives the Secretary of Labor regulatory and inspection powers over covered entities.

Frequently asked questions

Can a foreign company hire Filipino workers directly? For overseas employment, generally no. The Omnibus Rules impose a ban on direct hiring, and hiring must go through authorized entities unless the employer falls under an exempted category such as the diplomatic service or international organizations.

Does a foreign employer need a permit to employ an alien in the Philippines? Yes. Article 39 of the Labor Code requires both the alien and the employer desiring to engage the alien to obtain an employment permit from the Department of Labor.

Can an alien employee change jobs after getting a permit? Not without prior approval. Article 40 states that after the issuance of an employment permit, the alien shall not transfer to another job or change his employer without prior approval of the Secretary of Labor.

Practical takeaways

• An employment permit under Article 39 is required for aliens working in the Philippines, and issuance depends on proving no competent, able and willing local person is available.
• Article 40 bars an alien from transferring to another job or employer without prior approval of the Secretary of Labor.
• Direct hiring of Filipinos for overseas employment is banned under the Omnibus Rules, subject to narrow exemptions processed by the Overseas Employment Development Board.
• Recruitment and placement activities are reserved to Filipino citizens or entities at least 75% Filipino-owned and controlled under the Omnibus Rules.
• Where the rules are unclear, resolve the doubt carefully — both the Labor Code and the Omnibus Rules direct that doubts be resolved in favor of labor.

Primary sources

The rules discussed above are drawn from the following primary sources, as published in the Official Gazette and the national statute book.

• OMNIBUS RULES IMPLEMENTING THE LABOR CODE - OMNIBUS RULES IMPLEMENTING THE LABOR CODE

• Labor Code of the Philippines (Presidential Decree No. 442)

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.