Withholding Tax on Compensation is effectively a tax on the income of employees in the Philippines. Taxation on Compensationīusiness owners must also be aware of the key taxation implications that might arise depending on if the company hires employees or engages independent contractors. In order to enforce any such protections, an independent contractor would have to take action through the formal courts, usually in the form of a breach of contract.
EMPLOYEE VS INDEPENDANT CONTRACTOR EXPENSES CODE
Why? The purpose of The Labor Code is to provide financial protections for employees – not for independent contractors!Īs such, the primary protection that an independent contractor would have when working with a company would be any protections that he or she negotiates under the specific terms of his or her service agreement or contractor agreement with that company. When engaging an independent contractor, the company and the contractor have a lot more flexibility to negotiate the terms of the engagement without fearing a breach of local Philippine labor laws. So, when seeking to hire employees in the Philippines, business owners should make themselves fully aware of the protections afforded to employees and the obligations imposed on employers under Philippine labor laws and how this can potentially impact the finances of the business.
If an employee has an issue or complaint against their employer company, they can enforce their labor law protections by making a claim to DOLE. For example, minimum wage rates, form and timing of compensation payments, prohibitions on wage deductions, mandatory compensation payments for regular or special holidays, overtime payments and 13th Month Pay (see No. Importantly, The Labor Code provides for various finance-related protections for employees.
EMPLOYEE VS INDEPENDANT CONTRACTOR EXPENSES FULL
If you hire employees to work for your business in the Philippines, they will be entitled to receive the full suite of protections afforded to them by the Department of Labor and Enterprise, or DOLE, and specifically, under The Labor Code of the Philippines.īoth DOLE and the Labor Code set out the rules and guidelines that employers in the Philippines must comply with in order to ensure protection and support for the employer-employee relationship. In summary, the primary protections that an individual has as an “employee” will be under Philippine labor laws and under the terms of their employment contract (sometimes, these two might overlap).Īn independent contractor’s primary protection, however, will generally only be under the terms of their service agreement. Let’s start with a well known and clear distinction that often arises early within the employee v independent contractor debate – the status and protections of workers under local Philippine laws.
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