Mandatory Employee Benefits and Compensation in the Philippines (2025 Updated Guide)

Employee benefits play an important role in attracting, retaining, and motivating top talent in today’s competitive job market. In the Philippines, these benefits go beyond legal obligations, rather combining government-mandated entitlements with company-initiated programs that usually promote employees’ financial security, health, and career growth. When businesses comply with labor standards and go the extra mile with thoughtfully designed perks, they create a more engaged, loyal, and high-performing workforce.

In this blog, we’ll break down the mandatory employee benefits and compensation required by Philippine law and explore additional perks that can give your company a competitive edge. Dive in—and don’t forget to share your thoughts or let us know how we can support your employee engagement goals!

Employee Benefits and Compensation in the Philippines

While employee benefits and compensation are integral components of an employment package, it is imperative that both first-time employers and employees understand what these really are for labor compliance and the welfare of the employees.  

Compensation

Compensation refers to the monetary payment, including wages, salaries, and bonuses, that employees receive in exchange for their labor. In the Philippines, the compensation rate is determined by the role, experience level, market standards, and other key factors. 

Employee Benefits

Employee benefits are non-wage compensation that supplements the salary package and can include health insurance, retirement plans, paid time off, gym memberships, and other perks that a company offers its qualified employees.  

Mandatory Employee Benefits

Mandatory employee benefits, also known as statutory employee benefits, are entitlements that employers are obligated by law to provide to their employees. Common examples include benefits like paid annual leaves, parental leaves, workers’ compensation insurance, and paid sick leaves.

Legal Framework Surrounding Employee Benefits in the Philippines

The Labor Code of the Philippines (P.D. 442)

The Labor Code of the Philippines (P.D. 442), as amended, is a landmark legislation that governs all employment practices and labor relations in the Philippines. It ensures that both employers and employees are protected and covers various aspects of employment, including employee hiring, compensation, benefits, and termination.  

Social Security Act of 2018 (R.A. 11199)

The Social Security Act of 2018 (R.A. 11199), which repealed R.A. 1161, as amended by R.A. 8282, rationalizes and expands the powers and duties of the Social Security Commission (SSC) to ensure the long-term viability of the SSS. It introduces reforms for the improvement of the benefits for workers and their survivors.

Home Development Mutual Fund Law (R.A. 9679)

The Home Development Mutual Fund (HDMF) Law or Pag-IBIG Fund Law establishes a nationwide savings program for affordable housing for Filipino workers. It also mandates the creation of a fund for other benefits, such as short-term loans and other financial assistance programs.  

National Health Insurance Act of 2013 (R.A. 10606)

The National Health Insurance Act of 2013 (R.A. 10606), which amended NHIA of 1995 (R.A. 7875) expands and strengthens the country’s national health insurance system and aims to achieve universal health coverage. It also enhances the benefits package and focuses on the financial protection, especially of those in vulnerable sectors and marginalized populations. 

Relevant Tax Laws

Existing Philippine tax laws also affect employee compensation. In particular, the Tax Reform for Acceleration and Inclusion (TRAIN) Law has made significant changes to the tax system, particularly for employees. It lowered personal income tax rates across various income brackets, with the first PHP 250,000 of annual income now being tax-exempt. For employees earning above that, the law introduced more progressive tax rates, with reduced taxes for middle and lower-income earners, while higher earners still face higher rates. 

Wages and Compensation

Based on the existing Philippine labor laws, the following forms of compensation must be provided by the employers to their employees: 

Minimum Wage

Ordinary workers who render services for a total of 40 hours per week (i.e., 8 hours per day, 5 days per week) are entitled to receive at least the daily minimum wage. For companies operating within the National Capital Region, the minimum wage is PHP 608 – PHP 645. The DOLE guide to the minimum wage rates per region can be found here. 

Overtime Pay

Employees who render work beyond the prescribed daily work hours are entitled to additional compensation. The standard overtime rate in the Philippines is 25% of the hourly rate during regular working days and 30% during rest days, regular, and special holidays. 

Premium Pay

Premium pay is awarded to employees who work on rest days and regular/special non-working holidays. It is equivalent to 130% of the employee’s daily wage – the rate of the first 8 hours of work, plus a premium of at least 30%. If work is rendered on a special holiday that falls on a scheduled rest day, the premium increases to at least 50% of the regular daily wage. 

Night Shift Differential (NSD)

Employees receive a night shift differential pay of 10% premium added to the regular wage for each hour of work done between 10PM to 6AM. 

13th Month Pay

Rank-and-file employees are entitled to extra month’s basic wages which they must receive before December 24 of every year. Employees who resign from the company before the release of the 13th month pay are still entitled to a pro-rated amount based on the number of months they have worked since the start of the calendar year.

Separation Pay

If an employer terminates employees for labor-saving devices, redundancy, or retrenchment to prevent further business losses or closure, the separated employees are entitled to a separation pay of 1 month salary or ½ to 1 month of salary for every year of service.  

Retirement Pay

Employees who reach 60 to 65 years of age upon serving the employer for at least five years will receive compensation upon retirement. The amount should be at least half a month’s salary for every year of service, i.e., in the absence of a retirement plan or agreement. 

Work Leave Benefits

In addition to compensation, labor laws protect the rights of employees to take breaks and request leaves of absence as needed.

Regular Meal and Break Periods

Employers must give employees a minimum of 60 minutes per day for their regular meals. Break times are not included in the prescribed 8-hour daily work period. 

Service Incentive Leaves

Employees who have worked with the company for at least one year are entitled to a minimum of 5 days with pay, which can be used as sick leaves or vacation leaves. 

Maternity Leaves

All female employees, whether married or not, are entitled to a paid maternity leave of 105 days in case of live birth, with an option to extend it for 30 more days, but without pay. In cases of miscarriage or emergency termination of pregnancy, which includes stillbirth, the paid maternity leave is 60 days. Maternity leaves are also dependent on the employees contributing to the Social Security System (SSS) for at least three months during the prior 12-month period. 

Paternity Leaves

Married male workers can have 7 days of paid paternity leave for the purpose of lending support to the wife during recovery and/or nursing of the newly-born child. They can apply for paternal leave only when they are living with their spouse at the time of delivery or miscarriage. They need to apply for leave within a reasonable period.

Solo Parent Leaves

Solo parents can take up to seven days’ leave to fulfill their parental duties, especially where physical presence is necessary. To be eligible for solo parent leave, one must work for at least one year, including holidays and authorized absence. This one-year period of service can be continuous or broken.

Special Leaves for Female Employees

Under Philippine law, female employees are also granted additional special leave benefits: (a) up to 2 months with full pay for those who undergo surgery to treat gynecological disorders; and (b) up to 10 days with full pay for victims of violence against women and their children.

Bereavement Leaves

While bereavement leave is not mandated by law and falls under the employer discretion, some companies provide the leave as part of their employee benefits. Otherwise, most employers allow employees to take up to 3 days of unpaid leave on the occasion of a death in the family.