Can an Open-Ended Contract Be Used for Project-Based Employment in the Philippines?

Short answer

No. A genuine project-based engagement in the Philippines must have a clearly defined project with a determinable scope and end point known at the time of hiring. Using an open-ended (indefinite) contract for such work is legally risky: it will very likely be treated as regular employment (or, in some industries, a “regular project” relationship), with all the attendant security-of-tenure consequences.

Why this matters

Security of tenure is a constitutional and statutory guarantee in Philippine labor law. Employees are deemed regular when they perform activities usually necessary or desirable to the employer’s business, except when engaged as project or seasonal employees under strict conditions.
Employers carry the burden of proof to show that a worker is legitimately project-based. An open-ended contract undermines that proof.

Legal framework (in plain English)

Labor Code, Art. 295 (formerly Art. 280): Defines regular employment and recognized exceptions, including project and seasonal employment.
Project employment exists when:
1. There is a specific project or undertaking;
2. The duration and scope are defined and made known to the employee at engagement; and
3. The employee is hired only for that project.
Fixed-term employment (a different concept) is allowed when the term is knowingly and voluntarily agreed and not used to circumvent security of tenure. A fixed term can cover a project, but the project nature still requires that the end be tied to completion of the identified undertaking.
Authorized cause vs. completion of project: Completion of a bona fide project is a valid mode of separation different from redundancy, retrenchment, or closure. Separation pay is not due upon project completion (unless the CBA/company policy provides one), but reporting and documentation rules still apply.

What is an “open-ended” contract?

Open-ended / indefinite-term contracts do not specify an end date or a project completion trigger. They presume continuity until a valid cause for termination arises.
If you assign a worker with an open-ended contract to a “project,” you are not creating project employment; you are assigning a regular (or probationary-to-regular) employee to a project.

Consequences of using an open-ended contract for project work

Regularization risk. The worker is likely deemed regular, either immediately (because work is necessary or desirable) or after the probationary period. The label “project” will not save the arrangement.
Termination restrictions. You cannot end the relationship at “project completion” as if it were a project hire. You must have:
- A just cause (e.g., serious misconduct) with twin-notice due process, or
- An authorized cause (e.g., redundancy) with 30-day prior notice to both the employee and the DOLE, plus separation pay where required.
Back wages and damages exposure. Ending a purported “project” assignment at completion without the proper basis may lead to illegal dismissal findings.
Contracting/outsourcing pitfalls. If the worker is deployed via a contractor and the arrangement is labor-only contracting, the worker can be deemed an employee of the principal, with solidary liabilities.

Project employment done right: key elements

To validly engage a project employee, make sure all of this is in place at day one:

Named project
- Identify the project or undertaking (e.g., “Fit-out of ABC Tower – Level 28”).
Defined scope and deliverables
- Describe tasks tied to the project, not to the employer’s general business.
Determinable duration / completion trigger
- State either a specific end date or the objective event that ends the engagement (“upon issuance of the owner’s Certificate of Completion,” “upon turnover of Module 3 to the client,” etc.).
- If duration is uncertain, the completion trigger must still be objective and verifiable.
Disclosure and consent
- Make clear at hiring that employment is for the project only, and the relationship ends automatically upon completion.
Payroll and benefits
- Project employees are still employees: enroll in SSS, PhilHealth, Pag-IBIG, pay 13th-month, and comply with wage orders and OT/holiday pay rules. Service Incentive Leave accrues for at least one year of service (whether continuous or broken), subject to recognized exemptions.
End-of-project documentation
- Provide a written notice of completion to the employee (best practice), and report the termination due to completion to DOLE using the current prescribed form and deadline.

Special industry notes

Construction and shipbuilding: “Project-to-project” hiring is common. Courts recognize “regular project employees”—workers repeatedly hired for similar tasks across projects—who enjoy certain expectations of re-engagement but whose employment still commences and ends per project. Even here, open-ended hiring defeats the project characterization.
IT/software & creative industries: Output-based contracts often blur lines. If the deliverable can be defined and the end point is clear (e.g., “delivery of Version 1.0 plus 60-day bug-fix sprint”), a project engagement is feasible. If the work looks like ongoing operations (maintenance, rollouts, customer support), expect regularization.
BPO/Shared services: Client campaigns with shifting volumes are not projects per se. If the task is part of the employer’s usual business, the safer route is regular employment with internal assignment letters rather than project contracts.

What not to do

Do not issue a contract that says “project-based” but is silent on project scope/duration.
Do not rely on unilateral memos after hiring to “convert” an open-ended hire into project status.
Do not stack back-to-back short terms to mask permanent roles—courts look at substance over form.

Sample clause language (illustrative only)

Nature of Engagement. Employee is hired as a project employee for the [Project Name]. Scope. Employee shall perform [tasks/deliverables] limited to the above project. Project Duration and Completion. This engagement shall commence on [date] and end upon [objective completion event], or on [outer date], whichever occurs first. The parties acknowledge that completion is the automatic terminating event of this employment. No Expectation Beyond Project. Employee understands there is no assurance of continued employment beyond project completion. Reporting of Completion. Employer shall issue a completion notice and file the DOLE termination report due to project completion as required by regulation.

(Replace bracketed items; align with current DOLE forms and deadlines.)

Decision guide: Is project employment appropriate?

Can you name the project? — If no, it’s not project employment.
Is the end point objective and determinable at hiring? — If no, it’s not project employment.
Are the tasks limited to the project (not ongoing operations)? — If no, it’s not project employment.
Will the person be repeatedly rehired for similar work? — If yes, anticipate “regular project” treatment and adjust documentation.
Are you tempted to keep the contract open-ended “just in case”? — If yes, don’t call it project employment. Use regular employment and manage assignments internally.

Frequently asked edge cases

“Milestone-based but no final date yet—okay?” Yes, if the completion trigger is objective (e.g., client acceptance of final deliverable). Avoid vague triggers like “until management decides.”
“Add an outer long-stop date?” Good practice. It supplies determinability and prevents “endless project” optics.
“Early termination for cause?” Include a just-cause clause with twin-notice due process. For authorized causes, follow statutory 30-day notice and separation pay rules.
“Multiple concurrent projects under one contract?” Use separate project addenda (each with scope and completion) or distinct contracts, to preserve project character.
“Completion bonus?” Not mandatory by law. If you provide one, spell out eligibility and forfeiture rules cleanly.

Practical compliance checklist

Project named and described in the offer and the contract
Scope and completion trigger disclosed at hiring
Outer date included (recommended)
Payroll/benefits set up like any employee (SSS, PhilHealth, Pag-IBIG, 13th-month, wage/OT rules)
Completion notice to the employee (best practice)
DOLE termination report due to project completion filed on time
Record-keeping: contracts, completion certifications, client acceptances

Bottom line

A true project engagement in the Philippines cannot be open-ended.
If you want flexibility for shifting workloads or uncertain horizons, use regular employment and manage assignments, or craft a proper project contract with clear completion triggers (and optionally a long-stop date).
Labels don’t control; facts and documents do. Design the arrangement to reflect the actual work reality and the legal requirements from day one.

This article provides general information for the Philippine setting and is not a substitute for specific legal advice on a particular set of facts.