(Philippine legal context; practical drafting guide for HR and employers)

1) The legal baseline: what an employment contract must reflect

In the Philippines, an employment contract is not the only source of rights and duties. Many terms are imposed by law and will apply even if omitted or written inconsistently. A well-drafted contract should therefore (a) clearly state the parties’ agreement, and (b) align with mandatory labor standards and procedural due process rules.

Core governing sources (high level):

Labor Code of the Philippines (as amended) and implementing rules
DOLE issuances and wage orders (regional minimum wages; labor advisories)
Social legislation: SSS, PhilHealth, Pag-IBIG coverage and remittances
Employee welfare and workplace laws (e.g., OSH, anti-harassment, data privacy)

A contract that reduces statutory benefits or waives labor rights is typically unenforceable to that extent.

2) Start with classification: the “type of employment” clause

This is foundational because it drives security of tenure, end-of-contract rules, and termination standards.

A. Regular employment (default when in doubt)

A worker becomes regular if engaged to perform activities usually necessary or desirable in the employer’s business, or after completing probation. Regular employees enjoy security of tenure—they can be dismissed only for just causes or authorized causes with due process.

Drafting essentials

State the role and nature of work clearly.
Avoid “end date” language inconsistent with regular status.

B. Probationary employment

Probation is permitted only if the employee is informed of the reasonable standards for regularization at the time of engagement, and probation does not exceed the legal maximum (commonly 6 months, subject to limited exceptions in jurisprudence).

Must-have components

Probation period start and end (or maximum duration).
Regularization standards (measurable criteria: performance metrics, attendance, conduct, competencies).
Evaluation schedule and documentation.

C. Project employment

Valid when employment is tied to a specific project with defined scope and duration, and the employee is informed of the project nature and expected completion.

Must-have components

Project name/description, assignment, deliverables.
Estimated start/end or completion milestone.
Treatment of extensions, re-assignment, and completion reporting.

D. Fixed-term employment

Permissible if the fixed term is genuinely agreed and not used to defeat security of tenure. Draft carefully: fixed-term is scrutinized.

Must-have components

Clear term dates.
Clear explanation of why term employment is appropriate (business justification).
Non-contradictory provisions (avoid “regular employee” language).

E. Seasonal employment

Appropriate when work is seasonal and employment is for the season only.

Must-have components

Seasonal period and nature of season-based work.
Recall/re-hire mechanics, if any.

F. Special categories

If the engagement falls under special regimes, use a dedicated template:

Kasambahay (Domestic Workers) — governed by the Domestic Workers Act; contract must contain specific items.
Apprentices/learners — require compliance with training standards and documentation.
Fixed-term for officers/expatriates — add immigration/work authorization clauses where applicable.

3) Parties, capacity, and employer identity

Essential clause elements

Full legal names, addresses, and identifiers of employer and employee.
Employer’s registered business name and signatory authority.
Worksite/business locations (including branches).

Why it matters: misidentification can complicate enforcement, tax, and benefits registrations.

4) Position, duties, reporting line, and flexibility

A. Job title and primary responsibilities

Define:

Title and department
Direct supervisor / reporting structure
Scope of duties (core functions)

B. Management prerogative / reasonable re-assignment

Employers generally retain the right to reassign work within reason (same rank/pay; non-punitive; business necessity). Draft a clause that permits:

changes in duties consistent with qualifications,
transfers among sites within a defined geographic scope, and
temporary assignments.

Guardrail drafting: add that changes will be consistent with law and will not reduce compensation/benefits.

5) Place of work, remote work, and mobility

Essential coverage

Primary work location and any fieldwork requirements.
For remote/hybrid: specify the arrangement, reporting, availability windows, equipment use, reimbursements (if any), data security, and right to require onsite work for business reasons.

Recommended remote-work inclusions

Work hours and timekeeping method
Confidentiality/data privacy controls at home
Safety and incident reporting expectations
Employer-provided tools vs BYOD rules

6) Term/commencement and pre-employment conditions

Must-have

Start date and whether employment is subject to conditions precedent:
- background checks (where lawful and relevant),
- medical fitness, and
- submission of statutory IDs and requirements.

Drafting caution: conditions should be reasonable, job-related, and consistently implemented.

7) Compensation: wage, pay period, and lawful deductions

A. Basic pay

State clearly:

Basic salary rate (monthly/daily/hourly), and
Pay schedule (e.g., semi-monthly) and pay method.

Ensure compliance with regional minimum wage and wage-related rules.

B. Allowances and benefits

Identify whether each item is:

taxable or non-taxable (as administered), and
integrated into wage or separate.

Common items:

Transportation, meal, communication allowances
Rice subsidy
De minimis benefits (if structured accordingly)
HMO/insurance

C. 13th month pay

This is generally mandatory for rank-and-file employees. Include a clause acknowledging entitlement and computation basis (aligned with PD 851 practice).

D. Incentives, commissions, bonuses

Draft precision points:

Definition of “earned” commissions (upon billing? collection? delivery?)
Clawback/chargebacks (returns, cancellations)
Bonus as discretionary vs guaranteed (avoid creating unintended enforceable obligations)

E. Overtime, premiums, differentials

A robust template addresses:

Overtime authorization and approval process
Rest day/holiday work premiums
Night shift differential applicability
Timekeeping rules

F. Lawful deductions

State deductions only as allowed by law (statutory contributions, withholding tax, authorized deductions with written consent where required). Include:

Salary loans/advances and repayment rules (with consent)
Damage/loss deductions only when legally permissible and with due process

8) Work hours, rest days, holidays, and leave entitlements

A. Hours of work

Specify:

Regular work schedule and break periods
Flexitime (if any) and core hours
Rules on timekeeping and tardiness/undertime

B. Rest day and holidays

Include:

Weekly rest day schedule or rotating rest days
Holiday work policies and compensation references to company handbook/policy (provided such policies meet legal minimums)

C. Service Incentive Leave (SIL) and other leaves

Recognize statutory minimums (e.g., SIL for covered employees) and company-provided leaves:

Vacation leave / sick leave (if offered beyond statutory minimums)
Special leaves applicable by law (maternity, paternity, solo parent, VAWC leave, special leave for women, etc.)—often referenced via “in accordance with law and company policy.”

Drafting tip: For statutory leaves that change over time, use “as provided by applicable law” rather than hardcoding numbers that may become outdated.

9) Standards of conduct and company policies (incorporation by reference)

Most employers use a handbook/code of conduct. The contract should:

Incorporate company policies by reference,
Require acknowledgment of receipt, and
Clarify that policies may be updated subject to law and due process.

Common policy areas to reference

Attendance/timekeeping
Anti-harassment and respectful workplace
Drug-free workplace
Conflict of interest and gifts
IT and acceptable use
Data privacy and security
Discipline and investigation procedures

10) Performance management and probation/regularization mechanics

For probationary employees, include:

Clear performance standards
Evaluation intervals
Documentation and coaching process
Consequences for failing standards, consistent with due process

For regular employees:

KPI setting and performance review cadence
Performance Improvement Plan mechanics (if used)

11) Confidentiality, trade secrets, and data privacy

A. Confidentiality clause

Define:

“Confidential Information” (business plans, pricing, client lists, technical specs, source code, etc.)
Duty to protect during and after employment
Permitted disclosures (authorized, legal compulsion, whistleblowing under applicable protections)

B. Data privacy clause (Philippine setting)

Employment involves personal data processing. Include:

Employee acknowledgment of company privacy notices/policies
Lawful processing for HR administration, benefits, compliance, security
Cooperation obligations (e.g., secure handling of personal data)
Breach/incident reporting obligation

C. Return and deletion of information

Require return of documents, IDs, keys, devices; deletion of company data from personal devices/accounts if BYOD is permitted.

12) Intellectual property and work product ownership

For roles producing creative/technical output, specify ownership and assignment:

Works created in the course of employment or using company resources
Assignment of rights to employer to the extent permitted by law
Assistance in perfecting IP filings
Moral rights handling (for copyrightable works) to the extent allowed

Drafting tip: Be specific about scope (what belongs to the company) and exclude prior inventions or purely personal work created without company resources and outside job scope, if that is the intended balance.

13) Non-solicitation, non-compete, and restraints of trade

A. Non-solicitation (generally more enforceable)

Prohibit solicitation of:

clients/customers,
suppliers, and/or
employees, for a limited period after separation.

B. Non-compete (high scrutiny)

Non-competes must be reasonable in:

time,
geographic scope, and
scope of restricted activity, and necessary to protect legitimate business interests.

Practical drafting approach

Prefer narrow restrictions tied to actual competitive harm.
Use tiered restrictions (e.g., stricter for senior executives, lighter for rank-and-file).
Consider substituting non-solicitation + confidentiality where feasible.

14) Tools, equipment, and expense policies

Include:

Issuance of company property (laptop, phone, access cards)
Acceptable use, monitoring (consistent with privacy rules and notices)
Accountability for loss/damage (with lawful deductions/discipline rules)
Reimbursement policy and approval workflow for business expenses

15) Workplace health and safety; OSH compliance

A contract typically references compliance with employer safety policies, including:

Reporting of incidents and hazards
Participation in OSH trainings
Fitness-to-work and medical examinations where required/justified
Drug and alcohol policy (if implemented under lawful standards)

16) Anti-harassment, respectful workplace, and non-discrimination

Given Philippine statutory frameworks on sexual harassment and safe spaces, include:

Duty to comply with anti-harassment policies
Reporting channels and investigation commitment
Non-retaliation statement
Equal opportunity / anti-discrimination policy reference

This is often implemented via handbook policies, but contract-level acknowledgment strengthens enforceability.

17) Disciplinary procedure and administrative investigations

While detailed procedure is often in the handbook, the contract should:

Recognize the employer’s right to impose discipline for just causes,
Tie enforcement to company rules and due process, and
Require cooperation in investigations.

Due process alignment (conceptual)

For just causes: notice and opportunity to be heard (twin-notice rule in practice).
For authorized causes: notices and separation pay rules where applicable.

18) Termination and separation clauses (must be legally aligned)

A. Grounds for termination

A contract may enumerate grounds but should anchor them to:

Just causes (e.g., serious misconduct, willful disobedience, gross neglect, fraud, etc.)
Authorized causes (e.g., redundancy, retrenchment, closure not due to serious losses, disease under conditions)

Avoid adding “grounds” that effectively allow termination at will.

B. Resignation and clearance

Include:

Notice period requirement (commonly 30 days, subject to lawful exceptions)
Clearance process for return of property and final pay processing
Final pay timing subject to company process and applicable DOLE guidance

C. Separation pay

State that separation pay applies when required by law (authorized causes, etc.) and that company policy may provide additional benefits.

19) Employee benefits administration and statutory contributions

Include:

Registration and remittance of SSS, PhilHealth, Pag-IBIG
Withholding tax compliance
Employee obligation to provide accurate information and update civil status/dependents for benefits administration

20) Conflict of interest, outside employment, and ethics

A strong clause covers:

Duty to avoid conflicts (self-dealing, vendor relationships, gifts)
Disclosure obligations
Limits on outside employment/business that competes, impairs performance, or creates conflict
Requirement to obtain written approval for certain activities (if policy so provides)

21) Communication, notices, and electronic signatures

Modern templates specify:

Official channels (company email, HRIS portals)
Consent to electronic notices/policies
Rules on acknowledgment and record-keeping
E-signature validity (where used)

22) Dispute resolution, venue, and governing law

A. Governing law

State: laws of the Philippines.

B. Internal grievance mechanisms

Reference HR grievance procedures and escalation.

C. Venue and labor jurisdiction reality

Employment disputes involving labor standards, illegal dismissal, money claims, etc., generally fall under Philippine labor tribunals and statutory frameworks; contractual venue clauses have practical limits. Drafting should avoid implying that employees waive statutory forums.

D. Arbitration clauses

Arbitration in employment is a specialized area; enforceability depends on context and cannot override mandatory labor protections. If used, draft narrowly and consistently with applicable rules.

23) Separability, entire agreement, and amendments

Include standard legal hygiene clauses:

Separability: invalid provisions don’t void the whole contract.
Entire agreement: supersedes prior discussions.
Amendments: must be in writing and signed (or formally acknowledged via HRIS with audit trail).

24) Practical “template architecture” (recommended order)

A clean Philippine employment contract template commonly follows:

Title and Parties
Commencement Date; Employment Type (probationary/project/fixed-term/etc.)
Position; Duties; Reporting Line; Management Prerogative
Work Location; Mobility; Remote Work (if applicable)
Work Schedule; Timekeeping; Overtime Authorization
Compensation; Pay Schedule; Allowances; 13th Month; Incentives/Commissions
Benefits; Statutory Contributions; Withholding
Leaves and Holidays (by reference to law and policy)
Standards of Conduct; Handbook/Policy Incorporation
Confidentiality; Data Privacy; Return of Property
Intellectual Property; Work Product
Conflicts of Interest; Outside Work
Discipline; Investigations
Termination; Resignation; Clearance; Final Pay
Non-solicitation/Non-compete (if any)
Notices; Electronic Communications
Governing Law; Dispute Resolution
Miscellaneous: Separability, Entire Agreement, Amendments
Signature Blocks; Acknowledgments (handbook/privacy notice receipt)

25) Sample clause language (illustrative, not one-size-fits-all)

Employment classification (probationary)

The Employee is engaged on a probationary basis commencing on ___ and ending on ___ (or upon completion of a maximum probationary period allowed by law). The Employee shall be assessed for regularization based on the following reasonable standards communicated at the start of employment: (a) quality and timeliness of work outputs; (b) achievement of role-specific performance metrics; (c) attendance and punctuality; (d) compliance with company policies and code of conduct; and (e) teamwork and professionalism.

Compensation

The Employee shall receive a basic salary of PHP ___ per month, payable semi-monthly on ___ and ___. Statutory deductions and lawful withholdings shall be made. The Employee shall be entitled to 13th month pay and other legally mandated benefits in accordance with applicable law. Any discretionary bonus, if granted, shall be subject to company rules and performance considerations and shall not be deemed a guaranteed benefit unless expressly stated in writing.

Confidentiality

The Employee shall hold in strict confidence all Confidential Information acquired during employment and shall use such information solely for the performance of duties. This obligation continues after separation. Confidential Information excludes information that becomes publicly available through no fault of the Employee or is disclosed pursuant to lawful order, provided the Employee promptly notifies the Company when legally permitted.

Return of property

Upon demand or separation, the Employee shall return all Company property and records, including devices, documents, and credentials, and shall not retain copies in any form. Where the Employee used personal devices for work pursuant to Company policy, the Employee shall cooperate in the removal of Company data and access credentials.

Non-solicitation (post-employment)

For a period of ___ months after separation, the Employee shall not, directly or indirectly, solicit Company clients/customers with whom the Employee had material dealings during the last ___ months of employment, for products or services that compete with the Company.

26) Frequent drafting mistakes in Philippine employment contracts

Labeling an employee “fixed-term” while assigning ongoing core business functions with repeated renewals.
Probationary contracts that do not specify regularization standards at hiring.
“Termination at will” language or clauses that bypass due process.
Deductions for loss/damage without legal basis or without due process/consent where required.
Overbroad non-competes imposed on all employees regardless of role, with excessive duration or scope.
Vague commission clauses that trigger disputes over when commissions are “earned.”
Failure to incorporate handbook policies properly or to obtain signed acknowledgments.
Inconsistent clauses (e.g., “regular employee” while stating an end date).

27) Bottom line

An “essential clauses” Philippine employment contract template is less about adding more text and more about correctly capturing: (1) employment classification; (2) compensation and statutory entitlements; (3) hours and leave framework; (4) policy incorporation and discipline; (5) confidentiality/data/privacy and IP; and (6) separation rules aligned with security of tenure and due process.