How Philippine Start-Ups Can Stay 100 % Compliant With Labor Laws
A comprehensive legal guide for founders, HR leads, and investors
1. Why Labor-Law Compliance Matters
- Risk management: Monetary penalties, stop-work orders, or even criminal liability under the Labor Code can derail fundraising rounds or acquisitions.
- Talent strategy: Early-stage companies that pay mandated benefits and follow due-process rules can recruit senior hires away from incumbents more easily.
- Investor diligence: Venture capital term sheets now include “clean employment practices” reps and warranties—non-compliance becomes a valuation haircut.
2. Core Legal Framework
| Law / Issuance | Key Coverage |
|---|---|
| Labor Code of the Philippines (Pres. Decree 442, as amended) | Working hours, wages, leaves, termination, labor relations |
| Pres. Decree 851 | 13th-Month Pay |
| Republic Act 11210 | 105-Day Expanded Maternity Leave |
| RA 8187 | Paternity Leave |
| RA 11165 | Telecommuting Act (work-from-home parity) |
| RA 11058 + DOLE D.O. 198-18 | Occupational Safety & Health Standards |
| RA 10911 | Anti-Age Discrimination in Employment |
| DOLE D.O. 174-17 | Regulation of job contracting/sub-contracting |
| SSS Law (RA 11199), PhilHealth Law (RA 11223), Pag-IBIG Law (RA 9679) | Mandatory social security, health, and housing fund coverage |
(Other special leaves: solo parent, VAWC, gynecological, Magna Carta for Women, COVID-related EEC aid, etc.)
3. Before Hiring Your First Employee
Register as an employer with
- SSS (R-1 form)
- PhilHealth (ER1 form)
- Pag-IBIG (Employer’s Data Form)
- BIR (update COR to include “WITHHOLDING TAX ON COMPENSATION”)
DOLE Establishment Reporting
- Submit “Rule 1020” form within 30 days of operation.
Draft core HR documents
- Employment contract templates (probationary, regular, project-based).
- Company handbook with code of conduct, grievance, disciplinary, and OSH policies.
Set up payroll system that automatically
- Computes minimum wage per latest Regional Wage Order.
- Calculates tax-required withholding (BIR Table 1) and statutory contributions.
- Generates BIR Form 2316 and Alpha List.
4. Hiring & Contracting Correctly
4.1 Employment Statuses
| Status | Max Duration | Notes |
|---|---|---|
| Probationary | 6 months | Must specify reasonable standards in writing on day 1. |
| Regular | — | Tenure security; dismissal only for just/authorized cause + due process. |
| Project/Seasonal | Life of project/season | No separation pay at end of project if bona fide. |
| Fixed-Term | Specific period | Allowed if employee knowingly consents and term is determinable from the start. |
| Apprentice/Learnership | 3–6 months | Must be DOLE-registered training program; apprenticeship for technical; learnership for non-technical. |
4.2 Independent Contractors & Freelancers
- Apply the four-fold test (selection & dismissal, payment of wages, power of control, ownership of tools).
- Engage manpower agencies only if DOLE-licensed per D.O. 174; check certificate validity.
- Include Service Agreement with clear deliverables, indemnity, and proof of remittances to statutory agencies for contractor’s personnel.
5. Working Time & Pay Rules
| Item | Statutory Rule |
|---|---|
| Normal hours | 8 hrs/day, 48 hrs/week max (Art. 83) |
| Meal break | 60 min unpaid (may be 30 min for startups with < 10 workers) |
| Overtime | 25 % premium (workdays); 30 % (rest-day/holiday OT) |
| Night-shift differential | 10 % premium (10 PM–6 AM) |
| Rest day premium | 30 % of basic for first 8 hrs |
| 13th-Month Pay | 1/12 of total basic earned; must be paid on/before 24 Dec |
| Service Incentive Leave | 5 paid days after 1 year of service |
| Leaves (special) | Maternity 105 days (+ optional 30); Paternity 7; Solo Parent 7; VAWC 10; Magna Carta of Women 2-month gynecological; etc. |
| Holiday Pay | 100 % for regular holiday even if unworked; plus 30 % if worked |
| Minimum Wage | Use current regional wage board order (e.g., NCR ₱610 effective July 2024) |
6. Statutory Contributions & Reporting Calendar
| Due Date | Form | Agency | What |
|---|---|---|---|
| 10th of next month | R-5 + Electronic Payment | SSS | Employer share 8.5 % + employee 4.5 % (salary credit cap ₱30k) |
| 15th & last day of month | RF-1 | PhilHealth | 4.5 % split 50-50 (salary cap ₱100k) |
| 10th of next month | MCRF | Pag-IBIG | 2 % employee + 2 % employer (salary cap ₱5k) |
| On or before payday | BIR Form 1601-C | BIR | WTC withheld |
| 31 Jan (annual) | BIR 1604-C | BIR | Alpha list of employees |
| 30 Apr (annual) | OSH Program report | DOLE | Mandatory, include safety officer and first aider credentials |
| End of Nov | Yearly establishment report | DOLE | Labor Standards Compliance |
(Use an internal compliance calendar or automations to ensure no missed filings.)
7. Workplace Standards & OSH
Safety Officer & First Aider
- Start-ups with 1–9 workers: Safety Officer 1 (BOSH-SO1 8-hr online) + 1 first aider with BFAD-accredited training.
OSH Program must be submitted and posted.
Fire & building permits must reflect occupancy load and emergency plans.
Provide PPE where necessary; ergonomics assessment for prolonged computer use.
Mental Health: RA 11036 requires company policies and referral mechanisms for psychosocial support.
8. Equality & Anti-Harassment
Anti-Sexual Harassment Act (RA 7877)
- Create Committee on Decorum and Investigation (CODI) even if < 10 employees; can pool with sister company.
Safe Spaces Act (RA 11313) extends liability to online harassment—important for remote-first teams.
Anti-Age, Anti-Gender, Anti-Disability and Anti-HIV Discrimination statutes require objective job qualifications and diversity policies.
9. Telecommuting & Flexible Work
- Written Telecommuting Agreement stating that remote employees receive “at least the same” wages, leave credits, and career development opportunities.
- Provide or subsidize ICT equipment and shouldering of utility costs if included in policy.
- Data-privacy compliance under RA 10173: implement access controls, NDAs, and Secure VPN.
10. Discipline, Termination & Resignation
| Cause | Statutory Steps |
|---|---|
| Just Cause (e.g., serious misconduct, willful disobedience) | Twin-Notice Rule: 1) Notice to Explain (NTE) describing facts + 5-day reply period; 2) Notice of Decision with findings. |
| Authorized Cause (redundancy, retrenchment, closure) | 30-day advance notice to employee and DOLE Regional Office; pay separation per Art. 298 scale. |
| Abandonment | NTE sent to employee’s last known address + notice of decision. |
| Resignation | Employee gives 30-days’ written notice unless cause prevents it; employer issues COE within 3 days of clearance. |
11. Labor Relations & Unions
Even micro-startups may receive a Notice of Union Organizing. Management may:
- Respect employees’ right to self-organization (Art. 257).
- Engage in Certification Election if majority support.
- Bargain in good faith once union becomes exclusive bargaining agent.
12. Government Inspections & How to Pass Them
Labor Inspection / Compliance Visit (formerly TPLEX).
Hot issues for start-ups:
- Misclassification of “consultants” who pass control test.
- Unpaid statutory OT/night premiums (especially for engineering teams pushing product sprints).
- No OSH program or trained Safety Officer.
Preparation Checklist:
- 201 file for every employee with signed contract, IDs, SSS/PhilHealth numbers.
- Latest payroll register + proof of remittances.
- Copies of policy postings: wages, OSH, Safe Spaces, Anti-Sexual Harassment.
- Logbook of accidents/incidents, fire drill certificate.
13. Special Topics for Start-Ups
Equity-compensated talent: Stock options are not wages but still require payment of minimum wage and 13th-month pay in cash.
Foreign founders & employees:
- AEP (Alien Employment Permit) + 9(g) visa; SMEs under BOI may apply for exemption quotas.
Start-up Act (RA 11337): tax incentives do not waive labor-law duties.
ESOP tax withholding: Taxable at exercise; plan administration does not replace BIR Form 2316 reporting.
14. Compliance Infrastructure & Best Practices
Digital HRIS + Payroll that syncs to BIR, SSS, PhilHealth, Pag-IBIG APIs.
Employee Handbook reviewed annually; circulate via e-signature platform.
Quarterly legal audit: involve outside counsel to sample payslips, permits, termination papers.
Train founders & managers: at least 1-hour annual briefing on labor standards and harassment laws.
Document retention:
- Payroll & remittance records = 3 years (Art. 115).
- OSH medical records = 5 years.
- Tax compliance docs = 10 years (NIRC amended).
15. Penalties for Non-Compliance
- Labor–only contracting: stop-work order, solidary liability, and up to ₱100 k fine per worker.
- OSH violations: ₱40 k/day until corrected.
- Non-payment of 13th-month: up to ₱30 k fine per offense + imprisonment of company officials.
- Wage underpayment: double indemnity (amount underpaid × 2).
16. Quick-Start Compliance Checklist
☐ Register with SSS, PhilHealth, Pag-IBIG, BIR ☐ File DOLE Rule 1020 & OSH Program ☐ Draft employment contracts & handbook ☐ Set payroll to current minimum wage and compute statutory contributions ☐ Enroll at least one Safety Officer 1 and First-Aider ☐ Establish CODI and anti-harassment policy ☐ Pay 13th-month by 24 December ☐ Keep remittance & payroll records for 3 years
17. Final Thoughts
Compliance is a “build-once, maintain-always” discipline. Embedding statutory rules into your processes as early as seed stage is cheaper than paying fines or facing litigation when you scale. Use this guide as your blueprint, update it each time DOLE or Congress issues a new rule, and consult expert counsel for edge cases.
This article is for informational purposes only and does not constitute legal advice. For specific situations, consult a Philippine labor-law specialist or the nearest DOLE Regional Office.