Ultimate guide to hiring international contractors in the Philippines

Growing a business is always challenging. You have a lot of things to juggle, including understanding your customers, staying on top of market changes, and delivering excellent customer service. Great employees make a huge difference in helping your business scale, but you also need to keep down the costs of a large workforce. 

One popular way to help your business grow while cutting expenses is to outsource work to international contractors.

How to find contractors in the Philippines

In the Philippines, the best way to find contractors is through Onlinejobs.ph, Virtualstaff.ph, BestJobs.ph, EasyOutsource, JobStreet, and other freelancer sites.

What you should know before hiring a contractor in the Philippines

Who is a contractor in the Philippines?

In the Philippines, the main difference between an independent contractor and an employee is the amount of control you have over their work. If you don’t decide when, where, and how they work, you don’t monitor and review their work or track their work hours, they are probably contractors.

Independent contractors have to be registered with the Bureau of Internal Revenue (BIR). It’s strongly recommended to have a written contract with independent contractors in the Philippines.

The regulations around hiring contractors in the Philippines

In the Philippines, independent contractors aren’t entitled to employee benefits like minimum wage, paid time off for public holidays, paid vacation or sick leave, etc. It’s up to you to decide on compensation, together with the contractor. 

They also have to pay their own contributions to social security, health insurance (Philhealth), and pension funds. But you do have to withhold income tax from their pay at a rate of 0-10%, depending on their circumstances, and transfer it to the government. 

Employees can only be terminated for specific causes, but it’s different for independent contractors. According to law in the Philippines, your relationship with an independent contractor can be terminated according to the conditions laid out in your contract, or if both parties agree to the termination. Otherwise, it can only be terminated by the court. 

You can learn more here about the regulatory framework around hiring an independent contractor in the Philippines, or talk to a local legal expert.

The difference between contractors and employees

Every country has laws that define whether your worker is an employee who’s entitled to certain benefits and working conditions, or a contractor who’s essentially self-employed. 

It’s important to check what the definition is of a “contractor” in the country where you want to hire workers, and make sure that you respect it. If the country thinks your worker is an employee, then you might have to pay them back for unpaid compensation and other missed benefits.

If your worker is a contractor and not an employee, it makes a difference to:

• The number of hours they can work in a day, week, and month
• Their entitlement to benefits like vacation time and employer-contributed pensions
• How their salaries are taxed
• What your tax situation is in that country and your home country

The definition of an independent contractor

Generally, this means the payer has a say in what work is done, but not in when, where, or how the work is completed. A contractor can work for more than one payer at the same time without consulting the payer, and they can accept or refuse work whenever and however they like. 

The definition of an employee

If the work they do is controlled by the payer, the worker is usually considered as an employee. Someone who can’t work for more than one payer at the same time, or without permission from the payer, is also considered an employee.

If you’re unsure if your workers are contractors or employees, here are some more ways to tell the difference:

• Who provides tools and supplies? If it’s you, the person is more likely to be considered an employee.
• Are expenses reimbursed? If so, they are probably an employee.
• Is the work performed a fundamental aspect of the business? If so, they are probably an employee.
• How long has the contractor been working for you? The longer the relationship, the more likely they are to be considered an employee.
• Did the worker sign a non-compete agreement? That’s often seen as turning a contractor into an employee.

Here are some ways to make sure your workers are contractors and not employees:

• Do not set fixed hours they have to work (e.g. 9am-5pm).
• Avoid hiring a contractor to perform an essential aspect of your business.
• Don’t request an exclusive relationship; instead, give the contractor freedom to have multiple clients outside your organization.
• Don’t require workers to complete a training or supervision period.
• Ask workers to provide their supplies and tools, and don’t reimburse them for expenses.
• Don’t provide workers with the kind of compensation that you’d usually give to an employee, like insurance, pension, or vacation days.

Some countries require you to make a written contract with an independent contractor, while others do not. But when it comes to deciding if the worker is an employee or a contractor, authorities will look more at your actual relationship than at anything written in a contract. 

The benefits of hiring overseas contractors

• You’ll have employees on the ground at your target markets, so they can supervise the supply chain.
• You have local employees who understand the culture and market that you’re selling to.
• You can hire the best talent there is, no matter where it’s located.
• Hiring talented workers in areas where the cost of living is low helps keep your costs down.
• You can easily provide “follow the sun” round the clock customer support, because you have employees in different time zones.

Whatever your reasoning, working with international contractors can be a great way to build your business and employ the best talent anywhere in the world. 

Payoneer makes it easy to pay your global contractors

Once you’ve found local independent contractors to hire, you’ll want a convenient and affordable way to pay them. With Payoneer, you can pay independent contractors in 190+ countries around the world in their local currency, which makes it far easier and more convenient for the contractor to access their funds.

Payoneer’s fast, secure, and low-cost online payments solution allows you to send payments using your credit card or ACH bank debit transfers, which means you can skip the hassle of pre-funding your account. You can even save time and use batch payments to pay dozens of contractors simultaneously, or automate recurring payments so you’ll never be late with payday. 

Payoneer has a competitive foreign currency exchange rate and attractive fees, like just 1% for ACH bank debit transfers and 3% for credit card payments. What’s more, if you already have funds in your Payoneer account, such as a payment from your own clients, you can use that balance to pay your contractors free of charge.

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^[1] According to eligibility and current Payoneer offering