Business, Employment, & Entrepreneurship

Employment contracts—to give or to get

By law, if you are not married to a Filipino, you really aren’t supposed to work in the Philippines unless you bring something to the table which can’t be done by a Filipino. The concept is that while you are working here, you should simultaneously be teaching a Filipino how to do the job that you are doing. The idea behind that concept is that, at the end of the day, you–a foreigner– will be replaced at your job by a Filipino who has been trained how to do the job by an expert–you.

Things have to stay legal of course, and they do, but usually that chore is handled by an attorney, either for the company or for the individual.

If you are a foreigner married to a Filipino, the laws are much more lenient. You don’t need to apply for a work permit; you just need to register at the Department of Labor and Employment (D.O.L.E.). You can look at their website at www.dole.gov.ph.

There are foreigners who are hired from abroad to work for a company here. They come to the Philippines with a job, and the company that hired them handles their visa requirements via the company lawyer. These expats usually fill jobs are for highly skilled personnel, such as an upper management position in one of the call centers or multinational companies, or an as an expert on aircraft engines for companies such as the ones here in Baguio. There is a huge Texas Instruments plant in Baguio that requires management personnel to be brought in from abroad. The percentage of these expats is very small when compared to the Filipino members of the rank and file and management.

Other industries that see a lot of expats working in them are restaurants, where there are a fair amount of expat chefs; as bar managers, mostly for expat bars; in the computer industry; as consultants in various industries as varied as banking and professional sports; and as teachers in one of the international schools. In other words, a great number of working expats come to the Philippines as professionals with an existing job that pays them a decent wage.

If you relocate to the Philippines with the intention of seeking employment here, on a local pay scale, expect to make much lower wages than you would receive for doing the same job back home. Many expats are comfortable with this and take the lower wages because of the lower cost of living here allows them to do this. They are able to find a decent job that generates enough money to cover their expenses while allowing them the excitement of living in a different land and experiencing a new culture.

If you are coming here to “work in the economy” of the country, understand that you will need to bring with you a skill of some sort that would give you an edge in the job market. Not only do you have to cover the cost of living, understand that either you or whoever hires you is going to have to bear the expenses of your work visa. This cost is not exorbitant, but it is a cost that needs to be factored in to your living expenses in addition to what you need to provide for yourself so that you can live comfortably and enjoy life.

If what you have at home is a job that covers your lifestyle well there, that same job might not do it here. If you are a bookkeeper, realize that in this country a bookkeeper can be hired for around US$300.00 per month; if at home you were a cook in a fast food restaurant, like McDonald’s or Burger King, that job here would pay you less than US$200.00 per month; a clerk in one of the big retail stores, like Rustan’s or SM would take home less than US$150.00 per month. The rank and file jobs here pay very poorly because there are a lot of people who can fill those positions. No employer will hire an expat for those jobs because you would be too expensive. Even if you were willing to take the low pay, no employer would hire you because you lack the ability to speak Filipino.

In summary, you must remember that unless you are hired from your country of origin for a job in the Philippines, do not expect that you will find a job here that pays you a decent wage unless you bring to the table a skill or talent that cannot be found from a Filipino.

Starting up a small business

The most important piece of advice I can give you is to always remaining legal in all of your dealings. Do not take shortcuts with the law, no matter how innocent or tempting these might be. Make sure that you pay the correct taxes. There is a short list of businesses approved by D.O.L.E. that expats can legally operate. These change periodically, so before starting out, it is best to check with the Department of Labor and Employment (D.O.L.E.) to see if the business you want to do qualifies. Any business that is not on the list requires a Filipino signatory, which is not very difficult to find, but the choice of who your signatory should be shouldn’t be made casually. The paperwork–which may seem endless–is best taken care of by your local attorney (ELRAP Index of Professionals will provide you contact information of member-approved attorneys in your area). This will make things run more smoothly and keep operations fairly stress-free.

The second best piece of advice I can give you is to always have a Filipino, whether your spouse, a partner, your attorney, or a trusted employee, to serve as your representative when undertaking business transactions. The point that I am trying to make is that having a good Filipino front person is not only absolutely essential to success, it makes life infinitely easier.

Capital requirements for starting up a business are often minuscule; setting up small operations or business incubators is amazingly inexpensive.

The major resource here is a large, well educated, English- speaking, population. The most lucrative expat businesses–the ones expanding most rapidlyare the ones that provide employment and opportunity for this resource. Expat businesses like call centers, medical transcription offices, or any other sort of outsourced service centers succeed more often than not by tapping this resource of affordable, capable, talent.

In fact, given the growth of the industry and the steadily growing improvement of communication services, many expats are setting up their own niche-market operations. This could be a perfect way to generate some additional income for an expat while still affording him or her the luxury of time to remain free.

Unless you have a specific business idea, or area of expertise, before starting a business in the Philippines, I would caution you to move here first, and take your time to see where the opportunities might lie. Do a detailed feasibility study of any business you might be interested in. Worth mentioning is that in Manila, there is a company called ServCorp (www.servcorp.net) that offers a virtual office, a telephone (within twenty-four hours of applying), the services of a secretary, and conference rooms, all for a reasonable monthly fee. A company like this might save you a lot of the expenses of setting up an office until the time that you are ready to actually do so.

If you are thinking of getting into a business requiring any sort of manufacturing , consider it very carefully. There is a lot of competition, price-wise, from China, and other roadblocks as well, such as the fluctuating values of foreign currencies, for example. That being said, there is demand for high quality, specialized, manufactured products–again, a niche market.

While it is true that there is great freedom and ease-of-entry into any business venture, actually running the operation is a whole other story. You would require the services of excellent staff, all of whom would require intense training on your part, to represent your interests. Once the staff is well trained, though, you can manage the business with the greatest of ease provided you use your creativity to implement good working systems.

How to hire/fire staff for small business including DOLE regulations

The laws for hiring and firing employees are pretty much the same for a small business as for a large one. There are some differences, but one must follow the labor laws closely to be safe. The best thing to do would be to consult with an attorney who is well versed in labor law as well as the Department of Labor and Employement (D.O.L.E.). You can take a look at D.O.L.E.’s website at www.dole.gov.ph.

There is a standard minimum wage all throughout the country, but the rate varies depending on what city you are setting your business up in. It also varies based on the position of the employee. The big city rates are higher than the provincial rates. Verify the rates with the local D.O.L.E. office before proceeding.

In many places, D.O.L.E. requires you to go to their office and fill out a form before you are allowed to put an ad in the newspaper for potential employees. D.O.L.E. will stamp the form for you free of charge. Bring the stamped form with you when you go to place your ad in the newspaper.

I strongly urge you to put a good accountant and a good attorney on retainer from the very moment you set up your business (for reliable recommendations for attorneys and/or accountants in your area, refer to the ELRAP Index of Professionals on this website). It does not matter if the business you set up is small or large, you will constantly need their services. If the business is small, the monthly retainer for each of these valuable people should be about US$100.00 each.

I also suggest that you put one hundred percent of your employees on a very specific contract after they have worked for you for thirty days (and you are going to keep them on). Have your attorney draft it for you. The contract should contain a detailed job description, the salary, and the percentage of the breakdown of the employee’s contribution to Social Security and health insurance payments, as well as the company’s contribution to same. Philippine labor law will stipulate exactly how this works. Also, the contract should define, based upon the labor law, what would constitute a disciplinary write up or warning, and what can lead to terminating an employee. Make sure that the attorney stipulates this, and get the input of the accountant on this matter, if need be. If the business you are going to start has anything to do with outsourcing and the employee will be required to work at night, there is both a night differential pay and a Cost Of Living Allowance (COLA) pay, as well as holiday pay and the end of the year bonus payment, also known as thirteenth month pay. All of these must be stipulated in the contract as well.

There are two very important things you must be vigilant of to keep you out of trouble. They are the laws pertinent to termination of an employee, and the laws pertaining to the employee’s thirteenth month pay.

To terminate an employee after thirty days requires following the specific laws outlined by the Department of Labor and Employment. The law stipulates that an employee is entitled to a separation pay equivalent to one month of the current salary for every year of service they have rendered to the company. For example, if the employee is terminated after six months of service, the employee is owed two week’s pay; if the employee is terminated after five years of service, the employee is owed five month’s pay. Be very sure that you pay this separation, down to the last centavo owed to the employee. The law says, however, that if an employee has committed specific acts, like if it has been proven that the employee was stealing, for example, no separation pay is owed to the employee.

The second very important law pertains to the thirteenth month pay. This is given in the early part of December and is a holiday bonus that is required by law. Even small businesses are not exempt from paying for the thirteenth month pay. The law says that the employee must receive one full month salary as a bonus each December, provided the employee has worked for the entire year. If the employee has only worked with the company for six months, then two week’s bonus is due. The bonus is paid on a pro-rated basis, based upon the amount of time the employee has been working for the company. Christmas in the Philippines is taken very seriously, and your employees will be relying on this bonus. You wouldn’t want to upset anybody during Christmas– or wind up with a labor issue–so be sure to follow the letter of the law so that everyone is happy during the holidays.

Try to keep people enthused about work, as it makes a major difference in their job performance. Unlike my experience with office staff when I worked in the First World, in the Philippines, your employees really appreciate your efforts to help them get ahead in life.

“ More and more folks are retiring at an earlier age, while they are still healthy enough to enjoy their lives. The problem is, in the First World, even a couple in their late fifties that have a $500,000 investment portfolio, which includes their home equity and other investments, won’t have enough retirement income to take advantage of their hard-won freedom. ”

The FREEDOM HANDBOOK
By Bruce Silverman
http://funphilippinesretirement.com
“ELRAP is a friendly website! On our pages please--no vulgarity, and no politics or religion discussed!”