A clear, peso-by-peso breakdown, and why most growing companies skip setting up their own entity
The Philippines has become a go-to destination for companies in Australia, Singapore, Hong Kong, the UAE, the US, the UK and Europe. The talent is highly educated, fluent in English, and experienced in international accounting standards, customer service and back-office work. The question most business owners ask next is simple: what will it actually cost me?
There are two legal ways to employ someone full-time in the Philippines: set up your own local entity, or hire through an Employer of Record (EOR). Below, we compare both and walk through a real example.
What is an Employer of Record?
An EOR is a local company that legally employs your team member on your behalf. The EOR handles the employment contract, payroll, government contributions, tax withholding and labor law compliance. You manage the person’s day-to-day work, just as you would any member of your team.
Your team member gets a compliant local employment contract with full statutory benefits. You get a skilled professional working for your business, without registering a company in the Philippines.
Sample Breakdown: Hiring a Bookkeeper at ₱40,000/Month
Here is what a full-time bookkeeper with a monthly salary package of ₱40,000 costs through UpStaff’s EOR service.
Cost item | PHP / month | USD / month |
Gross monthly salary | ₱40,000.00 | $640.00 |
SSS – employer share (incl. EC) | ₱3,530.00 | $56.48 |
PhilHealth – employer share | ₱1,000.00 | $16.00 |
Pag-IBIG – employer share | ₱200.00 | $3.20 |
13th month pay (monthly accrual) | ₱3,333.33 | $53.33 |
Total employment cost | ₱48,063.33 | $769.01 |
UpStaff EOR fee | ₱15,625.00 | $250.00 |
Total monthly cost to you | ₱63,688.33 | $1,019.01 |
That’s about $1,019 per month, or roughly $12,228 per year, for a fully compliant, full-time bookkeeper.
A few notes on the numbers:
- SSS: The rate is 15% of the Monthly Salary Credit (MSC), with the employer paying 10% and the employee 5%. The maximum MSC is ₱35,000, so on a ₱40,000 salary the employer share is capped at ₱3,500, plus a ₱30 Employees’ Compensation premium.
- PhilHealth: The premium is 5% of monthly salary, split equally at 2.5% each between employer and employee, with a floor of ₱10,000 and a ceiling of ₱100,000.
- Pag-IBIG: Contributions are 2% for both employer and employee, capped at ₱200 each for salaries above ₱10,000.
- 13th month pay: Required by Philippine law, it equals one month’s basic salary per year. We show it as a monthly accrual so there are no surprises in December.
- Exchange rate: USD figures use ₱62.50 = $1. Actual costs shift slightly with the exchange rate.
- Leave and holidays: Employees typically receive 15 to 20 days of paid annual leave, plus around 12 regular paid public holidays each year. These are not included in the monthly cost above. Instead of being accrued in advance, paid leave and holidays are charged only when actually taken, so you pay for the days your team member really uses rather than a fixed estimate.
What does the bookkeeper take home? After their own SSS, PhilHealth and Pag-IBIG shares (₱2,950) and withholding tax (about ₱2,618), your bookkeeper receives roughly ₱34,432 a month. Everything is computed, withheld and remitted correctly on your behalf.
What If You Set Up Your Own Entity Instead?
Setting up your own Philippine company is a valid route, but it comes with significant upfront capital, time and ongoing overhead, regardless of how many people you hire.
Capital requirements. A foreign-owned domestic company selling to the local market generally needs a minimum paid-up capital of US$200,000. This can be reduced to US$100,000 under specific conditions, such as employing at least 15 Filipino staff or qualifying as an advanced technology business. Branch offices have similar requirements. Export-oriented setups follow different rules but come with their own registration process.
Setup process. You’ll need to register with the SEC, BIR, your local government (barangay clearance and mayor’s permit), and as an employer with SSS, PhilHealth and Pag-IBIG. You’ll also need a registered office address, a resident treasurer, and a Filipino corporate secretary. The whole process often takes several months before you can legally run your first payroll.
Ongoing costs. Once running, your entity must handle:
- Monthly and quarterly BIR tax filings
- Annual audited financial statements filed with the SEC and BIR
- Annual General Information Sheet (GIS) filing
- Mayor’s permit renewal every January
- Office lease for your registered address
- Accounting, payroll and legal support
- HR compliance, including contracts, final pay, and labor disputes
On top of all this, you still pay the same salary, SSS, PhilHealth, Pag-IBIG and 13th month pay shown in the table above. Your own entity doesn’t reduce employment costs; it adds a fixed layer of corporate overhead on top of them.
EOR vs. Your Own Entity at a Glance
| EOR (UpStaff) | Your own entity |
Upfront capital | None | Typically US$100,000–200,000 |
Time to hire | Days to weeks | Several months |
Monthly cost for 1 bookkeeper | ~$1,019 all-in | ~$769 + entity overhead |
Payroll, HR, tax & compliance | Handled for you | Your responsibility |
Annual audit & filings | Not required | Required |
Exit or scale down | Simple | Requires formal dissolution |
Legal and labor risk | Carried by the EOR | Carried by you |
When Does an EOR Make the Most Sense?
An EOR is usually the smarter choice when you’re hiring your first few team members in the Philippines, testing the market before committing, or want to scale quickly without tying up capital. Setting up your own entity starts to make sense when you have a large, long-term team, want a permanent physical presence, or plan to sell to Philippine customers.
For most companies building a remote team of accountants, bookkeepers, admin staff or customer service professionals, the math is clear: $250 a month buys you full compliance, zero setup costs and the freedom to scale up or down as your business needs change.
Hire Your Philippine Team With UpStaff
UpStaff has spent the past five years helping businesses across Asia-Pacific, the Middle East, the US, the UK and Europe build high-performing teams in the Philippines. We handle recruitment, contracts, payroll, government contributions and compliance, so you can focus on growing your business.
Ready to get a cost estimate for your first hire?
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