Technology Elite Employer-of-Record Services

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In 2024 Fair Work Australia made a carefully -considered but astounding decision: accepting an unfair dismissal claim from an overseas Filipino legal assistant contracted by an Australian business.

The commission found she was entitled to Australian workplace protections simply because she was engaged by an Australian business, and regardless of her citizenship or country of residence.

These are the same rights available to Australian employees and include the rights to file for unfair dismissal, to leave entitlements, legislative protections etc…. and Australian pay rates for the entirety of their employment.

The case law now indicates that it does not matter whether you have a written contract with the team member or not, and the contract wording cannot waive the rights of your staff to receive Australian working conditions, regardless of their country of residence.

You might wonder why Fair Work Australia thinks that everyone in the Philippines should receive Australian wages despite living costs in the Philippines being around 1/8^th of Australian living conditions, and frankly we think it’s completely illogical too.

If a team member who has been with you for 2 years now decides to sue through Fair Work, the backpay you’re forced to give them would be more than enough for them to buy a house and land package in their country.  The law firm who was recently prosecuted was paying around DOUBLE the salary of what that employee would get working for a Filipino company. And still the media claims they were “exploiting offshore workers”.

It doesn’t matter what you or I think about this situation, it’s now a reality we have to deal with: anyone engaging staff in another country without a local company to employ them, runs enormous risks every single day.  If you’ve got a whole team in the Philippines that you engage directly, a group action in Fair Work could send you bankrupt.

Many Australian companies discovered years ago the benefits of employing Filipino overseas staff: great skills and capabilities, less director liabilities, and for a fraction of salary and transactions costs of the cost of employing Australian staff. For Australian companies that are directly employing Filipino staff, this Fair Work Commission decision significantly impacts your obligations and liabilities in relation to existing and future offshore employees.

The Simple Solution

Partnering with a Philippines Employer-of-Record solution can completely avoid the risks, allow continuity with an existing team, simplify your future hiring processes and help you save on employment costs.

At its core, an EoR service is one where your overseas employees sign an employment contract with a third party company (eg in the Philippines), and they then invoice you for the employee costs.

Thus the costs are still deductible expenses for you, but the Philippines company carries the responsibility of complying with their own country’s laws, and your Australian company has no liability and no FWA risks. (Yes this arrangement has been tested and proven with a court case by National Australia Bank as being safe from the recent FWA ruling.)

What is a Philippines Employer of Record?

A Philippines Employer of Record (EOR) is a professional HR service that act as the legal employer Philippines-based employees on behalf of global companies. The Philippines EOR provider is responsible for all compliance aspects of employment – ranging from the management of employment contracts, payroll, and statutory benefits to tax withholding to ensure compliance with all applicable Philippines employment laws.

Instead of setting up a local entity (which can take months and incur considerable legal fees), the EOR takes on the official employer role for you in the Philippines. That means they handle everything from employment contracts and tax filings to enrolment in the Social Security System (SSS), PhilHealth, and Pag-IBIG Fund. The EOR ensures your employment practices align with the Philippine Labor Code, including required benefits, holiday pay, 13th-month bonuses, and termination procedures. Full compliance.

Philippines Employer of Record vs Setting Up a Legal Entity

The key alternative to Philippines EOR services is to set up a legal entity and directly hire in-country through that entity. If you’re planning on entering the Philippine market and doing business there for a long time, this option can give you the most control and stability.

Technology Elite offers an “Incubation Model”, to assist you with transitioning to your own legal entity and direct hire. While you are going through the process and legalities we can manage your team as the Employer of Record, and when ready, seamlessly transfer your team to your complete management and control. We are one of the few providers that embrace and support this process to your benefit.

If you have an existing team this is your best option to minimise Australian legal liabilities until you establish your own Philippines based legal entity.

1. Setting Up a Legal Entity

Get your own up-to-date legal advice as needed, but here’s a quick overview:

Most foreign investors looking to register entities in the Philippines choose either a one-person corporation (OPC) or a joint-stock corporation (JSC). An OPC can be set up with just one person who acts as the single shareholder and director. The shareholder can be a foreigner and a non-resident, but must also appoint a Philippine citizen as a secretary and a treasurer who is resident in the country. An OPC pays a corporate income tax of 30%.  It requires at least two directors who must also be shareholders but can only be 100% foreign-owned if it has at least three resident shareholding directors. JSCs typically pay 25% CIT on their income.

If you want to register an entity in the Philippines, you’ll need to complete steps such as the below. The steps and process do vary based on the type of corporation and the LOCATION/JURISDICTION of the corporation, since locations such as Clark Freeport have their own tax laws and requirements.

• • • • • • • • • Register your company’s name with the Security and Exchange Commission (SEC) and receive a certificate of incorporation.
                • Register with the Freeport of choice or with PEZA, and confirm any tax breaks you might be eligible for.
                • Register your new company with the Bureau of Internal Revenue (BIR) to receive a tax identification number (TIN).
                • Obtain a business permit from your local district (barangay).
                • Register as an employer with each of the government departments including Social Security System, Philippine Health Insurance Corporation (PhilHealth), and Home Development Mutual Fund (HDMF) so you start to hire and pay employees.
                • This process typically takes 5-9 months to complete, and all the paperwork requires physical signatures, meaning your directors will need to be present in the Philippines to keep the procedures  moving forward.

When you’ve finished these steps, you’ll be able to do business and hire employees in the Philippines. However, you’ll likely need to work with HR specialists, tax accountants, and lawyers on a continuing basis to ensure compliance with all local laws. Be sure to include these costs in your operational budget.

2. Employer of Record on an ongoing basis

By contrast to this time-consuming process, a Philippines Employer of Record service provider that already has an entity in the Philippines and can use it to hire employees on your behalf. It becomes the legal employer of  local staff while you work directly with them, setting their tasks and work schedules. The EOR takes care of hiring, onboarding, payroll, benefits administration, and all other HR concerns on your behalf. While Philippines EOR services have a cost, compared to the expense and complexity of setting up a concern in the country, this may be an effective option.