Requirement for Foreign Employees to Work
Any foreigner seeking admission to the Philippines for employment purposes and any domestic or foreign employer who desires to engage a foreigner for employment in the Philippines shall obtain an employment permit (known as Alien Employment Permit or AEP) from the Department of Labor and Employment. The AEP may be issued only after a determination of the non-availability of a person in the Philippines who is competent, able, and willing at the time of application to perform the services for which the foreigner is desired.
In addition to the AEP, existing rules and regulations also require foreigners to obtain a work visa. Pending issuance of the AEP, or if the foreigner has already been issued with a valid AEP but the application for a work visa is still awaiting approval, a Provisional Permit to Work may be obtained to allow the foreigner to engage in work pursuant to an employment arrangement.
Furthermore, foreigners are likewise required to secure their Taxpayer Identification Number. This is because foreigners, whether resident or not, are taxable on income derived from sources within the Philippines.
Does a Foreign Employer need to Establish or Work through a Local Entity to Hire an Employee?
Yes, a foreign employer needs to establish local presence or work with local entity in order to hire an employee. While there is no express prohibition under the Labor Code for foreign employers without presence here in the Philippines to directly employ workers in the Philippines, there are certain obligations imposed by different laws which cannot be complied with by a foreign employer without a registered office in the country. These specific obligations include, among others, compliance with mandatory contribution requirements of the Social Security System, Philippine Health Insurance Corporation, and Home Development Mutual Fund, as well as the withholding and remittance of taxes on compensation. More importantly, the Secretary of Labor and Employment has visitorial and enforcement powers over the premises of the employer any time of the day or night to determine any violation of the Labor Code. Such power presupposes the existence of local establishment that is not only within but also subject to Philippine jurisdiction.
Note, however, that foreign employers may directly enter into agreements with independent contractors in the Philippines. Such agreements are not governed by the restrictions, prohibitions, and minimum standards of the Labor Code as no employer-employee relationship exists.
