From Hourly Freelancers to Salaried Employees in the Philippines: Cost Modelling Playbook for CFOs

 

Author: Martin English — CEO & Founding Partner
Published: November 21, 2025
Updated: November 21, 2025
Disclosure: This article is for informational purposes only and does not constitute legal or tax advice.

Audience & Intent

Who this guide is for

• CFOs, finance leaders and founders in the US, AU, UK, EU hiring in the Philippines

• Companies with hourly freelancers, contractors or VAs who are considering salaried employment via EOR or entity

• Teams that don’t just want “ballpark” numbers — they want a repeatable cost-modelling template

What you’ll get

• A step-by-step cost modelling playbook to compare hourly freelance vs salaried employee models in the Philippines

• A breakdown of direct, statutory, platform/EOR and hidden cost components

• A spreadsheet-ready framework you can reuse across support, EA/VA, finance, marketing and dev roles

• Guidance on how to present the business case: risk-adjusted cost, margin impact and scenario analysis for your board

 

TL;DR: What really changes when you turn hourly freelancers into employees?

When you move Filipino freelancers from hourly billing to salaried employment (via an EOR or your own entity), three things change in your model:

1. Shape of cost

   • You shift from variable, invoice-based spend to predictable monthly salary + statutory contributions + 13th month pay.

   • You add an EOR fee if you don’t have your own entity.

2. Risk profile

   • You reduce misclassification and continuity risk (no more pseudo-full-time “contractors” doing core work).

   • You gain payslips, contributions and formal employment records that investors and auditors actually like.

3. Unit economics

   • In many cases, effective hourly cost under a well-structured salaried model is similar to — or even lower than — freelance spend, once you price in:

     • Rate creep

     • Downtime and turnover

     • Training and quality issues

This playbook helps you build a side-by-side model so you can answer, numerically:

“What happens to our cost per FTE and per unit of output if we convert freelancers to salaried employees in the Philippines?”

Key takeaways for CFOs

• Don’t just compare hourly rate vs salary — compare effective hourly cost and risk-adjusted cost.

• A proper model splits costs into: base pay, statutory and benefits, platform/EOR fees, overhead and risk.

• Use role-based templates so you’re not reinventing the wheel for each freelancer conversion.

• Model EOR vs entity vs “stay freelance” scenarios with the same structure.

• Bring it back to unit economics: cost per ticket, per sprint point, per campaign, per annotated data unit, etc.

 

Step 1: Build your “current state” hourly freelancer baseline

Before you model anything, you need to know what you’re actually spending today.

For each freelancer, capture:

• Role (e.g., CS agent, EA/VA, bookkeeper, marketing specialist, developer)

• Hourly rate (in USD / EUR / AUD)

• Average hours per week

• Weeks per month used in planning (usually 4.33)

• Effective monthly cost = hourly rate × hours per week × 4.33

• Hidden overhead:

  • Time your managers spend coordinating with multiple freelancers

  • Training and ramp-up for short-tenure freelancers

  • Rework due to quality issues

You can structure your sheet like this:

This gives you a clean monthly number per freelancer to compare against salaried employment.

Step 2: Translate hourly usage into a salaried employee workload

Next, decide what “full-time” looks like in your context.

In the Philippines, a standard full-time schedule is commonly 40 hours/week, but real workloads can vary depending on:

• Night shift vs day shift

• Seasonality (peak support periods, launches)

• Whether you want buffer capacity (not 100% utilisation)

For each freelancer or role:

1. Calculate their average monthly hours:
   Hours per week × 4.33

2. Map them to a full-time equivalent (FTE):
   FTE = (average monthly hours) ÷ (standard monthly hours)

Where standard monthly hours = 40 × 4.33 = 173.2 hours.

Examples:

• 35 hrs/week ≈ 0.87 FTE

• 20 hrs/week ≈ 0.5 FTE

This tells you whether you’re:

• Understaffed (people working more than 1.0 FTE worth of hours)

• Using part-time patterns that you might want to consolidate into full-time salaried roles

 

Step 3: Define salary bands for equivalent roles

You now need market-aligned salary bands for the Philippines. Usually you’ll work with:

• Your EOR partner’s benchmarks

• Local recruiters

• Internal hiring history if you already employ in PH

For each role, define:

• Target base salary range (e.g., PHP 40–60k/month)

• Whether the role has:

  • Night differential

  • Allowances (internet, equipment, transport)

  • Performance bonuses

In your sheet, update per role:

You now have:

• Current freelance monthly cost

• Proposed employee base salary for that role

 

Step 4: Add statutory and mandatory costs for PH employees

In the Philippines, salaried employees come with:

• 13th month pay (accrued monthly)

• Employer contributions to SSS, PhilHealth, Pag-IBIG

• Paid leave and holiday obligations

For modelling, CFOs typically:

• Treat 13th month as a monthly accrual:

  • 1 additional month of salary per year = salary ÷ 12 added on top each month.

• Express employer contributions as a % of salary based on typical ranges and caps (you can use an average % for scenario planning, then refine later).

Your cost model per employee should have:

This gets you to a true employer cost per month, before EOR fees.

Step 5: Add EOR fee or in-house HR/payroll cost

If you don’t have a PH entity and HR/payroll infrastructure, you’ll likely use an Employer of Record. Your EOR cost model will typically be:

• Flat admin fee per employee per month (e.g., USD 190)

• Sometimes additional pass-throughs (e.g., FX spread, one-time onboarding)

If you do have an entity, you should instead model:

• Cost of local payroll provider / HR headcount

• Incremental legal, accounting and compliance overhead

To keep things comparable, define:

• Per-employee EOR fee, or

• Allocated HR/payroll cost per PH employee in the entity model

Add a line item:

Now you have:

Total employment cost = Salary + 13th month accrual + employer contributions + other benefits + EOR fee (or allocated HR cost)

Step 6: Compare effective hourly and unit economics

Now compare freelance vs salaried on equal footing by translating both into:

• Effective hourly cost

• Cost per unit of output

1. Effective hourly cost

For each model:

• Freelance:
  Freelance Monthly Cost ÷ Actual Hours Worked

• Employee:
  Total Employment Cost ÷ Productive Hours

Productive hours should account for:

• Training

• Meetings

• Non-billable time

You might assume 80–85% productivity rather than 100%.

2. Cost per unit of output

Depending on the role:

• Support: cost per ticket / conversation / CSAT-qualified contact

• Operations: cost per case / workflow

• Data annotation: cost per annotated unit

• Dev: cost per sprint point / feature

• Marketing: cost per campaign / asset / lead

Compute:

Unit Cost = Monthly Cost ÷ Units Output Per Month

This lets you answer:

• How does moving to salaried employment affect cost per ticket?

• Does EOR admin make a meaningful difference to cost per annotated unit?

 

Step 7: Include risk-adjusted cost and qualitative benefits

Freelance vs employment isn’t just a numeric game; there are risk and value layers that matter to CFOs and boards.

Risk-adjusted cost

Consider:

• Misclassification risk: potential back pay, penalties, reputational damage

• Continuity risk: churn of freelancers with no notice

• Compliance and due diligence risk: investor or buyer scrutiny

You don’t need a precise dollar number, but you can:

• Add a risk adjustment factor to the freelance model (e.g., a notional % uplift) to reflect the risk premium

• Present this qualitatively alongside the raw numbers

Qualitative benefits

Employment via EOR or entity often improves:

• Retention (benefits, stability, career narrative)

• Quality (better engagement, training and performance tracking)

• Brand perception (employer reputation in PH, investor confidence globally)

Your model should highlight:

Even when hard cost is similar, we get better stability, quality and compliance in the salaried scenario.

Step 8: Build scenarios CFOs care about

CFOs should not just model a single point estimate. Build three scenarios:

1. Conservative

   • Higher salary bands

   • Lower productivity assumptions

   • Full EOR fee

2. Expected / Base case

   • Median salary

   • Realistic productivity

   • Current EOR pricing

3. Optimistic

   • Salary at lower end of band

   • Higher productivity due to better processes and stability

   • Volume discounts on EOR or vendor consolidation

For each scenario, compare:

• Total monthly cost per FTE

• Effective hourly cost

• Cost per unit of output

• High-level risk commentary

This is what you put in a CFO pack or board slide.

Step 9: Make it presentable – CFO and board framing

When taking this to leadership:

1. Start with the business question

   “We currently spend $X/month on Y Filipino freelancers. What happens if we move them into salaried employment via EOR over the next 12 months?”

2. Show a simple comparison table (per FTE)

3. Add a phased plan:

   • Wave 1: high-risk, high-tenure freelancers

   • Wave 2: medium-risk roles

   • Wave 3: remaining long-tail roles / keep truly freelance roles as-is

4. Close with recommendations and guardrails:

   • When salaried explicitly beats freelance

   • When freelance is still fine (short-term, project-based, specialist roles)

   • Checkpoints (30/60/90-day review)

 

Step 10: Turn this into a reusable spreadsheet template

To make this scalable, build a standard template with:

Input tabs

• Freelancer list (rate, hours, role)

• Salary bands (per role, per level)

• Statutory assumptions and EOR fees

• Productivity and output assumptions

Model tab

• Per-role freelance vs salaried comparison

• Effective hourly and unit economics

Summary tab

• Aggregated view by team, region or client

• Scenarios (conservative, base, optimistic)

• Suggested conversion roadmap

Once built, you can use the same playbook for:

• Customer support

• EA/VA teams

• Finance, accounting, AP/AR

• Marketing and creative

• Data annotation and AI ops

• Product and project roles

 

Where this fits in your broader freelancer → EOR strategy

This cost-modelling playbook pairs naturally with:

• Contractor vs Employee in the Philippines (2025): Tests, Red Flags & Fixes via EOR – for understanding classification risk

• Are Your Filipino Freelancers Actually Employees? 10-Question Self-Audit Checklist – for triaging who should convert

• When Should You Convert Filipino Contractors to Employees? (Headcount, Tenure, Risk & Cost Triggers) – for timing and prioritisation

• Communication Pack: How to Explain an EOR Transition to Your Filipino Freelancers & Contractors – for managing the human side of the change once your model says “go”

Together, they give you a full CFO + HR toolkit: risk, cost, timing and communication.