Contractor-to-Employee Conversion Matrix for Philippines Teams (2025)

 

Author: Martin English — CEO & Founding Partner
Published: November 24, 2025
Updated: November 24, 2025
Disclosure: This article is for informational purposes only and does not constitute legal advice.

Audience & Intent

Who this guide is for

• CFOs, COOs, founders, People/HR and Legal leads with Filipino freelancers, contractors, or VAs

• Teams that know they need to convert some roles to proper PH employment but want a structured way to decide who, when, and how

• Companies using or considering a Philippines Employer of Record (EOR) for conversion

What you’ll get

• A Contractor-to-Employee Conversion Matrix framework for Philippines teams

• A spreadsheet-ready template structure to score each contractor on risk and strategic value

• Clear conversion categories: Keep as Contractor, Monitor & Prepare, Convert in 30–90 Days

• A simple way to link this matrix with your self-audit checklist, timing guide, communication pack, and cost modelling articles

 

TL;DR: What is the Contractor-to-Employee Conversion Matrix?

It’s a one-page grid that helps you decide, for each Filipino freelancer or contractor:

• How risky their current setup is (misclassification, tenure, control, hours)

• How important they are to your business (role criticality, performance, client impact)

• What you should do next:

  • Keep them as a genuine contractor

  • Monitor and prepare for future conversion

  • Convert to EOR/employee in the next 30–90 days

The matrix turns a messy list of freelancers into three clear decision buckets:

1. Green – Keep as Contractor (for now)

2. Amber – Monitor & Prepare for Conversion

3. Red – Prioritise Conversion to Employment

What the matrix measures: Risk vs Strategic Value

At its core, your matrix plots each contractor on two axes:

1. Misclassification / Compliance Risk (0–10)

2. Strategic Value / Criticality (0–10)

You then overlay a simple traffic light:

• Risk 0–3 = Low

• Risk 4–6 = Medium

• Risk 7–10 = High

Same idea for Strategic Value:

• Value 0–3 = Low

• Value 4–6 = Medium

• Value 7–10 = High

This gives you a 3×3 grid where each cell has a default recommendation.

Example conversion matrix (conceptual)

The spreadsheet template just makes this clickable and sortable.

The free template: Columns you should include

You can build this in Google Sheets or Excel using the following core columns:

With simple IF statements, you can automatically generate Risk Band, Value Band, Matrix Segment, and Recommended Action.

How to score “Risk” (0–10)

Use your 10-Question Self-Audit Checklist as the base.

For each contractor, ask questions like:

• Do we set their schedule and working hours?

• Do they work full-time or nearly full-time for us?

• Are they using our tools, accounts and email daily?

• Are they in core roles (support, dev, finance, EA/VA, PM)?

• How long have they been with us?

• Are they on a fixed monthly retainer rather than ad-hoc projects?

You can:

• Score each question 0 or 1

• Sum to a 0–10 risk score

Then convert that to:

• 0–3 = Low risk

• 4–6 = Medium risk

• 7–10 = High risk

High-risk profiles are strong candidates for EOR or entity-based employment.

How to score “Strategic Value” (0–10)

Ask managers and leadership to rate:

• Impact on customers (Do they touch clients daily? Are they customer-facing?)

• Impact on operations (If they left, would you be stuck?)

• Skill scarcity (Is their skill hard to replace in the PH market?)

• Client promises (Have you sold them in proposals as part of your delivery capability?)

• Leadership / multiplier effect (Do they coach others or manage processes?)

You can keep this simple:

• Score each of 5 items from 0–2

• Sum to a 0–10 value score

Then convert to bands:

• 0–3 = Low value

• 4–6 = Medium value

• 7–10 = High value

This avoids everything being labelled “critical”.

Turning scores into actions: the matrix logic

Once you have Risk Band and Value Band, your sheet can auto-assign a Recommended Action.

Suggested mapping:

1. High Risk – High Value

   • Action: Convert to EOR/employee within 30–90 days

   • Rationale: You’re heavily dependent on someone who looks like an employee in substance.

2. High Risk – Medium Value

   • Action: Convert or Replace within 90–180 days

   • Rationale: Still risky; decide if the role should exist as an employee or be reshaped.

3. High Risk – Low Value

   • Action: Phase out or redesign to true freelance project work

   • Rationale: High risk for a low-value role rarely makes sense.

4. Medium Risk – High Value

   • Action: Prepare Conversion (60–180 days)

   • Rationale: Important person; risk is not urgent but should not be ignored.

5. Medium Risk – Medium Value

   • Action: Monitor and reassess, consider conversion depending on cost and growth.

6. Medium Risk – Low Value

   • Action: Keep for now on shorter-term or project contracts, avoid dependency.

7. Low Risk – High Value

   • Action: Monitor and engage, consider conversion if they drift into high-risk territory.

8. Low Risk – Medium Value

   • Action: Keep as Contractor, review annually.

9. Low Risk – Low Value

   • Action: Keep as flexible freelance capacity or phase out if not needed.

Your spreadsheet can encode these rules so the Recommended Action column updates automatically after you change a score.

Example matrix with sample contractors

Here’s how four fictional contractors might look in your sheet:

In one glance, leadership can see who to move first, who to monitor, and who can stay freelance.

Using the matrix to drive your 30/60/90-day plan

Once your matrix is populated:

1. Filter by Matrix Segment = High Risk – High Value

   • These become your Wave 1 conversion candidates.

   • Aim to move them under an EOR or entity in 30–90 days.

2. Filter by High Risk – Medium Value

   • Decide if the role is:

     • A keeper (convert), or

     • A candidate for replacement or scope change

   • Target 90–180 days.

3. Filter by Medium Risk – High Value

   • Engage early, explain intentions, and start modelling cost.

   • Build them into your Q2/Q3 conversion plan.

4. Leave Low Risk – Low or Medium Value

   • Keep as flexible capacity, project-based or specialist freelancers.

   • Review annually or when their scope changes.

This turns your matrix into the control panel for the entire PH contractor-to-employee conversion project.

Related resources

• Contractor vs Employee in the Philippines (2025): Tests, Red Flags & Fixes via EOR
  Use this to define the criteria behind your Risk Score.

• Are Your Filipino Freelancers Actually Employees? 10-Question Self-Audit Checklist
  Directly plug the checklist score into the Self-Audit Risk Score (0–10) column.

• When Should You Convert Filipino Contractors to Employees? (Headcount, Tenure, Risk & Cost Triggers)
  Use this for timing signals and to sanity-check your Target Conversion Window.

• Communication Pack: How to Explain an EOR Transition to Your Filipino Freelancers & Contractors
  Once the matrix says “convert”, this pack tells you how to talk about it.

• From Hourly Freelancers to Salaried Employees in the Philippines: Cost Modelling Playbook for CFOs
  Pair each Red/Amber segment with detailed cost models so finance can sign off.

Together, they give you:

• A classification lens (contractor vs employee tests)

• A diagnostic tool (self-audit checklist)

• A timing guide (when to convert)

• A decision matrix (this article)

• A cost model (CFO playbook)

• A communication toolkit (EOR transition pack)

 

FAQs: Contractor-to-Employee Conversion Matrix for Philippines Teams

1. How many Filipino contractors do I need before using a conversion matrix makes sense?
Even with 5–10 contractors, a simple matrix helps you see who is high-risk and high-value. Once you reach 10+ recurring contractors or more than one Philippines team, a conversion matrix becomes almost essential for planning 30/60/90-day moves.

2. Do I need to convert all high-risk contractors into employees immediately?
Not necessarily. High-risk profiles should trigger action, but that can mean conversion, phased replacement, or redesigning the role into true project-based freelance work. The matrix helps you prioritise which roles should be converted in 30–90 days versus 90–180 days.

3. Can some contractors safely stay as freelancers long term?
Yes. Low-risk, low- or medium-value roles that are genuinely project-based, part-time or specialised can often remain freelance. The key is to avoid building your core delivery on people who look and behave like full-time employees in substance.

4. How often should we update the contractor-to-employee conversion matrix?
Most teams review it quarterly, or whenever there is a major hiring push, new client win, or structural change in the Philippines team. Any time someone’s hours, responsibilities or tenure jumps, it’s worth updating their scores.

5. What if a contractor moves from low-risk to high-risk over time?
That is exactly what the matrix is designed to surface. As tenure, hours and control increase, their risk score should rise. When someone crosses into “High Risk – High or Medium Value”, they usually become a candidate for the next conversion wave.

6. Do we need legal advice before acting on the matrix?
The matrix is a decision tool, not legal advice. It helps you prioritise where to focus. For complex situations, high headcount, or sensitive terminations, you should review your plan with local counsel or an EOR partner that can provide detailed guidance.

7. Can we use this matrix even if we already have a Philippine entity?
Yes. The logic is the same: you are still deciding who should move from contractor status into proper employment. The only difference is whether the landing place is your own entity or an Employer of Record.

Next steps: Book a 30-minute Contractor-to-Employee Roadmapping Call

If you’re looking at a list of Filipino freelancers and thinking:

“Some of these should clearly be employees… but where do we even start?”

you don’t need another theory piece — you need a simple matrix and a 30–90 day plan.

Here’s what you can do next:

1. Send us your anonymised roster (optional)

   • Headcount, roles, hours per week, tenure bands

   • We can help you sketch a first pass of your Red / Amber / Green segments

2. Book a 30-minute Contractor-to-Employee Roadmapping Call

   • Walk through your current PH contractor setup

   • Identify high-risk, high-value roles to convert first

   • Outline a realistic 30/60/90-day plan aligned with your budget and risk appetite