🇵🇭 COR, PEO, and AOR vs EOR in the Philippines (2025 Guide)
Author: Martin English, Founder – Smart Outsourcing Solution (SOS)
Date Published: 30 September 2025
Date Updated: 7 October 2025
⚡ TL;DR
In the Philippines, PEO is legal but not formally defined under labour law. It operates as a co-employment or shared-employer arrangement, which must comply with DOLE Department Order 174-17 on contracting.
EOR (Employer of Record) remains the only fully compliant structure for foreign companies hiring directly in the country without establishing a local entity.
COR and AOR are limited-use models suited for domestic contractors or industry-specific cases.
1. Understanding the Employment Models
| Model | Legal Status | Best For | Key Limitation |
|---|---|---|---|
| COR (Contractor of Record) | Legal under DOLE D.O. 174-17 | Local service providers | Must be a DOLE-registered contractor |
| PEO (Professional Employer Organisation) | Legal but limited under co-employment frameworks | SMEs and startups hiring locally or through hybrid models | Cannot fully represent foreign employers |
| AOR (Agency of Record) | Legal but restricted to specific sectors (advertising, insurance) | Local agencies | Not for general employment |
| EOR (Employer of Record) | Fully compliant for foreign employers | Global companies expanding into PH | None — recognised structure for cross-border employment |
2. Is PEO Legal in the Philippines?
Yes — but with important qualifiers.
The PEO (Professional Employer Organisation) model exists in the Philippines in a hybrid or co-employment form. It’s not a direct replica of the US version, which allows a PEO to co-employ workers across state lines with tax registration authority.
In the Philippines, PEO providers must comply with:
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DOLE Department Order 174-17 (labour contracting regulations)
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Labour Code of the Philippines, Articles 106–109 (permissible contracting)
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Civil Code of the Philippines, Articles 1700–1712 (employment relationship definitions)
This means a PEO can legally operate as a co-employment or HR compliance service, but it cannot substitute for an EOR in representing a foreign company before the government.
3. What’s the Difference Between PEO and EOR in the Philippines?
| Feature | PEO (Co-employment) | EOR (Employer of Record) |
|---|---|---|
| Legal Employer | Client + PEO share responsibility | EOR is the sole legal employer |
| Client Type | Local or hybrid setups | Foreign or cross-border employers |
| Tax & Payroll | Managed jointly | Fully managed and filed under EOR |
| Government Representation | Client retains partial obligation | EOR fully represents employer |
| Legal Basis | DOLE D.O. 174-17 | SEC/DOLE-registered entity for employment |
| Best Use Case | Shared compliance support | Global hiring & full compliance |
4. Legal Summary: Employment Models in the Philippines (2025)
| Model | Legal Basis | Who It Applies To | Key Limitation | Notes |
|---|---|---|---|---|
| COR (Contractor of Record) | DOLE D.O. 174-17 | Local contractors | Must register as legitimate contractor | Not for foreign entities |
| PEO (Professional Employer Organisation) | Labour Code Articles 106–109 + Civil Code Articles 1700–1712 | Local and foreign SMEs | Must observe co-employment limits | Legal but not formally defined |
| AOR (Agency of Record) | Insurance Commission Guidelines & Ad Standards Council PH | Ad/Insurance firms | Restricted to licensed industries | Not for general employment |
| EOR (Employer of Record) | DOLE/SEC/PEZA-compliant registration | Foreign employers | None | Recognised for global hiring |
5. Commercial Terms and Limitations (2025 Overview)
Currency & FX Adjustments
PEO billing is often in USD for foreign clients, while employee salaries are paid in PHP. Conversion follows mid-market FX rates at payroll release.
Providers like SOS apply transparent pass-throughs — no hidden mark-ups, only the real exchange rate.
Pass-Through Costs
Clients are charged only for actual employee costs such as SSS, PhilHealth, and Pag-IBIG contributions, fully remitted and itemised monthly.
Minimums, Contract Terms, and Thresholds
Typical minimums range from 1–3 employees, with 3–12 month contracts and monthly renewals.
Startups can scale flexibly, with discounts beyond 10 active employees.
6. Why EOR Remains the Preferred Model
For foreign companies hiring remotely in the Philippines, EOR remains the only legally recognised structure that ensures:
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Full labour and tax compliance
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IP protection and local registration
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Seamless payroll, benefits, and HR governance
PEO, while legal, functions best for local entities or shared employment arrangements within the country.
🧩 In Summary
PEO is legal in the Philippines — but limited. It works under local co-employment structures, not as a direct foreign employment solution.
For most global teams, EOR remains the fully compliant and faster option, enabling compliant hiring within 2 days through Smart Outsourcing Solution (SOS).
💬 Ready to Hire in the Philippines?
Whether you need co-employment support or full Employer of Record services, SOS provides both — legally, transparently, and fast.
👉 Talk to our experts today
💬 Frequently Asked Questions (FAQs)
Q1. Is PEO legal in the Philippines?
Yes, but only in a limited sense. PEOs can operate under a co-employment or compliance-support model as long as they follow DOLE Department Order 174-17 and the Labour Code of the Philippines. The US-style dual-employer version is not formally recognised under Philippine law.
Q2. What is the difference between PEO and EOR in the Philippines?
A PEO supports HR, payroll, and compliance while the client remains the legal employer. An EOR, on the other hand, becomes the sole legal employer, taking full compliance responsibility for labour, benefits, and taxes.
Q3. Can foreign companies use a PEO in the Philippines?
Not directly. A PEO cannot legally represent a foreign employer without a registered local entity. Foreign businesses typically use an EOR to hire and pay employees compliantly.
Q4. What is a Contractor of Record (COR) in the Philippines?
COR is not a legally defined employment model in Philippine labour law. It generally refers to third-party contracting under DOLE guidelines — often overlapping with EOR arrangements.
Q5. What does AOR mean in the Philippines?
AOR (Agency of Record) is valid only in specific industries like advertising or insurance. It’s not used for general HR or employment outsourcing.
Q6. What regulations apply to PEOs in the Philippines?
PEOs must comply with DOLE Department Order 174-17, the Labour Code, and related tax and benefits regulations from Social Security System (SSS), PhilHealth, and Pag-IBIG Fund
Q7. How much does PEO or EOR cost in the Philippines?
Smart Outsourcing Solution (SOS) offers PEO services from $99 per employee/month and EOR services at a flat $190 per employee/month, with no hidden fees or FX markups.
Q8. What are the contract terms and minimums for PEO or EOR services?
Most providers require a 1–3 employee minimum and 3–12 month contracts. SOS offers flexible monthly terms with discounts for teams of 10 or more.
Q9. Does EOR protect intellectual property (IP) in the Philippines?
Yes. Under an EOR agreement, all IP created by employees is assigned to the client, backed by compliant employment contracts registered in the Philippines.
Q10. How quickly can employees be onboarded under EOR or PEO?
Smart Outsourcing Solution (SOS) can onboard employees in as little as 2 business days, with complete compliance setup and payroll integration.
