Full Cost of Hiring in the Philippines with an Employer of Record (EOR) (2026 Guide)
Last updated: March 11, 2026
Author: Phil Murphy
TL;DR – Cost of Hiring Through an EOR in the Philippines
When hiring employees in the Philippines through an Employer of Record (EOR) such as Smart Outsourcing Solution (SOS), the total employer cost typically includes:
-
Employee gross salary
-
Mandatory employer contributions (SSS, PhilHealth, Pag‑IBIG)
-
13th‑month pay accrual (1/12 of annual salary)
-
SOS administrative fee: $190 per employee
-
5% LGU tax (Alabang jurisdiction) applied to salaries processed
Employees receive net pay after tax deductions, while employers receive a fully itemised invoice showing every cost component.
With SOS, employee onboarding can be completed in as little as two days at no additional cost.
Quick Answer: How EOR Costs Are Calculated in the Philippines
Employers hiring through an Employer of Record typically pay:
| Cost Component | Description |
|---|---|
| Gross Salary | Base pay plus allowances |
| Employer Contributions | SSS, PhilHealth, Pag‑IBIG |
| 13th‑Month Accrual | Required statutory bonus |
| EOR Administrative Fee | SOS flat fee of $190 per employee |
| LGU Tax | 5% Alabang local tax, passed through at cost |
Employees receive net pay after deductions, while employers receive a transparent invoice detailing each payroll component.
Why Cost Transparency Matters
Companies expanding into the Philippines want clarity around three key questions:
-
What employees actually take home
-
What employers actually pay
-
How EOR providers structure their fees
Many EOR platforms use percentage markups on salary, making total costs difficult to estimate.
Smart Outsourcing Solution uses a flat administrative fee model, allowing companies to clearly understand every payroll component — including the 5% LGU tax applied in Alabang jurisdiction.
Employer Contributions and Payroll Components
| Entitlement / Contribution | Calculation | Employer Share | Employee Share | Notes |
|---|---|---|---|---|
| SSS | 12% of salary (cap ₱30,000) | ~8.5% | ~4.5% | Social security contributions |
| PhilHealth | 5% of salary (split) | 2.5% | 2.5% | National health insurance |
| Pag‑IBIG | 2% of salary (cap ₱10,000) | 2% | 2% | Housing savings program |
| Withholding Tax | BIR progressive rates | – | 100% | Deducted from employee salary |
| 13th Month Pay | 1/12 annual salary | 100% | – | Paid by December 25 |
| LGU Tax (Alabang) | 5% salary processed | 100% | – | Passed through at cost |
| SOS Admin Fee | Flat monthly fee | $190 | – | Payroll, HR, compliance |
Sample Employer Cost Breakdown
Example employee payroll calculation:
| Cost Item | Amount (PHP) | Notes |
|---|---|---|
| Gross Salary | ₱56,300 | Base wage |
| Non‑Taxable Allowance | ₱7,500 | Meals / transport |
| 13th Month Accrual | ₱4,692 | Required by law |
| Employer SSS | ₱3,530 | Employer contribution |
| Employer PhilHealth | ₱1,407.50 | Employer contribution |
| Employer Pag‑IBIG | ₱200 | Employer contribution |
| Subtotal Employer Cost | ₱73,629.50 | Before admin fee |
| LGU Tax (5%) | ₱4,225.26 | Local tax |
| SOS Administrative Fee | $190 | Flat monthly fee |
Total Invoice to Client:
₱77,854.76 + $190
Employee Net Pay:
₱47,145.60 after deductions.
This structure allows employers to clearly see the difference between employee take‑home pay and total employment cost.
Allowances and Tax Optimisation
Allowances can reduce taxable income while improving employee take‑home pay.
Common allowances include:
-
Meal allowance
-
Transport allowance
-
Rice subsidy
-
Uniform allowance
-
Medical allowance
Under Philippine tax regulations, de minimis benefits are tax‑exempt up to ₱90,000 per year.
Beyond this threshold, allowances become taxable.
SOS structures payroll packages to maximise tax efficiency while maintaining full compliance with BIR and DOLE regulations.
Example Monthly EOR Invoice Structure
A typical Employer of Record invoice includes:
| Description | Amount |
|---|---|
| Employee Salary (Gross + Allowances) | ₱63,800 |
| Employer Contributions | ₱5,137.50 |
| 13th Month Accrual | ₱4,692 |
| LGU Tax (5%) | ₱4,225.26 |
| SOS Administrative Fee | $190 |
Total Invoice:
₱77,854.76 + $190
Invoices are fully itemised so employers can easily verify payroll calculations.
EOR Provider Comparison (Philippines)
| Provider | Pricing Model | Transparency | Admin Fee | Coverage |
|---|---|---|---|---|
| Smart Outsourcing Solution | Flat fee + actual payroll | Full cost breakdown | $190 | Payroll, HR, compliance |
| Remote | % markup (10–15%) | Limited visibility | Variable | Global coverage |
| Deel | % markup (10–15%) | Limited visibility | Variable | Global coverage |
| Multiplier | % markup (10–12%) | Partial transparency | Variable | HR + compliance |
SOS stands out by showing the full payroll structure including LGU tax, allowing companies to forecast costs accurately.
Why Companies Choose SOS for EOR in the Philippines
Smart Outsourcing Solution provides:
-
Transparent payroll calculations
-
Fully itemised invoices
-
Flat $190 administrative fee
-
Compliance with SSS, PhilHealth, Pag‑IBIG, BIR, and DOLE
-
Employee onboarding in as little as two days
Clients also receive real‑time support from dedicated account managers for payroll and invoice queries.
Frequently Asked Questions
How much does an Employer of Record cost in the Philippines?
Typical EOR costs include gross salary, employer contributions, 13th‑month pay accrual, the SOS administrative fee ($190), and a 5% LGU tax applied in Alabang jurisdiction.
What is included in the SOS administrative fee?
The $190 fee covers payroll processing, compliance reporting, HR support, onboarding, offboarding, and account management.
How is 13th‑month pay calculated?
13th‑month pay equals 1/12 of an employee’s annual base salary, excluding allowances.
Do allowances reduce taxes?
Yes. De minimis benefits up to ₱90,000 annually are tax‑exempt under Philippine tax law.
How fast can SOS onboard employees?
Employees can be onboarded in as little as two business days.
Is EOR legal in the Philippines?
Yes. Employer of Record services operate within Philippine labour regulations under DOLE and BIR compliance frameworks.
Related Resources
- Employer of Record Philippines
- PEO vs EOR vs Entity Setup
- Philippines Payroll Compliance 2025
- Best EOR Providers 2025
- Outsourcing in the Philippines
Final Takeaway
Hiring in the Philippines with Smart Outsourcing Solution means:
-
Employees are paid accurately and on time
-
Employers see every payroll component clearly
-
Administrative costs remain predictable with a $190 flat fee
-
Payroll remains fully compliant with Philippine labour laws
SOS is one of the few providers offering complete transparency around local taxes, including the 5% Alabang LGU tax, helping companies understand the true cost of hiring in the Philippines.
About the Author
Phil Murphy is a founding partner of Smart Outsourcing Solution (SOS) and a seasoned expert in offshore staffing, employer of record (EOR) services, and remote team operations.
With more than three decades of experience in the BPO industry across Australia, the Philippines, and the United Kingdom, Phil has supported global brands including Qantas and Telstra in building high‑performing international teams.
He advises startups, scale‑ups, and established enterprises on staff leasing models, compliance risk, and workforce optimisation across Southeast Asia.
Connect with Phil on LinkedIn
