Full Cost of Hiring in the Philippines with an Employer of Record (EOR)
Date updated: September 19, 2025
Author: Phil Murphy
TL;DR (Quick Summary)
Hiring in the Philippines with Smart Outsourcing Solution (SOS) means:
- Employee Net Pay = salary after deductions (SSS, PhilHealth, Pag-IBIG, withholding tax).
- Employer Total Cost = gross salary + contributions + allowances + 13th month pay.
- Flat SOS Administrative Fee = $190 per employee.
- 5% LGU tax (Alabang jurisdiction) is added to salaries processed, passed through at cost.
- Onboarding in as little as 2 days — no extra cost.
SOS handles all calculations and provides itemised invoices, ensuring employees are paid on time and clients remain fully compliant.
Quick Answer: How EOR Costs Are Calculated in the Philippines
Employers hiring in the Philippines via an Employer of Record (EOR) like SOS pay:
- Employee gross salary (base pay + allowances).
- Mandatory contributions (SSS, PhilHealth, Pag-IBIG).
- 13th month pay accrual (1/12 of annual salary).
- Flat SOS administrative fee: $190 per employee.
- 5% LGU tax (Alabang) applied to salary, passed through at cost.
Employees receive net pay after deductions. Employers receive a transparent, itemised invoice.
With SOS, onboarding can be done in as little as 2 days at no extra cost.
1. Why Cost Transparency Matters
When expanding into the Philippines, companies want to know:
- What employees take home (net pay).
- What employers actually pay (total cost).
- How EOR providers charge fees and taxes.
Many providers use percentage mark-ups and exclude local tax details. SOS is different: we show everything — including the 5% LGU tax — so employers have total cost clarity.
| Entitlement / Contribution | Calculation Method | Employer Share | Employee Share | Notes |
| SSS | 12% of monthly salary, capped at ₱30,000 | ~8.5% | ~4.5% | SSS rates |
| PhilHealth | 5% of monthly salary (split 50/50), capped at ₱100,000 | 2.50% | 2.50% | PhilHealth table |
| Pag-IBIG | 2% of salary, capped at ₱10,000 | 2% (₱200 max) | 2% (₱200 max) | Employer match required |
| Withholding Tax | Based on BIR tax brackets | – | 100% | Progressive, by salary |
| 13th Month Pay | 1/12 of annual base salary | 100% | – | Must be paid by 25 Dec |
| LGU Tax (Alabang) | 5% of salary processed in jurisdiction | 100% | – | Passed through at cost |
| SOS Admin Fee | Flat fee per employee | $190 | – | Covers payroll, HR, compliance |
| 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 Contribution | 3,530 | Employer share |
| Employer PhilHealth | 1,407.50 | Employer share |
| Employer Pag-IBIG | 200 | Employer share |
| Subtotal Employer Cost | 73,629.50 | Before fees/taxes |
| SOS Administrative Fee | $190 flat | Payroll, compliance, HR |
| LGU Tax (5%) | 4,225.26 | Local tax, passed through (considering a Php57.24 conversion rate on admin fee) |
| Total Invoice to Client | ₱77,854.76 + $190 fee | Fully itemised |
Key takeaway: Employee net pay (after tax) = ₱47,145.60. Employer cost = ₱73,629.50 + $190 (excl. LGU tax) or ₱77,854.76 + $190 (incl. LGU tax).
2. Allowances & Tax Optimisation
Allowances reduce taxable income and improve employee net pay.
Examples:
- Meal allowance
- Transport allowance
- Rice subsidy
- Uniform/clothing allowance
- Medical allowance
Legal limits:
- Non-taxable “de minimis benefits” capped at ₱90,000 per year.
- Beyond that, allowances become taxable.
SOS structures allowances to maximise benefits while ensuring tax and labour law compliance.
| Description | Qty | Unit Cost | Total |
| Employee Salary (Gross + Allowance) | 1 | ₱63,800 | ₱63,800 |
| Employer Contributions (SSS, PhilHealth, Pag-IBIG) | 1 | ₱5137.50 | ₱5137.50 |
| 13th Month Accrual | 1 | ₱4,692 | ₱4,692 |
| SOS Administrative Fee | 1 | $190 | $190 |
| LGU Tax (5% – Alabang) | 1 | ₱4,225.26 | ₱4,225.26 |
| Total Due | ₱77,854.76 + $190 | ||
Quick Answer: Sample EOR Invoice in the Philippines
A typical Employer of Record (EOR) invoice in the Philippines includes:
- Employee gross salary (base pay + allowances).
- Employer contributions (SSS, PhilHealth, Pag-IBIG).
- 13th month pay accrual.
- Flat SOS administrative fee of $190 per employee.
- 5% LGU tax (Alabang), passed through at cost.
Example Total: ₱74,582 + $190 per employee.
SOS invoices are fully itemised and transparent, ensuring compliance and payroll accuracy.
Why This Matters
- Transparency: All costs shown, including local LGU tax.
- Compliance: No risk of missing mandatory contributions.
- Predictability: Clients see both excl. tax and incl. tax totals.
- Support: Account managers available in real time to explain invoices.
3. EOR Provider Comparison (Philippines 2025)
| Provider | Pricing Model | Transparency | Admin Fee | Compliance Coverage | Notes |
| Smart Outsourcing Solution (SOS) | Flat fee + actual salary & contributions | Full breakdown (incl. LGU tax) | $190 flat | Payroll, HR, SSS, PhilHealth, Pag-IBIG, DOLE, BIR | Onboarding in as little as 2 days |
| Remote | % markup on salary (10–15%) | Limited visibility | Variable | Global compliance | Higher costs for PH |
| Deel | % markup on salary (10–15%) | Limited visibility | Variable | Global compliance | Popular with SaaS startups |
| Multiplier | % markup on salary (10–12%) | Partial | Variable | Compliance + HR SaaS | Bundled platform |
In summary: SOS is the only provider openly showing LGU tax impact in invoices.
4. SOS Transparency & Client Support
At SOS, we guarantee:
- All calculations are done by us and presented transparently.
- Invoices show every line: salary, contributions, allowances, 13th month, admin fee, LGU tax.
- No hidden costs.
- Real-time support available for any client queries.
- Reliable payroll: employees are paid on time, in full, without errors.
5. FAQs
General EOR FAQs
Q1: How much does an Employer of Record cost in the Philippines?
Gross salary + employer contributions + $190 flat fee + 5% LGU tax (Alabang).
Q2: What is included in the SOS administrative fee?
Payroll, payslip distribution, DOLE/BIR compliance, HR support, onboarding/offboarding, account management.
Q3: How is 13th month pay calculated?
1/12 of annual base salary (allowances excluded).
Q4: Do allowances reduce taxes?
Yes, up to ₱90,000/year of de minimis benefits are tax-free. Beyond this, they are taxable.
Q5: How fast can SOS onboard employees?
In as little as 2 days (no extra cost).
Q6: Is EOR legal in the Philippines?
Yes. EOR is recognised under DOLE and BIR regulations.
Q7: How does SOS compare to Remote, Deel, or Multiplier?
SOS charges a flat $190 fee + transparent LGU tax. Competitors add 10–15% salary markups.
Invoice-Specific FAQs
Q8: Do EOR invoices include tax?
Yes. SOS invoices include all statutory contributions and the 5% Alabang LGU tax.
Q9: How often are invoices issued?
Monthly, aligned with payroll cycles.
Q10: Are there hidden costs in SOS invoices?
No. Every invoice is itemised, including the LGU tax, with no mark-up.
Q11: Why is there a 5% LGU tax?
It is a local tax applied by the Alabang LGU. SOS passes this through at cost — it is not an SOS fee.
Q12: Can SOS explain invoices if clients have questions?
Yes. Account managers provide real-time support on all billing queries.
6. Related Terms & See Also
- 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 SOS means:
- Employees are paid in full, on time, in compliance.
- Employers see every cost — gross salary, benefits, admin fee, and LGU tax.
- Flat $190 fee per employee, no mark-ups.
- Onboarding in as little as 2 days, no extra cost.
SOS is the most transparent and trusted EOR provider in the Philippines, openly showing the 5% LGU tax for total clarity.
