1. Real Case: The Struggles of an Expanding Business
At the beginning of last year, a Chinese construction materials company ambitiously entered the Southeast Asian market. However, within just six months, they faced unexpected setbacks in the Philippines. Applying their domestic management policies directly to their overseas operations, they encountered repeated compliance issues. As a result, they were reported to the Department of Labor and Employment (DOLE) three times for violations such as unpaid social security contributions, incorrect holiday pay calculations, delayed salaries, illegal termination, and failure to provide 13th-month pay.
The company’s HR team tried to present their Chinese-language employee handbook to DOLE, but officials simply shook their heads, stating that the document was irrelevant. Only then did the management realize that overseas employment compliance is far more complex than simply replicating domestic practices.
2. Hidden Compliance Pitfalls: Overlooked Costs
Initially, the company thought these were minor issues caused by cultural differences. However, after receiving multiple mediation notices from DOLE, they realized the severity of their compliance gaps:
- Different payroll frequency: Philippine labor law requires salaries to be paid at least twice a month, with payments made on fixed dates.
- Mandatory 13th-month pay: Employees are entitled to a prorated 13th-month salary, regardless of whether they resign or are terminated.
- Social security contributions during probation: Employers must register probationary employees for SSS (social security), PhilHealth (health insurance), and Pag-IBIG (housing fund), and make the required contributions.
Each assumption about "standard practices" turned into a legal risk for the company.
3. The Solution: A Systematic Approach
With FEILONG LEGAL stepping in, a structured solution was implemented within two weeks:
- Customized Employee Handbook – A company-wide meeting was held where legal professionals explained policies, ensuring all employees acknowledged and signed the handbook.
- Comprehensive Employment Contracts – Tailored probationary and permanent employment contracts were provided to clearly define rights and obligations, preventing disputes.
- EOR (Employer of Record) Services – Payroll processing, tax deductions, and social security contributions were outsourced to FEILONG LEGAL, ensuring full compliance and zero errors.
The impact was immediate. The company no longer had to worry about salary miscalculations, and payroll and social security contributions became streamlined. They successfully broke free from the “complaints-fines-remediation” cycle.
4. Advice for Entrepreneurs Expanding Overseas
- Compliance First – Start by hiring 1-2 local employees through EOR while working with legal advisors to understand regulations.
- Targeted Hiring – Use integrated recruitment services to find the right talent, with legal teams ensuring a compliant hiring process.
- Long-term Strategy – Once the market is validated, EOR allows seamless team expansion, while legal experts establish a solid compliance framework.
5. Why Choose FEILONG LEGAL?
- Local Expertise – A Manila-based team with years of experience across various industries.
- Comprehensive Approach – A unique “Legal + Recruitment + EOR” model for efficient and compliant market entry.
- Risk Prevention Over Crisis Management – Proactively identifying and mitigating risks to ensure smooth business operations.
Compliance is the key to success in overseas expansion! Consult FEILONG LEGAL today to navigate the complexities of Philippine labor laws and ensure your business grows with confidence.