The Ultimate Employer of Record Philippines Glossary

Joy Garingo | January 19 2024

On January 19, 2024

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Employer of Record Employer-of-Record in the Philippines

Reference · Zero-Ten Park Philippines

Most of the confusion around an employer of record philippines arrangement is vocabulary, not concept. A buyer who knows that a security deposit is refundable, that a contribution is not a tax, and that "regularization" is a legal event rather than a courtesy reads an EOR proposal completely differently from one who does not. This glossary collects the terms that actually come up, grouped into the three families that matter: the foundational words that describe the model, the financial words that appear on an invoice, and the legal words that carry real consequences. Zero-Ten Park Philippines uses these terms precisely, and the searchable list below lets you find any of them in seconds.

Executive summary

Three families of terms. Foundational words define the structure, financial words appear on the invoice, and legal words determine liability and compliance.
The costly confusions are specific. Mistaking a refundable reserve for a fee, a pass-through for income, or a probationary hire for an at-will one leads to bad decisions.
Search, then read. Use the filter and search box to jump to any term, or browse a whole category at once.

The Employer of Record Philippines Vocabulary, in One Place

The list below is interactive. Type any word, such as "deposit," "tax," or "termination," to filter instantly, or tap a category to see only the foundational, financial, or legal terms. Each definition is written to match how the word is actually used in a Philippine EOR engagement, not its dictionary sense. The three short sections after the tool explain why each family of terms matters.

Interactive glossary

Search any term or filter by category.

Employer of Record (EOR)Foundational

A company that becomes the legal employer of your staff in a country where you have no entity, handling payroll, contracts, and statutory compliance while you direct the day-to-day work.

Client CompanyFoundational

Your business. You control the work, set priorities, and manage performance, but you are not the legal employer of record on paper.

Legal EmployerFoundational

The party that holds the employment relationship in law: it signs the contract, runs payroll, remits contributions, and carries the statutory obligations. Under an EOR, that party is the EOR, not you.

OnboardingFoundational

The process of bringing a new hire into compliant employment: contract signing, government registrations, payroll setup, and benefits enrolment.

OffboardingFoundational

The compliant exit of an employee, covering final pay, certificate of employment, and proper documentation of the cause of separation.

Probationary EmploymentFoundational

An assessment period of up to six months during which an employee must meet standards communicated at engagement. It is not at-will employment; dismissal still requires a valid cause.

Regular EmploymentFoundational

Permanent employment with full security of tenure, reached after probation or by operation of law. A regular employee can only be dismissed for a just or authorised cause.

Fixed-Term EmploymentFoundational

Employment for a defined period or project, valid when the term reflects genuine time-bound work. Misused renewals can be treated by law as creating regular employment.

SecondmentFoundational

An arrangement in which a worker employed by one entity performs work under the direction of another. An EOR is a structured, compliant form of this idea.

Gross SalaryFinancial

The full agreed monthly pay before any deductions. The employee's statutory share and withholding tax come out of this figure, not on top of it.

Net PayFinancial

The take-home amount the employee actually receives after statutory contributions and withholding tax are deducted from gross salary.

Statutory ContributionsFinancial

The mandatory SSS, PhilHealth, and Pag-IBIG payments, each split between employer and employee. A contribution funds a benefit; it is not a tax.

SSSFinancial

The Social Security System: contributions of 15% of the Monthly Salary Credit, split 10% employer and 5% employee, funding pensions, sickness, maternity, disability, death, and unemployment benefits.

PhilHealthFinancial

The national health insurance program: a 5% premium on basic salary, split evenly between employer and employee, on an income base from ₱10,000 to ₱100,000.

Pag-IBIGFinancial

The Home Development Mutual Fund: a 2% contribution from each side on a maximum fund salary of ₱10,000, funding housing loans and member savings.

Monthly Salary Credit (MSC)Financial

The bracketed figure SSS uses to compute contributions, moving in ₱500 steps between a ₱5,000 floor and a ₱35,000 ceiling. It is not the employee's exact salary.

Withholding TaxFinancial

Income tax deducted from salary each pay period under the TRAIN tax tables and remitted to the BIR on the employee's behalf.

13th-Month PayFinancial

A mandatory benefit equal to one-twelfth of basic salary earned in the year, paid by 24 December. EORs typically accrue it monthly at about 8.33%.

Security DepositFinancial

A refundable reserve, usually one month of salary, held in trust against a lawful exit and returned at offboarding. It is not a fee.

Prepaid PayrollFinancial

A float, usually one month of salary, funded in advance so the EOR can pay staff on the statutory date without waiting on the client's transfer.

Contingency FundFinancial

A capped buffer, often 10% of salary, for mid-cycle adjustments, reconciled at the end of the engagement.

Flat FeeFinancial

The fixed monthly amount that pays for the EOR service itself, separate from salary and contributions. It is the only line on the invoice that is purely the provider's income.

VATFinancial

Value-added tax at 12%, applied to the EOR service fee. Amounts documented as pass-throughs are generally excluded from the VAT base.

Pass-Through (Reimbursement)Financial

Money the EOR collects and forwards to a third party, such as salary to the employee or contributions to the government, which does not count as the provider's income when properly documented.

Labor CodeLegal

The Philippines' primary statute governing employment, covering wages, benefits, security of tenure, termination, and contracting.

DOLELegal

The Department of Labor and Employment, which regulates labour standards, contracting, and dispute resolution.

BIRLegal

The Bureau of Internal Revenue, which administers income tax, withholding tax, VAT, and invoicing rules.

Four-Fold TestLegal

The test for who the real employer is, weighing selection, payment of wages, power of dismissal, and control over the means and methods of work, with control the decisive factor.

Control TestLegal

The most important element of the four-fold test: who directs not just the result but the means and methods by which work is done.

Labor-Only ContractingLegal

A prohibited arrangement where a contractor merely supplies workers without substantial capital or genuine control. It exposes the principal to direct employer liability.

Legitimate Job ContractingLegal

A lawful arrangement where the contractor has substantial capital, its own tools, and genuine control over the work, and is registered with DOLE.

D.O. 174Legal

Department Order No. 174-2017, which implements the Labor Code's contracting rules, bans labor-only contracting, and sets the requirements for legitimate contractors.

Solidary LiabilityLegal

Joint and several responsibility: where it applies, a worker can claim the full amount owed from either the contractor or the principal. A core reason compliant structuring matters.

Separation PayLegal

Statutory pay owed on certain authorised-cause terminations, ranging from a half to a full month per year of service, with a floor of one month. The Philippine term for what others call severance.

Just & Authorised CausesLegal

The only lawful grounds for dismissal. Just causes relate to employee fault; authorised causes relate to business or health reasons and usually carry separation pay.

Final PayLegal

All amounts owed to a departing employee, which DOLE guidance says should be released within 30 days of separation.

Certificate of EmploymentLegal

A document stating the dates and nature of employment, which must be issued within three days of an employee's request.

RegularizationLegal

The legal event by which an employee becomes regular, gaining full security of tenure. It can happen by completing probation or by operation of law, not by employer choice alone.

FIA (Foreign Investments Act)Legal

The law setting minimum capital for foreign-owned domestic-market enterprises, generally US$200,000, reducible under specific conditions. Relevant when comparing an EOR to your own entity.

Revised Corporation CodeLegal

The 2019 statute governing Philippine companies, which removed the old minimum capital rule and allows one-person corporations.

PEZALegal

The Philippine Economic Zone Authority, which grants tax incentives to registered enterprises operating inside economic zones. An EOR does not, by itself, confer these incentives.

No terms match that search. Try a different word or clear the filter.

Showing all 40 terms.

Foundational Terms

The foundational words describe the architecture of the arrangement, and most early misunderstandings live here. These are the terms that recur in every employer of record philippines conversation, so getting them right at the start keeps the rest from drifting. The single most important distinction is between the client company and the legal employer: you direct the work, but the EOR holds the employment in law. Get that one clear and the rest of the model follows. The employment-status terms, probationary, regular, fixed-term, matter because Philippine law attaches real consequences to each, particularly security of tenure, and treating a probationary hire as though they were at-will is a common and expensive error for companies used to other jurisdictions.

Financial Terms

The financial words are the ones that appear on an invoice, and the recurring trap is conflating three very different kinds of money. A statutory contribution is not a tax, a security deposit is not a fee, and a pass-through is not the provider's income. The only line that is purely the cost of the service is the flat fee, with VAT applied on top of it. Once those distinctions are clear, an outsourcing Philippines invoice stops looking like a single opaque number and starts reading as a sorted list of salary, government remittances, refundable reserves, and the actual service charge.

Legal Terms

The legal words carry the consequences. The four-fold test and the control test determine who the law treats as the employer, which is the foundation of the entire model. Labor-only contracting and solidary liability describe what goes wrong when a structure is not compliant. And the termination vocabulary, just and authorised causes, separation pay, final pay, governs the most litigated moments in any employment relationship. A buyer who understands these terms can read a provider's compliance posture from the language it uses.

Why this matters

Fluency in the terms is fluency in the risk.

Every word in this glossary maps to a decision or a liability. Knowing that "regularization" is a legal event, that a "contribution" funds a benefit, and that a "deposit" comes back changes how you read a proposal and what you negotiate. Zero-Ten Park Philippines uses these terms the way the law does.

Zero-Ten Park

When a provider's words are precise, so is its compliance.

The fastest read on an EOR provider is linguistic. One that calls a refundable deposit a fee, or describes dismissal as "at-will," is telling you something about how carefully it handles the things those words name.

The test: ask a provider to define separation pay, the four-fold test, and what is and is not subject to VAT. Precise answers signal a compliant operation. Vague ones are a flag.

Explore the EOR knowledge base

Frequently Asked Questions

What is the difference between a statutory contribution and a tax?

A contribution funds a specific benefit the employee can claim, such as a pension, health coverage, or a housing loan, and is split between employer and employee. A tax is a general government levy with no earmarked individual benefit. SSS, PhilHealth, and Pag-IBIG are contributions; withholding tax is a tax.

Is a security deposit the same as the EOR fee?

No. A security deposit is a refundable reserve held in trust and returned to you at the end of the engagement. The EOR fee is a non-refundable charge that pays for the service. Treating the deposit as a cost overstates what an EOR actually charges.

What does "regularization" actually mean?

It is the legal event by which an employee becomes a regular employee with full security of tenure, either by completing probation while meeting communicated standards or by operation of law. It is not a discretionary favour the employer grants; the law can trigger it regardless of intent.

Why does the glossary separate foundational, financial, and legal terms?

Because they do different jobs. Foundational terms describe how the model works, financial terms describe what appears on the invoice, and legal terms describe liability and compliance. Grouping them this way makes it easier to find the word you need and to understand which kind of consequence it carries.

Is "severance" the right word in the Philippines?

The correct local term is separation pay, which is governed by the Labor Code and owed on specific authorised-cause terminations. "Severance" is the term used in some other countries; in a Philippine context it refers to the same idea but the statutory rules are what apply.

Sources & further reading

DOLE Handbook on Workers' Statutory Monetary Benefits — the Department of Labor and Employment's reference on 13th-month pay, holiday pay, separation pay, and other mandated benefits.
Labor Code of the Philippines and Department Order No. 174-2017 — definitions of employment status, contracting, and the four-fold test.
Zero-Ten Park Philippines — Employer of Record knowledge base: thecompany.ph/services/employer-of-record/wiki.