EOR Solutions in Cebu: Balancing Client Needs and Legal Requirements

In an increasingly globalized economy, companies are expanding their operations across borders, necessitating the management of international employees. Employer of Record (EOR) services have become an invaluable tool for businesses seeking to navigate the complexities of foreign employment laws. However, a common concern is the perceived loss of control over employee management. This article examines this concern within the context of Cebu City, Philippines, detailing the roles and responsibilities of EORs, highlighting real-world examples, and showcasing how The Company Cebu offers a nuanced solution to maintain client control while ensuring compliance and operational efficiency.

EOR Responsibilities and Client Control

EOR services in the Philippines handle a wide range of administrative and compliance tasks, from payroll processing and benefits administration to tax filings and adherence to local labor laws. In Cebu City, where businesses often tap into a rich pool of talent in IT, customer service, and creative industries, EORs play a crucial role in managing statutory requirements such as contributions to the Social Security System (SSS), PhilHealth, and the Home Development Mutual Fund (Pag-IBIG Fund.)​

However, EORs are not typically involved in day-to-day management or strategic decision-making. This separation of roles can lead to concerns among businesses about losing control over key aspects of employee management. For example, while an EOR may manage payroll and ensure compliance with the 13th-month pay regulation—a mandatory benefit equivalent to one-twelfth of an employee’s annual salary—the client company retains the authority to set job roles, determine salaries beyond statutory requirements, and make decisions about employment terminations​.

A Tech Startup in Cebu

A Cebu-based tech startup used EOR services to rapidly scale its team of software developers. The startup faced challenges related to understanding local labor laws and managing employee benefits. By partnering with an EOR, the startup could focus on product development while the EOR managed HR compliance, including ensuring the provision of mandatory health benefits and adherence to working hour regulations.

In this scenario, the EOR provided crucial support by setting up legally compliant contracts and handling payroll processing, including the complex computation of overtime pay and night shift differentials​. For instance, under Philippine law, night shift workers are entitled to an additional 10% of their regular wage for work performed between 10 PM and 6 AM. The EOR ensured these calculations were accurate and compliant, freeing the startup’s management to focus on their core business.

An Outsourcing Company Expanding to Cebu

An international outsourcing company expanded to Cebu and needed to onboard a large team of customer service representatives quickly. The company faced the challenge of navigating Philippine labor laws, which require compliance with specific provisions such as the prohibition of unjust termination and the requirement for clear, written contracts.

By utilizing an EOR, the company ensured that all employees received their due benefits, including the 13th-month pay and mandatory leave entitlements. The EOR also managed the recruitment and onboarding processes, ensuring that all employees had signed compliant contracts that outlined their roles, compensation, and conditions for termination​. The company retained control over training and day-to-day supervision of the employees, thus maintaining the quality and consistency of customer service.

Computation and Compliance: A Closer Look

To illustrate the financial aspects of EOR services, consider a typical scenario involving payroll management. For a customer service representative earning PHP 25,000 per month, the EOR would handle deductions for SSS, PhilHealth, and Pag-IBIG Fund contributions. These contributions typically total around 11% of the employee’s salary, split between employer and employee contributions. The EOR ensures that these amounts are accurately deducted and remitted to the respective agencies, thereby maintaining compliance with Philippine laws.

Moreover, the EOR manages the computation of the 13th-month pay, which in this case would amount to PHP 25,000, payable by December 24th. This amount is calculated as one-twelfth of the employee’s total basic salary earned during the calendar year​​. The EOR also provides regular reporting to the client, detailing all payroll-related expenses and ensuring transparency.

Solutions: The Company Cebu’s Approach

The Company Cebu offers a unique EOR solution that emphasizes flexibility and client control. Recognizing the concerns about limited control, we provide a range of customizable services that allow businesses to maintain their strategic and operational authority. Clients can choose their level of involvement in the recruitment process, from selecting candidates to defining specific employment terms.

We prioritize clear communication and transparent reporting, ensuring that clients are fully informed about local labor law changes and their implications. For example, recent updates to the Philippine Labor Code regarding employee benefits and working conditions are communicated promptly, allowing clients to make informed decisions.

Our team of experts is dedicated to providing a seamless experience, from onboarding to payroll management. We handle all compliance aspects, including the meticulous calculation of contributions and benefits, thus allowing our clients to focus on their core business activities. We also offer additional services such as visa processing and work permit arrangements for foreign employees, further simplifying the complexities of international employment​.

Conclusion

Employer of Record services offer significant advantages in managing the complexities of international employment. However, concerns about limited control over employee management can arise. By offering customizable services and maintaining transparent communication, The Company Cebu ensures that clients retain control over their critical business functions while leveraging the administrative efficiencies of EOR services. This balance of control and compliance not only mitigates risks but also enhances the overall effectiveness of business operations in Cebu and beyond.