The Fair Work Act vs Philippine Labour Code: What Australian Employers Need to Know
Two Legal Frameworks. One Employment Relationship.
If you’ve spent your career hiring under the Fair Work Act, Philippine labour law will feel unfamiliar at first. The concepts overlap in places — there are still notice periods, leave entitlements, and termination rules — but the mechanics are different enough to catch Australian employers off guard.
This guide maps the key differences so you know exactly what to expect before you make your first Philippine hire.
Side-by-Side: Fair Work Act vs Philippine Labour Code
| Area | Australia (Fair Work Act) | Philippines (Labour Code) |
|---|---|---|
| Minimum wage | National minimum wage, set by Fair Work Commission | Regional minimum wages, set by Regional Tripartite Wage Boards |
| Annual leave | 4 weeks (20 days) paid leave per year | 5 days Service Incentive Leave (SIL); more common in practice is 10–15 days |
| Sick leave | 10 days paid personal/carer’s leave per year | Included in SIL; no separate statutory sick leave for most employees |
| Probation period | Up to 6 months (unfair dismissal protection applies after) | Maximum 6 months; must be in writing; automatic regularisation if not terminated before end |
| Notice of termination | 1–5 weeks depending on tenure | 30 days written notice required for both employer and employee |
| Grounds for termination | Valid reason + procedural fairness | Just cause (misconduct) or authorised cause (redundancy, etc.) — strict process required |
| Redundancy pay | 4–16 weeks based on tenure | 1 month salary per year of service (separation pay) |
| 13th month pay | Not applicable | Mandatory — 1/12 of annual basic salary, due by December 24 |
| Superannuation | 11.5% employer contribution (2024–25) | No equivalent; replaced by SSS, PhilHealth, and Pag-IBIG contributions |
| Overtime | Penalty rates apply (25% weekday, 50% weekend) | 25% premium on regular hours; 30% on rest days; higher on holidays |
The Biggest Practical Differences
1. Termination Is More Procedurally Complex in the Philippines
Under the Fair Work Act, you can dismiss an employee for a valid reason as long as you follow a procedurally fair process. In the Philippines, the bar is higher. For just cause termination (misconduct, serious neglect, fraud), you must issue a written notice specifying the grounds, give the employee a chance to respond, and then issue a second written notice confirming the decision. Skip any step and the termination may be ruled illegal regardless of the underlying reason.
For authorised cause terminations (redundancy, retrenchment, closure), a 30-day advance notice must be given to both the employee and the Department of Labor and Employment (DOLE) — not just the employee.
2. Probation Works Differently
Philippine probation has a specific trap that catches foreign employers out: if you don’t terminate an employee before the end of the 6-month probation period, they automatically become a regular employee with full security of tenure. The clock runs on calendar days, not working days. Set a reminder well in advance if you’re assessing a probationary hire.
3. No Superannuation — But Three Government Contributions Instead
Australia’s superannuation system has no direct equivalent in the Philippines. Instead, employers contribute to three separate government schemes: SSS (social security, ~9.5%), PhilHealth (health insurance, ~5%), and Pag-IBIG (housing fund, 2%). These are remitted monthly to separate government agencies — a process your EOR handles automatically.
4. The 13th Month Pay Has No Australian Equivalent
There’s no concept in Australian law equivalent to the mandatory 13th month pay. Australian employers sometimes confuse it with a Christmas bonus — but it’s non-discretionary. Every rank-and-file employee is entitled to it, regardless of performance, and it must be paid by December 24 each year. Budget for it from day one: it adds 8.33% to annual base salary costs.
What This Means for Australian Employers
The practical implication is straightforward: Philippine labour law is more prescriptive than the Fair Work Act in some areas (particularly around termination procedure and 13th month pay), and less prescriptive in others (leave entitlements). If you’re used to managing HR under Australian law, the learning curve is real — but manageable with the right support.
That’s exactly why Australian companies working with an Employer of Record in the Philippines don’t need to become Philippine labour law experts themselves. Your EOR handles compliance, contracts, and HR processes — you stay focused on the work.
Want Compliance Handled From Day One?
Our local HR team in the Philippines manages all of this on your behalf — from compliant employment contracts to termination procedures and 13th month pay. You hire; we handle the law.
