Employer of record is a market phrase, and Philippine labor law does not carry it as a category. The law carries a principal, a contractor, a Service Agreement and a certificate of registration issued by the Department of Labor and Employment, and those are the things that decide who may lawfully stand as the employer of the accountant working your files.
So the first question to a Philippine provider is not whether it is an employer of record. It is whether the country's contracting rules reach the arrangement at all, which registration the provider holds, what the per-seat number is built from, and how the invoice is raised.
Whether the Contracting Rules Reach Your Arrangement
Contracting and subcontracting in the Philippines run on Department Order 174, Series of 2017, the Department of Labor and Employment's rules implementing Articles 106 to 109 of the Labor Code, as amended. Section 35 of it supersedes every rule issued by the Secretary of Labor and Employment inconsistent with its provisions, in the published text of the Order.
That Order does not reach everything a Philippine provider sells. Department Circular No. 001-17, dated June 9, 2017, says the Order applies only to the trilateral relationship which characterizes a contracting or subcontracting arrangement, and that it does not contemplate covering information technology-enabled services involving an entire or specific business process, listing Business Process Outsourcing, Knowledge Process Outsourcing, Legal Process Outsourcing, IT Infrastructure Outsourcing, Application Development, Hardware and/or Software Support, Medical Transcription, Animation Services and Back Office Operations/Support, per the Circular's own text.
Read those two shapes against what you are actually buying. A named preparer who sits inside your workflow, works to your deadlines and takes direction from your reviewer is the trilateral shape: a principal, a contractor, and the contractor's employee. A provider that takes an entire process off your hands, runs it on its own account and returns finished output is the second shape. Which one you have is a question about how the work is really done rather than about the words on a proposal, and it decides whether a certificate of registration is a document you can ask to see at all.
Underneath both shapes sits the Labor Code's own rule on labor-only contracting, which writes a route from the intermediary straight back to the buyer. That route, its verbatim text and the diligence it calls for are set out in the published post on EOR versus independent contractor, and the equivalent question for an Indian provider, where the entitlement is registered under a different statute, is worked through in employer of record India. What follows is the registration, liability and invoice layer that applies once the arrangement is the trilateral one. If the provider runs an entire process on its own account, the certificate and the Service Agreement contents below are not documents it is required to hold, and the invoice section is where your diligence goes instead.
What the Registration Actually Is
Registration is a duty rather than a badge. It is mandatory for all persons or entities acting as contractors to register with the Regional Office of the Department of Labor and Employment where the contractor principally operates, and failure to register gives rise to the presumption that the contractor is engaged in labor-only contracting, under Section 14 of the Order.
Behind that registration sits a capital test with a number on it. Substantial capital refers to paid-up capital stock or shares of at least Five Million Pesos (P5,000,000.00) in the case of corporations, partnerships and cooperatives, and in the case of a single proprietorship a net worth of at least Five Million Pesos (P5,000,000.00), under Section 3(l) of the Order. Proof of compliance with that requirement goes into the application itself, under Section 15, alongside a certified listing of the facilities, tools, equipment and work premises the contractor actually uses.
Three numbers tell you what the certificate cost and how long it lasts. A registration fee of One Hundred Thousand Pesos (P100,000) is payable on approval of the application under Section 19, renewal costs the same and has to be applied for thirty (30) days before the current registration expires under Section 21, and the Certificate of Registration is effective for two (2) years unless cancelled after due process, under Section 20 of the Order.
Region is the detail that decides whether a genuine certificate covers your seat at all. The certificate is valid in the region where it was issued, and a contractor with Service Agreements outside that region has to request a duly authenticated copy from the registering Regional Office and submit it, with copies of its Service Agreements in the area, to the Regional Office where it seeks to operate, under Section 20 of the same Order. Ask which region your seat is staffed from before you ask for the document.
A recruitment license is not a substitute for this certificate, either. A Philippine company licensed to recruit for local employment is barred from job contracting, which is why a vendor that both finds candidates and supplies a managed team should be asked to name the registration behind each activity, a point set out with its own rules in the published post on how to source offshore accounting candidates.
The Service Agreement Has Required Contents
The contract between you and the provider has a name in these rules, and a content list. A Service Agreement has to include the specific description of the job or work being subcontracted including its term or duration, the place of work and the terms and conditions governing the arrangement, the agreed amount of the contracted job or work, the standard administrative fee of not less than ten percent (10%) of the total contract cost, and a provision on the issuance of the bond, renewable every year, under Section 11(b) of the Order.
That fee line is worth pausing on, because it prices the wrapper rather than the person. The rule sets a floor and not a ceiling, so a single all-in rate has the administrative fee folded into it and the only way to see it is to ask for the contracted amount and the fee as separate lines. The bond in the same section is the bond under Article 108 of the Labor Code, which the principal may require from the contractor to be posted equal to the cost of labor under contract, under Section 3(a) of the Order.
Getting the paperwork wrong lands on the buyer, not on the seller. A finding of violation of the section on the rights of the contractor's employees, or of the section on required contracts, renders the principal the direct employer of the contractor's employees, under Section 12 of the Order.
Solidary Liability, and Why the Word Matters
Solidary is a term of art, and it does not mean a share. A solidary obligation is one where each party can be made to answer for the whole of it, so a worker with a claim has no reason to split it between the provider and the buyer.
The rules put the buyer inside that obligation directly. In the event of violation of any provision of the Labor Code, including the failure to pay wages, there exists a solidary liability on the part of the principal and the contractor for purposes of enforcing the provisions of the Labor Code and other social legislations, to the extent of the work performed under the employment contract, under Section 9 of the Order. The Order's own definition adds the second limb, the liability of the principal in the same manner and extent as to its direct employees when the contractor fails to pay the wages of its employees, under Section 3(k).
Ending a seat early is where that reaches an invoice. Where employment ends because the Service Agreement was pre-terminated for something that is not an authorized cause, the employee's unpaid wages and other unpaid benefits, including unremitted legal mandatory contributions such as those to the SSS, PhilHealth, Pag-IBIG and the Employees' Compensation Commission, are borne by the party at fault, without prejudice to the solidary liability of the parties to the Service Agreement, under Section 13 of the Order.
A cancelled registration carries a date you should know about. Cancellation does not impair legitimate job-contracting arrangements the contractor entered into with other principals before the cancellation, and any valid and subsisting Service Agreement is respected until it expires, but after that, contracting with a delisted contractor makes the principal the direct employer of all employees under the Service Agreement, under Section 26 of the Order. So put both dates in a calendar, the certificate's two-year expiry and the Service Agreement's own, rather than the certificate in a folder.
Enforcement against a US buyer directly is a separate question, and the commercial point holds without it. A provider funding an obligation it had not priced is a provider that reprices, and that arrives in your March as a service failure.
What Sits Inside a Philippine Per Seat Invoice
A Philippine seat price is a wage plus a short list of employer obligations, and each obligation is set by a rule you can read. Ask for the build-up line by line, then check it against what follows.
The Social Security Employer Share Is Capped by a Bracket
The Social Security System is the country's contributory pension and benefit fund, and Republic Act 11199, the Social Security Act of 2018, carries its schedule. The last step in that schedule, for 2025, is a contribution rate of 15%, split as an employer share of 10% and an employee share of 5%, with a minimum monthly salary credit of P5,000.00 and a maximum of P35,000.00, under Section 4(a)(9) of the Act.
The monthly salary credit is the bracket the contribution is computed on rather than the salary itself, so the employer line stops growing once pay clears the top bracket. The employer's own contribution is also not recoverable from the person in the seat. Notwithstanding any contract to the contrary, an employer shall not deduct, directly or indirectly, from the compensation of covered employees, or otherwise recover from them, the employer's contribution, under Section 19 of the same Act.
The Social Security System publishes its current table as effective January 2025, on the SSS contribution table page. Ask a provider which schedule its numbers run on and when it last checked, because a costing built on a superseded bracket understates the seat.
The Health Insurance Premium Uses a Different Base
PhilHealth is the national health insurance program, and Republic Act 11223, the Universal Health Care Act, schedules its premiums. That schedule ends at a premium rate of 5.00% of monthly income, with an income floor of P10,000.00 and an income ceiling of P100,000.00 for 2024 and 2025, under Section 10 of the Act. The Act sets the premium and does not allocate it between employer and employee, so ask the provider how much of it sits inside your seat price and under which issuance.
The rate is still the live one. Direct contributors are required to pay premium contributions equivalent to five percent (5.0%) of monthly income effective January 2025, per the PhilHealth advisory issued in 2026.
The base is where the two employer contributions part company. Employers compute the premium on the Monthly Basic Salary, which is the fixed basic rate of an employee and does not include sales commission, overtime pay, allowances, thirteenth month pay, bonuses or other gratuity payments, per the PhilHealth advisory on premium contributions for 2025. A seat that works overtime to cover a US deadline earns overtime pay that lifts the wage bill without lifting this line at all, so a quote that folds every employer obligation into one percentage of pay is not telling you what the seat costs.
The same prohibition carries a price on this side. An employer that deducts, directly or indirectly, from the compensation of covered employees, or otherwise recovers from them the employer's own contribution, is punished with a fine of Five thousand pesos (P5,000.00) multiplied by the total number of affected employees, or imprisonment of not less than six (6) months but not more than one (1) year, or both, under Section 38 of the Universal Health Care Act.
The third employer counterpart, the Pag-IBIG savings fund, and the wage-side items sitting under any Philippine quote, from thirteenth-month pay to the night differential and the regional wage floors, are already set out with their rules in the published post on bookkeeping services in the Philippines.
The Indirect Tax Line on an Invoice to a US Buyer
Value-added tax is the Philippine indirect tax on services, and charging it is the default rather than the exception. There shall be levied, assessed and collected a value-added tax equivalent to twelve percent (12%) of gross receipts derived from the sale or exchange of services, under Section 108 of the National Internal Revenue Code as amended by Section 33 of Republic Act 10963.
The zero rate is what your invoice probably relies on, and it carries conditions. Services other than the processing, manufacturing or repacking of goods for export, rendered to a person engaged in business conducted outside the Philippines, or to a nonresident person not engaged in business who is outside the Philippines when the services are performed, are subject to the zero percent (0%) rate where the consideration is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas, under Section 108 of the same Code. The whole subsection applies to services performed in the Philippines by VAT-registered persons, so a provider that is not registered for the tax is answering a different question.
That wording survived the most recent rewrite. Section 7 of Republic Act 12066, the CREATE MORE Act, re-issued the zero-rating subsection of Section 108 and left the paragraph on services to a buyer outside the country untouched, in the Act.
So the currency you pay in and the account the money lands in belong to the provider's tax position rather than to your convenience. Ask whether the invoice is raised at the zero rate, which paragraph of the zero-rating subsection it relies on, and whether the provider is registered for the tax at all. A provider that cannot answer the second part has not read its own return.
Employer of Record or Your Own Philippine Company
The four-way comparison between an employer of record, a certified professional employer organization, a staffing partner and your own entity is already drawn in the published employer of record post, and why a professional employer organization cannot take an offshore seat is in PEO versus EOR. What separates the two live options in the Philippines is a capital test and a calendar.
The capital test comes from the foreign investment rules. Micro and small domestic market enterprises with paid-in equity capital less than the equivalent of Two hundred thousand US dollars (US$200,000.00) are reserved to Philippine nationals, and a minimum paid-in capital of One hundred thousand US dollars (US$100,000.00) is allowed to non-Philippine nationals where the enterprise involves advanced technology, is endorsed as a startup or startup enabler, or a majority of its direct employees are Filipinos and in no case fewer than fifteen (15), under Section 8 of the Foreign Investments Act of 1991 as amended by Republic Act 11647.
Whether that floor bites turns on which kind of enterprise you are setting up, meaning whether the company sells its output into the Philippine market or exports it. Foreign investment in an export enterprise whose products and services do not fall within Lists A and B of the Foreign Investment Negative List, which is the Section 8 list just cited, is allowed up to one hundred percent (100%) ownership, and an export enterprise that fails to meet its export requirement is ordered by the Securities and Exchange Commission or the Department of Trade and Industry to reduce its sales to the domestic market to not more than forty percent (40%) of its total production, under Section 6 of the Foreign Investments Act as amended. A non-Philippine national registers with the Commission, or with the Department of Trade and Industry in the case of single proprietorships, and the Commission shall effect registration of any enterprise applying under the Act within fifteen (15) days upon submission of completed requirements, under Section 5 of the Foreign Investments Act as amended by Republic Act 11647.
Then comes the calendar, and it does not end. Every corporation, domestic or foreign, doing business in the Philippines has to submit to the Commission annual financial statements audited by an independent certified public accountant, and a general information sheet, with the audit requirement replaced by certification under oath from the treasurer or chief financial officer where total assets or total liabilities are less than Six hundred thousand pesos (P600,000.00), under Section 177 of the Revised Corporation Code. Failure to submit those reportorial requirements three (3) times, consecutively or intermittently, within a period of five (5) years lets the Commission place the corporation under delinquent status.
One more date arrives with every board. Within thirty (30) days after the election of the directors, trustees and officers, the corporate secretary or another officer has to submit their names, nationalities, shareholdings and residence addresses to the Commission, under Section 25 of the same Code.
Where the people are allowed to physically sit is a separate constraint again, and it belongs to the provider's tax registration rather than to your preference. That rule, and the agency that writes the operating detail under it, are covered in outsourcing accounting to the Philippines.
So the honest decision rule is not cost per seat. An entity earns its calendar when headcount and time horizon justify a permanent finance and compliance function in the country, because somebody has to own those filings every year. A provider relationship earns its fee when you want named people and no calendar, and are willing to inspect somebody else's compliance instead of running your own. There is a third answer that changes the question: buy reviewed output from a provider that employs and supervises its own staff, so the employment question and the review question sit inside one contract.
Questions to Put in Writing Before You Sign
Every one of these has a public Philippine rule behind it, so all a provider has to supply is its own position. Put them in an email rather than on a call.
- Are we buying named people inside our workflow, or an entire process run on your account? The answer decides whether the contracting rules apply to the arrangement at all, and therefore whether a certificate of registration is a document that exists to be shown.
- May we see your certificate of registration, the region it covers and its expiry date? The certificate is regional and it runs out, so both facts matter as much as the document itself.
- Show the Service Agreement's required contents as separate lines: the described job, its term, the agreed contract amount, your administrative fee and the bond provision. A single all-in figure cannot be checked against any rule at all.
- Which employer contributions are inside the per-seat number, and what base is each one computed on? Ask separately about the fund that uses a capped bracket and the one that uses basic salary, because one stops at the top of its bracket and the other never counts overtime at all.
- Is the invoice raised at the zero rate, and are you registered for the tax? Ask it in writing, because the reply tells you how carefully the provider has thought about its own position.
- If the arrangement ends mid-season, who funds the unpaid wages and the unremitted contributions? Settle that before the seat starts rather than after it ends.
What the Seller Writes, and What the State Writes
The label on a proposal is written by the seller. The registration behind the employment, the required contents of the Service Agreement, the contribution rates and the tax footing of the invoice are written by somebody else, and every one of them is public. That asymmetry is the whole advantage a buyer has here. You can check the parts of the arrangement the provider never got to draft, and you can check them before anyone touches a client file.
None of it answers the question underneath, which is whether the work will be signable. Accountably delivers from its own offices in India rather than the Philippines, so a Philippine team is not a requirement we fill. If what you need is preparation and review capacity you can grade before your name is on the line, we run a Free 40-Hour Proof Pilot on a fixed block of your own representative work, on your software and your SOPs, through full multi-layer review. Since 2022 that has meant 30+ placements across 20+ US firms, with a 3 to 4 week ramp and a 30-Day Fit Guarantee that replaces anyone who is not the right fit on your account, free.
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