Services / Supply Chain Integrity Review

Are Your Filipino Contractors Actually Employees?

Most Australian and New Zealand businesses operating with Filipino contractors aren’t doing anything wrong intentionally. They’ve set things up in a way that made sense at the time the arrangement was put in place. A contractor agreement, an invoice arrangement, and a working relationship that’s been ticking along without issue.

However, here’s something that many businesses don’t realise: under Philippine law, the way a working relationship is documented on paper isn’t always what determines employment status.

What actually matters is how the work is performed on a day to day basis. And for a significant number of ANZ businesses, it’s this distinction that creates a compliance exposure they are completely unaware of.

Compliance Framework

The Philippine Supreme Court Fourfold Test

Philippine courts use a four-part framework to assess where a genuine employer-employee relationship exists. This is regardless of what your contract says. The fourfold test looks at the reality of the working relationship, not the paperwork describing it.

Before moving ahead, ask yourself honestly:

Do you dictate how the work is undertaken?
Not what needs to be delivered, but the method, approach, or process your contractor follows to get work done?

Do you require specific working hours?
Are there set start times, core availability windows or scheduled meetings and check-ins they are expected to attend?

Do you require them to use your equipment or business software? i.e., a laptop, your system, platform or tools?

Do you pay them directly on a regular basis at a fixed rate?
Not just per project or invoice?

If you’re nodding at any of these, an employer-employee relationship might already exist in the eyes of Philippine law. Your application of a contractor label to this relationship does not override that assessment.

What this actually means.

Employee entitlements and contributions

In the Philippines, employees are entitled to statutory contributions across three government schemes:

SSS (social security)
Philhealth (health insurance)
Pag-IBIG (housing fund)

As well as proper tax remittance through the BIR when these obligations are not being met, the liability sits directly with the business benefiting from the work. In this scenario that is you.

Australian compliance

The closest Australian equivalent for reference is sham contracting. The act of classifying someone as a contractor to avoid the obligations that come with employment. ANZ business owners understand intrinsically why this is a serious problem at home. The same principle applies in the Philippines under Philippine law.

The compliance picture became more complex in September 2024 when the Fair Work Commission ruled that Filipino workers contracted directly that Australian businesses are entitled to those same employee protections in Australia.

For ANZ businesses directly contracting Filipino workers that exposure now exists under both Philippine law and Australian law, not just one or the other. Paying a Filipino’s minimum entitlements isn’t just the right thing to do, it’s now compulsory.

The Good News

The good news is that most businesses in the position can transition to full compliance without disrupting their team, their operations or working relationships they’ve built. And businesses who are engaging Filipino workers through an offshore staffing provider are protected from this exposure directly.

Offshore Staffing

The Practical Solution

An offshore staffing provider is a third party entity that formally employs your team members on your behalf. Managing all statutory employment obligations in the country while your team continues to work for your business day to day.

You retain complete operational control over how your team works, what they work on and how they’re managed. The legal and compliance obligations sit with the offshore staffing provider, us.

Ascendia Works is positioned to aid ANZ businesses in reaching full compliance for Filipino workers within their existing structure. This means registering them correctly, managing their SSS, PhilHealth, Pag-IBIG and payroll tax obligations on an ongoing basis ensuring that your business is no longer exposed.

For businesses already working with another staffing provider, we can also conduct an independent review of your current arrangements and advise on compliance with no obligation.

Man in a tan sweater working at a laptop at a home desk

The Transition Process

How we help

Initial Review

We assess your existing contractor arrangements against the Philippines Supreme Court’s fourfold test and identify where compliance obligations may exist. We give you a clear picture of your current exposure and what needs to change.

Team Consultation

From here, we engage directly with your Filipino team members, explaining the transition clearly and addressing any questions they may have. This is important to get right, a well-handled transition protects the working relationships you have built thus far.

Compliant Employment Setup

We work with you to establish the correct employment structure under Philippine law, including registering your team members with the relevant government bodies, and formally so that your obligations under Employer of Record are satisfied.

Ongoing Management

This is the monthly contributions, payroll processing, statutory requirements and compliance reporting. All are managed by Ascendia Works on an ongoing basis, giving you full visibility into your obligations and zero ongoing exposure.