The Philippines is an ideal location for building an offshore team. Professional and Technical labor, as well as those proficient in the English language, are highly available and are at a lower cost than any other country in Asia. The Philippines has a legacy of Business Process Outsourcing, and a shared services industry, further lending to the idea of a more readily available workforce than other Asian countries, particularly in areas of professional and technical services that most foreign businesses require. The cost of running operations in the Philippines is significantly impacted by direct and indirect labor costs. These include statutory contributions, required employee benefits, costs of compliance, and the grade and district of the employee’s office. Establishing the direct and indirect costs of doing business in the Philippines accurately from the beginning will prevent businesses from encountering a budget surprise, which will remain accurate on paper until the first payroll is processed.
Salary Benchmarks Across the Philippines
In 2026, the daily minimum wage as set by Metro Manila is ₱695 (Philippine pesos). The minimum daily wage in other regions of the Philippines varies from approximately ₱366 to ₱695. The large wage difference has a major influence when businesses are deciding where to locate their operations. For example, a business can expect to pay a significantly lower wage for a customer support team in Davao compared to one in Metro Manila. This difference is also multiplied for the number of employees.
In actuality, minimum wage serves most usefully as a legal reference point for entry-level, frontline, and manual labor positions. The costs associated with professional and technical recruitment far exceed this. Starting salaries for fresh graduates employed in customer service and entry-level accounting and software positions in Metro Manila range from ₱18,000 to ₱28,000. Earners with three to five years of experience in business and IT operations typically earn ₱35,000 to ₱65,000. Senior management and experienced engineers and finance and legal specialists in Metro Manila earn ₱80,000 to ₱150,000 or more, depending on the industry and the organization. Cebu and Davao are preferred operating locations for Manila-based remote employees because salaries at comparable experience levels in those cities are approximately 15% to 25% lower than those in Metro Manila.
What Employers Actually Pay
The difference between gross salary and the total cost to the employer in the Philippines is driven by four legally mandated employment costs. The Social Security System, or SSS, requires a contribution of approximately 9.5% of the employee’s gross monthly salary. For PhilHealth, the national health insurance program, the employer’s contribution is 2.5% of the premium. For Pag-IBIG, the housing fund, the employer contribution is 2% of a wage ceiling, which is a small but fixed cost for most employees. When combined, these three governmental programs add about 14% to 15% to the cost of gross salary.
The mandatory thirteenth month pay is the most confusing element for first-time employers in the Philippines. It is the legal requirement of paying employees a thirteenth month of pay calculated as 1/12 of an employee’s annual total basic pay and equates to an additional 8.33% on annual payroll. Thirteenth month pay must be paid by December 24 of every year. It applies to all rank and file employees. The employer guides estimate the annual cost of employing staff in the Philippines is between 120% – 125% of total annual employee’s basic salary, depending on the salary band and the level of voluntary employee benefits that the employer providing in addition to the benefits provided by law.
For example, an employee that is paid a gross monthly salary of ₱30,000, the employer cost is ₱36,000 – ₱37,500. This is after factoring SSS, PhilHealth, Pag-IBIG, and thirteenth month pay. For a ten-person team, this results in an employer cost of ₱360,000 – ₱375,000. The total gross monthly salaries payable to the team is ₱300,000. This is the cost gap that the employer must bring to the budget.
Costs of Offices and Workspaces
As of early 2025, the overall vacancy in Metro Manila was approximately 19.8%, making the office market in Metro Manila tenant-friendly. However, the conditions vary by district. According to JLL data, vacancy in Bonifacio Global City in Taguig was approximately 9.2%, with grade-A office rentals the highest in Metro Manila at ₱1,331/sqm/month as of the end of 2025. An older and established business district, Makati CBD, has a greater range of rents. Premium office buildings on Ayala Avenue are in the upper range of ₱1,200/sqm/month and grade-B buildings in Salcedo and Legaspi villages are in the lower range of ₱700/sqm/month. Office rentals in Ortigas and Quezon City are fairly lower at between ₱450/sqm/month and ₱650/sqm/month, and serve as the location for back and mid-office operations without client and prestige directed functions that typically require an office in Makati or Bonifacio Global City.
Aside from the base rate, Philippine office leases typically include a Common Area Maintenance fee that adds to the total occupancy spend by an additional ₱150 to ₱450 per square meter per month, along with separately metered utilities, a 12% VAT, and typically a security deposit equal to three months’ rent plus three months’ rent paid in advance. The combination of base rent, CUSA, utilities, and VAT typically increases the total occupancy spend by anywhere between 30% and 50% of the headline base rate. This makes the per-seat budgeting exercise much more complex than simply multiplying the base rate with the net area.
For companies not yet ready to enter into a traditional lease, the cost of serviced office space and coworking space in Metro Manila budgets from ₱7,000 to ₱8,000 per desk, with a further cost of ₱12,000 to ₱20,000, and greater, per desk for private serviced offices in BGC and Makati. The cost of serviced office space simplifies the budgeting for small and nascent teams, as rent, utilities, internet, and receptionist services are included.
Building a Realistic Operating Budget
An operating budget in the Philippines includes the costs of basic utilities, independent office space, fiber internet (business-grade fiber connections are about ₱2,000 to ₱5,000 per month), payroll software, or the costs of outsourcing payroll, business permit renewals, and taxes (local government), and accounting, auditing, and tax services. In terms of tax compliance, the Bureau of Internal Revenue has the highest burden on philippine businesses. Filing late or filing taxes incorrectly increases the costs of tax compliance.
Another expense you should include in a Philippine operating budget is a recruitment budget. For a typical recruitment agency, a major expense is the cost of recruiting a professional. This cost is about 1 to 2 months’ salary. Also, when hiring a specialist to fill a technical or managerial position, you should expect the process to take anywhere from 4 to 8 weeks.
Cost Control Strategies
Since 2020, remote and hybrid work have become part of the Philippine professional work culture. They represent a genuine cost lever for foreign investors building distributed teams. A hybrid model that limits the maximum number of employees present in the office allows a company to lease office space at 50%-70% of the total team capacity as opposed to the one-to-one ratio. This significantly reduces the cost of office space. Cebu, Davao and the rapidly developing Clark and Iloilo create access to English-speaking, service-oriented employees who earn lower wages than in Metro Manila. Employer of Record (EOR) services are used by foreign companies to gain access to talent in the Philippines without the high cost of establishing a subsidiary and the cost of compliance.
A Practical Budgeting Checklist
Before finalizing the operating budget for the Philippines, it may be helpful to estimate the total number of employees, multiply the average gross salary by 1.20 to 1.25 to estimate total employer cost, add the average cost of office space in a target district multiplied by the square footage needed, add CUSA and utilities, add the one-time costs of setting up SSS and BIR, the initial fit-out, and technology and leave a cash buffer of 3-6 months. Even though the Philippines has a low average wage, it is not a low cost of compliance country. Companies that underestimate the compliance and setup costs find that the actual cost per employee is far greater than their initial estimate.
Most Common Inquiries
What will the minimum wage be in the Philippines in 2026? Most private sector employees in Metro Manila will have a daily minimum wage of ₱695. For private sector employees in the rest of the Philippines, regional minimum wages are set between ₱366 and ₱695.
What are employee total costs in the Philippines? Employee total costs in the Philippines are approximately 120% – 125% of the employee’s gross salary. This is after accounting for SSS (approximately 9.5% employer share), PhilHealth (2.5%), Pag-IBIG (2%), and the mandatory 13th month pay (8.33% of annual gross salary).
Is renting office space in Metro Manila expensive? It will depend on the district chosen for the office space. BGC office space will cost an average of ₱1,331 per sqm per month making it the most expensive area, with Makati between ₈700 and ₱1,200 and Ortigas and Quezon City between ₱450 and ₱650.
What business expenses other than salaries and rent should foreign investors expect? Business expenses foreign investors should expect include BIR compliance, local business permits, engaging an accountant and an auditor, payroll software and/or services, recruitment, and a cash buffer for the statutory deposit and advance payment for rent.