As US companies grow beyond borders, the Philippines continues to be one of the top choices for building remote teams. In 2025, many American businesses are hiring Filipino professionals for roles in IT, customer support, finance, marketing, and operations. The reasons are clear: strong English skills, cultural alignment with the US, and access to a large and skilled talent pool.
Still, one major concern holds many companies back. Hiring in another country comes with legal and compliance challenges. Philippine labor laws are strict, and mistakes can be costly. Setting up a local company is possible, but for most US businesses, it is not the most practical option.
The good news is that US companies can legally hire employees in the Philippines without opening a local entity, if they follow the right approach.
Why Hiring Directly in the Philippines Can Be Risky
Some US companies try to hire Filipino talent as freelancers to avoid legal work. This often creates problems.
In the Philippines, a worker is usually treated as an employee if they:
- Work full time for one company
- Follow fixed schedules and instructions
- Use company tools and systems
- Handle core business tasks
If someone is treated like an employee but paid as a contractor, it can lead to misclassification issues.
This can result in:
- Back payment of taxes and benefits
- Penalties from local authorities
- Legal disputes with workers
In 2025, enforcement around worker classification is much stricter. Informal hiring methods are becoming a serious risk.
Setting Up a Local Entity: Why Many Companies Avoid It
Opening a company in the Philippines is a legal way to hire, but it is not simple.
It usually involves:
- Company registration and capital requirements
- Local compliance filings and reporting
- Payroll, tax registration, and audits
- Ongoing legal and accounting work
For companies hiring a small or mid-sized team, this setup often costs more time and money than expected. It also reduces flexibility if hiring plans change later.
A Practical Option: Employer of Record (EOR)
In 2025, many US companies choose to hire through an Employer of Record, also known as an EOR.
An EOR is a local organization that legally employs workers on your behalf. You manage the employee’s work, while the EOR handles the legal side of employment.
With an EOR:
- The employee is hired under a local, compliant contract
- Payroll, taxes, and required benefits are handled properly
- Local labor laws are followed
- You avoid setting up a local entity
This makes it possible to hire full-time employees in the Philippines without taking on legal and administrative burden.
How the EOR Model Works
The process is usually simple:
- You choose the candidate
You interview and select talent just like you would for a US role. - The EOR hires the employee locally
A Philippine-compliant employment contract is issued. - Payroll and benefits are managed
This includes income tax, SSS, PhilHealth, Pag-IBIG, and statutory leave. - You manage daily work
Tasks, goals, and performance are handled by your team. - Compliance is maintained
Contract updates, labor changes, and offboarding are handled correctly.
This structure keeps both the company and the employee protected.
What US Companies Still Need to Handle
Using an EOR does not remove all responsibility. US employers still need to:
- Clearly define roles and expectations
- Manage performance fairly
- Follow proper termination processes
- Protect company data and intellectual property
A good EOR helps guide these steps under Philippine law, but business decisions stay with you.
Why the Philippines Fits the EOR Model Well
The Philippines works especially well with the EOR setup because:
- Labor laws are clearly defined
- Remote work is widely accepted
- Many professionals already work with US companies
- Time zone coverage supports US business hours
In 2025, more companies are shifting from contractors to legal employment models to reduce risk and build long-term teams.
Cost Comparison: EOR vs Local Entity
An EOR usually charges a monthly fee per employee. While this is an added cost, it is often lower than setting up and maintaining a local company, especially when:
- You are hiring fewer than 20 to 30 employees
- You want to test hiring before expanding further
- You need to hire quickly
- You want flexibility without long-term commitments
For startups and growing businesses, this balance makes the EOR model attractive.
Choosing the Right EOR Partner
Not all EOR providers offer the same level of support. When choosing one, US companies should look for:
- Strong knowledge of Philippine labor laws
- Clear and transparent pricing
- Proper handling of benefits and payroll
- Experience working with US-based teams
Some providers, such as Remotify, focus on helping global companies hire in the Philippines using compliant and locally grounded employment practices. This kind of local expertise helps reduce confusion and risk without adding unnecessary complexity.
Final Thoughts
So, can a US company hire a remote employee in the Philippines? Yes, and it can be done legally without setting up a local entity.
In 2025, US companies do not have to choose between growth and compliance. Hiring employees in the Philippines without setting up a local entity is both legal and practical when done correctly.
By using an Employer of Record, companies can build remote teams faster, stay compliant with local laws, and focus on business goals instead of paperwork.
For US businesses planning long-term hiring in the Philippines, understanding the EOR model is no longer just helpful. It is a smart and responsible way to grow.
