Why Every Entrepreneur Must Learn Labor Law Before Starting Their Own Business

Starting up a business in a country such as the Philippines is not quite as easy as it might appear to be. There are too many matters to take into consideration such as your particular target market, the type of products or services that you would offer, the way the business would operate, your finances, the ideal location, and a lot more. On top of all of these, you also need to keep reminding yourself that there shall be no rules and/or regulations that are not being followed and that everything has to be in line on the legal side.

Should You Learn About Labor Laws Before Starting a Business?

The exact answer is “yes, you ought to”. However, as reasonable as it sounds, you do not have to be a lawyer or to study each of all the laws related to business so as to comply with the country’s business regulations. In reality, if you are not willing to hire a business lawyer (no matter how important its role is on your business), you may then need to read and understand a few important key rules that can greatly affect your business and this includes the labor law.

As a Businessman, Why Must You Learn Labor Laws?

The Philippines’ Labor Code was established to provide a set of rules and guidelines for both employees and employers. It is important to understand this because not knowing the law is never going to be an excuse when you happen to violate one. Labor laws state the rights and benefits of employees, moreover, it also sets certain conditions such as the required weekly rest, contributions, and the likes. Being familiar with the law and complying to it also gives you and your business the best protection as it can save your business from empty threats and/or lawsuits.

Labor Laws that Every Entrepreneur Should be Knowledgeable of:

  1. EMPLOYMENT TYPE. First, you have to decide which type of employment arrangement you and your company needs. In the Philippines, we acknowledge that there are five kinds of employment arrangements depending on the nature of work. The employment categories are regular, probationary, project-based, fixed period or term-based employment, and seasonal employment.
  1. CONTRACT. Now that you have figured out the employment arrangement your company needs, a job contract will then be required. Usually, the job contracts are prepared in English, nonetheless, if the employee is a Filipino citizen, the employer is required to provide a dual language contract in Filipino to be able to communicate the exact terms of the contract in a more precise way. In addition to this, each contract shall explicitly state the terms of employment suitable to the employee type so that confusion or future disputes can be avoided including but not limited to:

– Job position, its description, and status

– Pay (including overtime pay, holiday, etc.) and Employee benefits

– Length and condition of the probationary period (if applicable)

– The company’s code of conduct and policies

Note that securing a crystal-clear contract is very vital to an employee and employer relationship.

  1. WORKING HOURS AND OVERTIME. The maximum working hours in the country are regularly eight hours a day or 48 hours a week with a daily unpaid meal break of at least one hour or a paid meal break of 20 minutes. Employees are also required by our law to have at least one whole day off (or a complete 24 hours) every week. If your employees work for more than eight hours in a day, they are entitled to overtime pay which equals to 125% of their hourly rate in a normal working day. Holiday and rest day overtime pays are paid at higher rates. You must also remember that requiring your employees to work anytime from 10:00 PM to 6:00 AM already falls under night shift which qualifies for Night Shift Differential (NSD), where they can get an additional 10% of their rate. However, there are exemptions from overtime pays and these include:

– Government employees

– Managerial employees (officers or members of the managerial staff)

– Field personnel

– Domestic helpers and individuals in the private service of another person

– Employees who are paid by results

  1. GOVERNMENT-MANDATED CONTRIBUTIONS AND BENEFITS. You are required to provide your workers at least 12 paid regular holidays/leaves each year, though sick leaves are not really required. Providing additional leaves more than the required 12 per year is entirely up to the employer. Furthermore, paid maternity and paternity leaves are also required by the labor code.

Our social legislation is requiring both the employees and employers to provide contributions to our Social Security System or SSS (11% of the employee’s monthly salary shouldered both by the employee and the employer), National Health Insurance Program, and the Home Development Mutual Fund that covers sickness, maternity, disability, retirement, deaths and funerals, health insurance, and housing loans. These contribution rates depend on the worker’s monthly salary. These monthly dues are so crucial that failing to pay for it within a given period may result in not only financial liability but also criminal penalties against the employer.

These are just a few things to take note of when planning to hire employees. Labor law is very important and could cost a lot of money if broken that’s why having a lawyer who’s willing to explain these things for you and protect your business from lawsuits really matter a lot. Unsurprisingly, these may seem a bit too much or maybe confusing to citizens who did not study labor law. Handling and establishing a business is tough enough for an entrepreneur that’s why it is always recommended to hire a lawyer for your business’ protection. A labor lawyer in Manila, Philippines is not hard to find, Yap, Kung, Ching & Associates Law Office has skilled and experienced labor lawyers to make matters easier for you.