Employer of Record Services: What Australian Businesses Actually Need to Know

Hiring Filipino professionals remotely is straightforward in principle. The complication is the legal employment structure — and it’s a complication most Australian businesses don’t discover until something has already gone wrong.

An Employer of Record solves this. But the term is used loosely enough in the market that it’s worth being precise about what a proper EOR actually does, what the alternative looks like, and how to tell providers apart before you commit to one.

What an Employer of Record actually does

An EOR is a company that acts as the legal employer of your staff in the Philippines. That means:

• The EOR signs the Philippine employment contract with your hire
• The EOR runs payroll and remits statutory contributions — SSS, PhilHealth, Pag-IBIG — on the employee’s behalf
• The EOR provisions 13th month pay and manages leave entitlements
• The EOR carries the employment relationship under Philippine labour law

You direct the work day-to-day. You set the tasks, the standards, the hours. The EOR handles everything on the employment and compliance side. You receive one monthly invoice.

No Philippine entity required. No local payroll to run. No statutory registrations to manage.

See: setting up a Philippine entity — if you’ve wondered whether you need one, this covers the full picture. Most Australian businesses don’t.

Why the contractor alternative is riskier than it looks

The common alternative to an EOR is paying your Filipino hire as an independent contractor. It looks simpler. The upfront cost is lower. A lot of businesses do it.

The problem is that Philippine labour law looks at the practical reality of the working relationship, not the contract label. If your hire works regular hours, follows your direction, uses your tools, and works exclusively for your business — that arrangement has the characteristics of employment. The NLRC (National Labour Relations Commission) can and does make findings of employment in contractor cases, regardless of what the contract says.

The exposure when that happens: back-payment of statutory contributions, separation pay, regularisation entitlements, and the legal and operational cost of resolving it.

Most businesses that use contractor arrangements don’t encounter this. But the ones that do — when a relationship ends badly, or when a former hire makes a complaint — find out quickly that the savings weren’t worth it.

See: offshore worker misclassification — what the legal risk looks like in practice.

Contractor arrangement vs EOR: what each actually means

	Contractor arrangement	EOR structure
Legal employer	Unclear / you by default	EOR company in Philippines
Employment contract	Service agreement	Proper Philippine employment contract
SSS, PhilHealth, Pag-IBIG	Not handled	Remitted by EOR
13th month pay	Not required (but liability exists)	Provisioned and paid by EOR
Leave entitlements	Not managed	Administered by EOR
Misclassification risk	High if relationship resembles employment	None — relationship is employment
Philippine entity required	No	No
Monthly cost	Salary only	Salary + statutory contributions + EOR fee
Compliance responsibility	On you	On EOR

The total cost difference between a contractor arrangement and a properly structured EOR hire is not as large as it looks on a spreadsheet. Once you account for statutory contributions and 13th month provisioning — which you’re arguably carrying as contingent liability in a contractor arrangement anyway — the gap narrows significantly. Our EOR cost calculator shows the real numbers for any role and salary level.

What statutory entitlements look like in practice

For context on what the EOR is managing on your behalf:

SSS (Social Security System): Covers sickness, maternity, disability, retirement, and death benefits. Both employer and employee contribute monthly based on salary bracket.

PhilHealth: The national health insurance scheme. Employer contributions are required alongside the employee’s own contributions.

Pag-IBIG (HDMF): A housing development fund with mandatory employer and employee contributions.

13th Month Pay: Legally required in the Philippines — one month’s base salary paid before 24 December each year, regardless of employment duration in that calendar year. Prorated for employees who haven’t completed a full year.

A contractor arrangement sidesteps all of these on paper. But the contingent liability for back-payment exists if the arrangement is ever treated as employment — and it’s backdated, not from when a complaint is made.

How to evaluate an EOR provider

The EOR market ranges from rigorous to genuinely dangerous. They use similar language. Here’s what to actually interrogate.

Employment structure: Are your placed staff directly employed under a proper Philippine employment contract with all statutory entitlements? Or are they classified in a way that limits their entitlements? Ask for specifics — which contributions are paid, at what rates.

Exclusivity: Does your hire work exclusively for your business? Some providers place the same person across multiple clients simultaneously. That’s not an EOR structure — it’s shared staffing with an EOR label.

Account management: Who do you call when something goes wrong? A named person who knows your placement, or a support ticketing system? This distinction matters most when you need it.

Replacement policy: What happens if the placement isn’t working at month two? A provider with real experience has a specific answer. One that doesn’t has either never dealt with it or prefers not to.

Cost transparency: Can they give you the full monthly cost — salary, statutory contributions, 13th month provision, EOR fee — before you commit? The total is calculable. A provider who can’t or won’t show it has a reason.

References: Ask to speak to current clients in businesses similar to yours. Testimonials on a website are not the same as a direct conversation.

What to do before any provider conversation

Before you speak to us or anyone else, spend 30 minutes writing down:

1. The role’s core function — one sentence
2. The three to five specific tasks the person will own
3. Every tool they need to use
4. What success looks like at 90 days
5. Your expected salary range for the role

Founders who come into these conversations with this prepared make better decisions faster. Founders who don’t end up in long discovery processes that delay the actual hire.

See: how to hire offshore staff in Australia — the full step-by-step process from role scoping to 90-day onboarding.

Ready to understand the cost?

Model the full cost of your hire — salary, statutory contributions, 13th month, EOR fee — before you speak to anyone.

Use the EOR cost calculator →

Or if you want to have an honest conversation about whether this makes sense for your business right now:

Book a 30-minute strategy call →

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Team Up Now is an Australian offshore staffing agency based in South Melbourne. We place dedicated Filipino professionals with Australian businesses through a compliant Employer of Record structure at a flat fee of AUD $300 per employee per month. Learn how we work →