Is Outsourcing to the Philippines Legal in Australia?

The short answer is yes. Australian businesses face no legal barrier to hiring staff based in the Philippines. There is no Australian legislation that restricts overseas hiring, no sector-specific prohibition and no government scheme that limits where Australian businesses can source labour.

But the full answer is more nuanced — and the nuance lives on the Philippine side, not the Australian side.

From Australia’s Perspective: Fully Legal

Australian employment law governs employees in Australia. When you hire someone based in the Philippines, Australian Fair Work obligations, superannuation requirements and Australian employment law do not apply to that person. They are employed in the Philippines, under Philippine law.

From an Australian business perspective, the main obligations are:

• Tax treatment: payments to overseas workers or EOR providers are a legitimate business expense, deductible under ordinary tax rules
• GST: professional services from overseas suppliers may be subject to GST on imported services — worth confirming with your accountant for your specific structure
• Business registration: no Philippines-side entity is required if you use an employer of record structure

That is it from the Australian side. The legal complexity — and there is some — is on the Philippine side.

From the Philippines’ Perspective: Compliance Is Required

The Philippines has a well-developed labour code that protects workers. Anyone performing work in the Philippines — regardless of who is directing that work — falls under these protections if they have an employment relationship.

The key mandatory entitlements under Philippine law include:

13th month pay: All rank-and-file employees are legally entitled to receive an amount equivalent to one month’s base salary by December 24 each year. This is mandatory, not discretionary.

Government contributions: Employers must contribute to SSS (Social Security System), PhilHealth (national health insurance) and Pag-IBIG (housing fund) for every employee. These are not optional.

Employment contract: A written employment contract is required. This must specify the role, compensation, working hours and conditions.

Leave entitlements: Employees are entitled to a minimum of five days service incentive leave per year. Many employers provide more as a competitive benefit.

Separation pay: For certain types of termination, Philippine law requires the employer to pay separation pay. Understanding when this applies is important if you ever need to end an employment relationship.

The Contractor Misclassification Problem

Here is where Australian businesses most commonly get into trouble.

Many businesses that try to hire directly in the Philippines — through platforms like OnlineJobs.ph or direct LinkedIn recruitment — classify their hire as an “independent contractor” rather than an employee. This can seem convenient: no need for an employment contract, no 13th month pay, no government contributions.

The problem is that Philippine labour law, like Australian law, looks at the economic reality of the working arrangement — not just the label on the contract. If your “contractor” works exclusively for you, follows your direction, uses your tools and works your hours, Philippine labour authorities are likely to view them as an employee regardless of what you call them.

Misclassification in the Philippines is a real legal risk — for your worker (who loses their entitlements) and potentially for your business (particularly if the worker raises a labour complaint with DOLE, the Department of Labour and Employment).

The Employer of Record Structure: Why It Exists

The employer of record (EOR) model exists precisely to solve the cross-border employment compliance problem cleanly.

Under an EOR structure:

• The EOR (in this case, Team Up Now) is the legal employer in the Philippines
• Your staff member is employed by the EOR’s Philippine-registered entity with a compliant contract
• All mandatory contributions — SSS, PhilHealth, Pag-IBIG — are paid correctly
• 13th month pay is accrued and paid correctly
• Tax withholding (BIR) is handled correctly
• You direct the work, control the outputs and manage the relationship
• You receive a single monthly invoice from the EOR

The result: your worker is properly protected under Philippine law, your business carries no Philippine employment compliance risk, and you do not need to register a Philippine entity to make it happen.

What About Using a Freelancer Platform?

Platforms like Upwork, Fiverr, and OnlineJobs.ph are not employer of record structures. When you hire someone through these platforms as a freelancer:

• The platform facilitates payment, but does not employ the worker
• The worker is typically classified as a contractor
• No 13th month pay, no SSS/PhilHealth/Pag-IBIG
• No compliance coverage for either party

For short-term, project-based work with genuinely independent contractors — this can be fine. For long-term, full-time, integrated team members — it creates the misclassification risk described above.

The Practical Summary

Arrangement	Legal in Australia?	Compliant under Philippine law?
Direct hire through EOR	✅ Yes	✅ Yes
Direct hire via Philippine entity you own	✅ Yes	✅ Yes (if compliant)
Freelancer platform (genuine contractor)	✅ Yes	⚠️ Depends on the arrangement
“Contractor” who is actually a full-time employee	✅ Yes	❌ Risk of misclassification

If you are hiring one or more full-time, integrated team members in the Philippines, the EOR structure is the cleanest, most legally robust way to do it.

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Want to understand exactly how Team Up Now’s EOR structure works? Read our full employer of record Philippines guide →

Or use our EOR calculator to see the full cost breakdown — including all mandatory employer contributions — for the role you want to hire.