Free Employment Contract Templates in the Philippines: A Guide for Small Businesses

In the Philippines, establishing a formal employment relationship is a critical step for any business, from startups to established small enterprises. While the law does not mandate a written contract for an employer-employee relationship to exist, a well-drafted agreement is essential for clarity, legal compliance, and protecting the interests of both parties. For small business owners and entrepreneurs seeking to formalise arrangements, free employment contract templates provide a practical and cost-effective starting point. These templates are designed to incorporate standard provisions required under Philippine labour law, helping to avoid future misunderstandings and ensuring that key terms are clearly defined from the outset.

A compliant employment contract in the Philippines typically outlines the fundamental elements of the working relationship. This includes the job title and specific duties, working hours, probationary period, compensation and benefits, confidentiality clauses, termination terms, and the governing law. The agreement serves as a reference document that both employer and employee can consult to understand their rights and obligations. It is widely recommended that both parties read, understand, and agree to each term before providing their signatures.

Types of Employment Contracts in the Philippines

Philippine labour law recognises several distinct types of employment contracts, each suited to different work arrangements. Understanding these categories is crucial for selecting the appropriate template and ensuring legal adherence.

Regular Employment Contracts are the most common form, providing employees with security of tenure. Under this arrangement, an employee performs tasks that are usually necessary or desirable in the usual business or trade of the employer. Regular employees are entitled to all benefits mandated by law, including those under the Labour Code and other relevant statutes.

Probationary Employment Contracts are a standard practice in the Philippines, often used by employers to assess an employee's capability to perform the required work. The probationary period typically lasts for six months, during which the employee's performance is evaluated. Upon successful completion of probation, the employee generally becomes regular and is entitled to standard company benefits. Some contracts may specify that the probationary period is for a fixed term, after which the employee either becomes regular or the employment ends.

Casual Employment Contracts are established for intermittent work or short periods of workforce demand. These contracts should clearly specify the main terms of employment and may feature limited benefits compared to regular employment contracts. Casual employees are not entitled to the same security of tenure as regular employees.

Project-Based Employment Contracts are used to hire employees for the completion of a specific project or task. These contracts must explicitly state the scope of the project, the duties and responsibilities of the employee, and the end date or project completion terms. Similar to casual employment, project-based employees may also receive limited benefits, and their employment automatically terminates upon the completion of the project.

Fixed-Term Employment Contracts are used for employment that is agreed upon for a specific, predetermined period. The contract must clearly state the start and end dates of the employment. These are distinct from project-based contracts, which are tied to the completion of a specific task rather than a calendar date.

Seasonal Employment Contracts are designed for work that is seasonal in nature, such as agricultural or tourism-related activities. The contract specifies the duration of the season and the terms of employment for that period.

Key Components of a Standard Employment Contract Template

Free employment contract templates available for the Philippines are structured to cover the essential clauses required by law and best practices. When using a template, it is important to review and customise it to fit the specific job role and company policies.

Job Title and Duties: The contract should list the official job title and provide a clear, detailed description of the employee's duties and responsibilities. Vague terms like "administrative tasks" should be avoided in favour of specific duties to prevent confusion and facilitate performance reviews.

Working Hours: This section specifies the standard working hours, including start and end times, and any provisions for overtime work, which must comply with Philippine labour standards on overtime pay.

Probationary Period: If applicable, the contract should state the duration of the probationary period (commonly six months) and the criteria for successful completion. It should also outline the grounds for termination during probation, which are generally based on failure to meet reasonable performance standards.

Compensation and Benefits: This clause details the employee's salary or wage, payment frequency (e.g., monthly), and any statutory benefits such as those under the Social Security System (SSS), Philippine Health Insurance Corporation (PhilHealth), and Home Development Mutual Fund (Pag-IBIG). It may also include details on non-statutory benefits like leave entitlements (vacation, sick, and maternity/paternity leave), allowances, and bonuses.

Confidentiality: A confidentiality clause protects the employer's proprietary information, trade secrets, and sensitive data. It typically survives the termination of employment.

Non-Compete and Non-Solicitation Clauses: Some contracts include clauses restricting the employee from engaging in competing activities or soliciting the employer's clients and employees for a specified period after leaving the company. The enforceability of such clauses under Philippine law can depend on their reasonableness in terms of duration, geographic scope, and the nature of the business.

Termination Terms: This section outlines the grounds and procedures for terminating the employment contract. Termination can occur for various reasons, including completion of the contract term, mutual agreement, resignation of the employee, or termination due to cause (e.g., serious misconduct, willful disobedience, or gross and habitual neglect of duties). For regular employees, termination requires due process, which includes a notice of dismissal and an opportunity to be heard.

Governing Law: The contract must specify that it is governed by the laws of the Philippines, particularly the Labour Code and other relevant labour regulations.

The Role of Collective Bargaining Agreements (CBAs)

In some industries, particularly in unionised workplaces, individual employment contracts may be supplemented or governed by a Collective Bargaining Agreement (CBA). A CBA is a negotiated contract between an employer and a union representing a group of workers. It establishes the terms and conditions of employment for that specific group, covering areas such as wages, working hours, benefits, job security, and other working conditions.

CBAs are legally binding and enforceable by Philippine labour courts. They have the force of law and take precedence over individual employment contracts and other labour laws in the event of a conflict. For employees covered by a CBA, the terms of the individual contract must align with or provide benefits that are at least as favourable as those stipulated in the CBA. Employers and employees should be aware of any applicable CBA when drafting or signing an individual contract.

Practical Advice for Using Free Contract Templates

When utilising a free employment contract template, it is crucial to adapt it to the specific circumstances of the employment. Here are some key considerations:

Customisation is Essential: A template is a starting point. Employers must replace all placeholders with accurate information, such as the company name, employee name, address, job title, salary, and specific duties. The contract should reflect the actual agreement between the parties.

Clarity and Specificity: As emphasised in guidance for first-time employers, listing duties and responsibilities clearly and specifically is vital. This avoids ambiguity and serves as a benchmark for performance evaluations.

Legal Review: While free templates are designed to be compliant, they are not a substitute for professional legal advice. For complex employment situations or significant roles, consulting with a lawyer is recommended to ensure the contract fully protects the employer's interests and complies with all applicable laws.

Record Keeping: Both parties should retain a signed copy of the contract. It is advisable to keep a digital version and a printed one for future reference, especially in case of disputes or when applying for benefits.

Discussion Before Signing: It is important to discuss all terms with the prospective employee before they sign the contract. This ensures mutual understanding and agreement, which is fundamental to a positive working relationship.

Conclusion

Free employment contract templates are a valuable resource for small businesses and entrepreneurs in the Philippines seeking to formalise their hiring processes. These templates provide a framework for creating legally sound agreements that cover the essential terms of employment, from job duties and compensation to termination clauses. By understanding the different types of employment contracts available—regular, probationary, casual, project-based, and fixed-term—employers can select the most appropriate structure for their needs. While templates offer a practical solution, careful customisation, clear communication, and, when necessary, legal consultation are critical steps to ensure the contract serves its purpose of fostering a clear, fair, and compliant employment relationship.