You are on page 1of 9

Page 1 of 9

Types of Employment in the Philippines

Depending on the company and/or industry, there are various types or categories of employment in the
Philippines. This essentially comes down to how the employer wants the employee's employment to be
structured, which should be bound by a contract signed by both the employer and employee.

Project Employment
Where the employment has been fixed for a specific project or undertaking, the completion or termination of
which has been determined at the time of the engagement of the employee in the Philippines.

Seasonal Employment
Where the work or services to be performed is seasonal in nature and the employment is for the duration of
the season in the Philippines.

Casual Employment
Where the employment is not covered by the foregoing, provided that an employee who has rendered at
least one year of service, whether continuous or broken, shall be considered regular with respect to the
activity in which he or she is employed and his or her employment shall continue while the activity exists.

Term or Fixed Employment
Another category of employment in the Philippines recognized in jurisprudence is "term" or "fixed-period
employment." This is based on Art. 1193 of the CC, which states that obligations with a resolutory period
take effect at once, but terminate upon arrival of the day certain - understood to be a day that must
necessarily come. The decisive determinant in "term employment" should not be the activities that the
employee is called upon to perform, but the day certain agreed upon by the parties for the commencement
and termination of the employment relationship. Stipulations in employment contracts providing for "term
employment" or "fixed-period employment" are valid when the period has been agreed upon knowingly and
voluntarily by the parties, without force, duress or improper pressure exerted on the employee, and when
such stipulations were not designed to circumvent the laws on security of tenure.

Probationary Employment
Probationary employment is not necessarily a category of employment in the Philippines. It pertains to a
period of time in which the employee is being observed and evaluated to determine whether or not he is
qualified for permanent employment. Under Art. 281 of the LC, probationary employment shall not exceed
six months. An employee who is allowed to work after a probationary period shall be considered a regular
employee. A probationary employee is, for a given period of time, under observation and evaluation to
determine whether or not he or she is qualified for permanent employment. During the probationary period,
the employer is given the opportunity to observe the skills, competence, and attitude of the employee while
the latter seeks to prove to the employer that he or she has the qualifications to meet the reasonable
standards for permanent employment.

Kinds of employees

ART. 280. Regular and Casual Employment.— The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be
regular where the employee has been engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer, except where the employment has been fixed for a
Page 2 of 9

specific project or undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or service to be performed is seasonal in nature and
the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided,
That, any employee who has rendered at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee with respect to the activity in which he is employed and his
employment shall continue while such actually exists.

The foregoing contemplates four (4) kinds of employees:
(a) regular employees or those who have been “engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer”;
(b) project employees or those “whose employment has been fixed for a specific project or
undertaking[,] the completion or termination of which has been determined at the time of the
engagement of the employee”;
(c) seasonal employees or those who work or perform services which are seasonal in nature, and
the employment is for the duration of the season; and
(d) casual employees or those who are not regular, project, or seasonal employees. Jurisprudence
has added a fifth kind— a fixed-term employee


In any business venture, there are two resources which must be considered: capital and labor. Every
businessman knows the saying “to make money, you have to spend money.” Every business entails a bit of
risk-taking. The ability and the willingness to take certain calculated risks are almost always essential for
every business venture to succeed. Thus, wise capital management, foresight, and ability to take calculated
risks are among the qualifications of all successful businessmen and entrepreneurs.

The other side of the coin is labor. Labor is another key component of a successful business venture. While
managing your financial investments in a business is quintessential, so is investing in its human resources,
hence the term labor management.

No less than our Supreme Court has declared that “[e]xcept as limited by special laws, an employer is free
to regulate, according to his own discretion and judgment, all aspects of employment, including hiring, work
assignments, working methods, time, place and manner or work, tools to be used, processes to be
followed, supervision of workers, working regulations, transfer of employees, work supervision, layoff of
workers and the discipline, dismissal and recall of workers.” This classic phrase is what we know now as
the “management prerogative”. However, exercise of the management prerogative does not mean that
employers are given carte blanche over their employees. Emphasis must be laid on those six (6) initiatory
words of the cited ruling of the high court “[e]xcept as limited by special laws”. The foregoing provision
refers to the Labor Code of the Philippines and other laws enacted by Congress which deal with the rights
of employees and limit exercise of the management prerogative.
The exercise of management prerogatives such as discipline, layoff of workers, or dismissal of an
employee is dependent on the type or nature of employment. A regular employee is an employee who has
been engaged to perform activities which are usually necessary or desirable in the usual business of the
employer. An employee who is by law deemed a “regular employee” can only be fired or terminated based
on grounds allowed by law (“authorized causes”) such as redundancy, retrenchment, closure or cessation
of operations, or by enumerated grounds (“just causes”) such as serious misconduct, willful disobedience,
Page 3 of 9

gross and habitual neglect of duty, commission of a crime against the employer or the latter‟s family and
other analogous causes. It must be noted that these grounds are exclusive. A termination based on a
ground not defined above may be considered as illegal dismissal.

Furthermore, in case the cause of termination is for a just cause, the employer must observe the “twin
notice and hearing” rule, whereby prior to termination, the employer must have given:

1) a notice requiring the employee to explain why he or she should not be terminated,
2) a hearing where the employee is allowed to examine the evidences presented against him or
her and adduce evidences in support of his or her defenses, and
3) a notice informing the employee of the latter‟s termination, stating the reasons for termination
based on the evidences presented.

Anything short of the foregoing is also tantamount to illegal dismissal and may render the employer liable
for damages in addition to payment backwages and separation pay.

Finally, in case the cause of the termination is for an authorized cause, the corresponding separation pay
must be given and prior timely notice must be conveyed, otherwise, the employer also stands to be liable.
It must also be noted that fixed-term, contract, and project employees are by law considered regular
employees for the duration of their employment or contract and can only be removed for grounds
enumerated above.

On the other hand, probationary employees, for example, may be terminated without complying with the
twin notice and hearing rule. It is sufficient that the employee be served a notice that he or she did not meet
the standards of employment to qualify the employee for regularization. For this reason, it is called a “trial-
basis” employment because the employer is allowed to see for himself whether the employee is suited for
employment in the business. Thus, employees who are not considered regular employees, such as
probationary and casual employees, may be terminated based on other grounds not provided by law. The
only requirement is that the termination is done in good faith.

Listed below are just some of the mandatory benefits and provisions for employees in the Philippines under
the Labor Code and special laws:

1. Minimum wage = P426 per day
2. 13th month pay (after 1 month of service) = 1/12 of the total basic salary earned by an
employee within a calendar year
3. Overtime pay= 25% premium on hourly rate
4. Night shift differential if work between 10:00 PM to 6:00 AM = 10% premium on hourly rate
5. Special Non-Working day = 30% premium if worked
6. Regular holiday pay= 100% premium if worked, paid if unworked
7. Service Incentive Leave = 5 days after 1 year of service
8. Maternity Leave = daily maternity benefit equivalent to one hundred percent (100%) of her
average salary credit for sixty (60) days or seventy-eight (78) days
9. Paternity leave = 7 days leave with pay (married only)
10. Parental leave for solo parents= 7 days leave with pay
11. Social Security System contribution (based on salary)
12. Pag-ibig contribution (based on salary)
Page 4 of 9

13. Philhealth contribution (based on salary)


1. Who is a regular employee?
A regular employee is an employee who engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer.

An employee who has also rendered at least one (1) year of service, whether such service is
continuous or broken, shall be considered as regular employee with respect to the activity in which he
is employed and his employment shall continue while such activity exists.

2. Who is a casual employee?

A casual employee is one who is not a seasonal or project employee, and has rendered service less
than one year. Usually, he performs tasks that are only incidental to the main business of the employer.

3. Who can be considered as a project employee?

Is one whose employment has been fixed for a specific project or undertaking, the completion or
termination of which has been determined at the time of the engagement of the employee.

4. Who is a seasonal employee?

Seasonal employee is one whose service is for the duration of season. He is called to work from time
to time, but temporarily laid off during off-season. He is not separated from the service during said
period, but is merely considered on leave until the next season comes. Thus, although the work may be
seasonal, the workers are considered regular if their job is necessary and desirable to the trade or main
business of the employer.

5. Who is a probationary employee?

He is a person hired on a trial basis for a period not longer than six (6) months. He only becomes
regular after meeting reasonable standards required for regularization, provided such standards were
made known to him at the time of his engagement.

6. What determines regular employment?

What determines whether a certain employment is regular or casual is not the word and will of the
employer, but the nature of the activities performed in relation to the particular business or trade of the
employer, considering all the circumstances.

7. There is a rule that the repeated rehiring of a contractual employee for a number of years is deemed
sufficient to consider the employment as necessary and indispensable to the business of the hirer, and
that accordingly, the employee should be considered regular. What is the exception on this rule?

The employment of seafarer is the exception to this rule. Seafarers are governed by the employment
Page 5 of 9

contracts they sign every time they are rehired. Accordingly, their employment is not terminated, not as
a case of illegal dismissal, but one caused by the expiration of their employment term.


Pakyaw, project employment and job contracting: What every employer must know

The Philippine Labor Code allows hiring of employees on a temporary basis, subject to certain guidelines.
Most important is the non-diminution of wages provided by law and other standards, followed by
occupational health and safety and observance of due process in case of termination, when applicable.
Depending on the need and nature of the business, “pakyaw,” “project employment,” and “job contracting”
may be resorted to.

“Pakyaw” or task basis refers to rendering of services by the result, regardless of the time spent for its
accomplishment. Workers are hired intermittently and for a short period of time only.

It is a system of hiring a labor group for the performance of a specific work and/or service incidental to the
implementation usually of infrastructure project by administration whereby tools and materials are furnished
by the principal. For the specific work/service output, a lump-sum payment is made either through the
group leader or divided among the pakyaw workers and disbursed using a payroll system.

Workers hired on this basis should receive wages not lower than the minimum wage rate for that particular
industry.

“Project employee” is defined as one whose “employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of the engagement of
the employee.”

In the case of Caseres v. Universal Robina Sugar Milling Corporation, the Supreme Court said that the
repeated and successive rehiring of project employees does not qualify them as regular employees, as
length of service is not the controlling determinant of the employment tenure of a project employee, but
whether the employment has been fixed for a specific project or undertaking, its completion has been
determined at the time of the engagement of the employee.

If the termination is brought about by the completion of the contract or phase thereof, no prior notice is
required.

“Job contracting” or subcontracting happens when an employer, referred to as the principal, farms out the
performance of a part of its business to another, referred to as the contractor or subcontractor. For the
purpose of undertaking the principal's business that is farmed out, the contractor or subcontractor then
employs its own employees.

Contracting is allowed if the following conditions concur:

a. the contractor or subcontractor carries on a distinct and independent business and undertakes to
perform the job, work or service on its own account and under its own responsibility, according to
its own manner and method, and free from the control and direction of the principal in all matters
connected with the performance of the work except as to the results thereof;
Page 6 of 9


b. the contractor or subcontractor has substantial capital or investment;

c. The agreement between the principal and the contractor or subcontractor assures the
contractual employees entitlement to all occupational safety and health standards, free exercise of
the right to self organization, security of tenure, and social and welfare benefits.

What is a Project Employee?

As held in the case of Filipinas Pre-fabricated Building (FILSYSTEMS), INC VS. FELIPE A. CRUZ, JR.,
[GR No. 153832, March 18, 2005], a project employee is one whose “employment has been fixed for a
specific project or undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or services to be performed is seasonal in nature and
the employment is for the duration of the season.”

According to Department (of Labor and Employment) Order No. 19, [April 1, 1993] Series of 1993, the
following are considered indicators of project employment:

(a) The duration of the specific/identified undertaking for which the worker is engaged is reasonably
determinable.

(b) Such duration, as well as the specific work/service to be performed, is defined in an
employment agreement and is made clear to the employee at the time of hiring.

(c) The work/service performed by the employee is in connection with the particular
project/undertaking for which he is engaged.

(d) The employee, while not employed and awaiting engagement, is free to offer his services to any
other employer.

(e) The termination of his employment in the particular project/undertaking is reported to the
Department of Labor and Employment (DOLE) Regional Office having jurisdiction over the
workplace within 30 days following the date of his separation from work, using the prescribed form
on employees‟ terminations/dismissals/suspensions.

(f) An undertaking in the employment contract by the employer to pay completion bonus to the
project employee as practiced by most construction companies.

In D.M. Consunji, Inc. v. NLRC,[ 348 SCRA 441, 447, December 18, 2000,] The Supreme Court has ruled
that “the length of service of a project employee is not the controlling test of employment tenure but
whether or not „the employment has been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the engagement of the employee.‟”

It is also worthy to note Clause 3.3(a) of Department Order No. 19, which states:

“Project employees whose aggregate period of continuous employment in a construction
company is at least one year shall be considered regular employees, in the absence of a
Page 7 of 9

“day certain” agreed upon by the parties for the termination of their relationship. Project
employees who have become regular shall be entitled to separation pay.

A “day” as used herein, is understood to be that which must necessarily come, although is may not be
known exactly when. This means that where the final completion of a project or phase thereof is in fact
determinable and the expected completion is made known to the employee, such project employee may
not be considered regular, notwithstanding the one-year duration of employment in the project or phase
thereof or the one-year duration of two or more employments in the same project or phase of the object.

Considering the above facts and circumstances, what are the rights of a project employee under labor laws
if he has been illegally dismissed?

Well settled is the rule that the burden of proving that an employee was lawfully dismissed lies with the
employer. Thus employers who hire project employees are mandated to state the actual basis for the
project employees‟ dismissal.

Section 3.2 of Department Order No. 19, Series of 1993 states that: “Project employees are not entitled to
separation pay if their services are terminated as a result of the completion of the project or any phase
thereof in which they are employed. Likewise, project employees whose services are terminated because
they have no more to do or their services are no longer needed in the particular phase of the project are not
by law entitled to separation pay.”

The rights of an illegally dismissed project employee is based only in the current project contract where he
was illegally terminated. If the employer fails to prove that the project was already completed, there is a
presumption that the services of the project employee has been terminated with no valid cause prior to the
expiration of the period of his project employment. In such a case, the illegally dismissed project employee
is entitled to reinstatement with full backwages, inclusive of allowances and other benefits. If the project has
already been completed during the pendency of the labor suit, the project employee can no longer be
reinstated. Instead, he shall be entitled to the payment of his salary and other benefits corresponding to the
unexpired portion of his employment, specifically from the time of the termination of his employment, until
the date of completion of the project.

Fixed-Term Employment Contract

What is a fixed-term employment contract and when is it considered valid? The Supreme Court had
occasion to tackle these questions in the case of Cherry J. Price, et al. versus INNODATA Phils. Inc., et al.,
(G.R. No. 178505), promulgated on September 30, 2008.

Cherry, Stephanie and Lolita were employed as formatters by INNODATA a domestic corporation engaged
in the data encoding and data conversion business. The parties executed an employment contract
denominated as a “Contract of Employment for a Fixed Period,” stipulating that the contract shall be for a
period of one year.



Page 8 of 9

The days passed by and soon Cherry and her companions found themselves separated from work due to
the end of their contract. Cherry and her companions decided to contest the validity of said contract by filing
a case for illegal dismissal. The case eventually reached the Supreme Court.

In the course of deciding the case the Court cited Art. 280 of the Labor Code which states, “The provisions
of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed regular where the employee has been engaged to perform activities which
are usually necessary or desirable in the usual business or trade of the employer…” According the Court:

“The employment status of a person is defined and prescribed by law and not by what the
parties say it should be. Equally important to consider is that a contract of employment is
impressed with public interest such that labor contracts must yield to the common good.
Thus, provisions of applicable statutes are deemed written into the contract, and the
parties are not at liberty to insulate themselves and their relationships from the impact of
labor laws and regulations by simply contracting with each other.”

It went on to say that, “Under Article 280 of the Labor Code the applicable test to determine whether an
employment should be considered regular or non-regular is the reasonable connection between the
particular activity performed by the employee in relation to the usual business or trade of the employer.”
However, the High Court also pointed out that employment which requires performance of usual and
desirable functions, and does not exceed one year, does not always result in regular employment. This is
where the concept of fixed-term employment comes in:

“Under the Civil Code, fixed-term employment contracts are not limited, as they are under
the present Labor Code, to those by nature seasonal or for specific projects with
predetermined dates of completion; they also include those to which the parties by free
choice have assigned a specific date of termination….The decisive determinant in term
employment is the day certain agreed upon by the parties for the commencement and
termination of their employment relationship, a day certain being understood to be that
which much necessarily come, although it may not be known when.”

Does this mean that fixed-term employment contracts are always valid, provided they are entered into
knowingly and voluntarily? No. In the case under consideration the Supreme Court emphasized that fixed-
term employment contracts are the exception rather than the general rule, and are valid only under certain
circumstances. Citing its earlier decision in Brent School v. Zamora (G.R. No. 48494, 5 February 1990, 181
SCRA 702) the Court identified several circumstances wherein a fixed-term is an essential and natural
appurtenance:

“Some familiar examples may be cited of employment contracts which may be neither for seasonal
work nor for specific projects, but to which a fixed term is an essential and natural appurtenance:
overseas employment contracts, for one, to which, whatever the nature of the engagement, the
concept of regular employment with all that it implies does not appear ever to have been applied,
Article 280 of the Labor Code notwithstanding; also appointments to the positions of dean,
assistant dean, college secretary, principal, and other administrative offices in educational
institutions, which are by practice or tradition rotated among the faculty members, and where fixed
terms are a necessity without which no reasonable rotation would be possible. Similarly, despite
the provisions of Article 280, Policy Instructions No. 8 of the Minister of Labor implicitly recognize
Page 9 of 9

that certain company officials may be elected for what would amount to fixed periods, at the
expiration of which they would have to stand down, in providing that these officials, “x x may lose
their jobs as president, executive vice-president or vice president, etc. because the stockholders or
the board of directors for one reason or another did not reelect them.”

The Court also mentioned the fact that in the same Brent case, it issued “a stern admonition that where,
from the circumstances, it is apparent that the period was imposed to preclude the acquisition of tenurial
security by the employee, then it should be struck down as being contrary to law, morals, good customs,
public order and public policy.”

To end the long story: Cherry and her companions were considered by the Court as regular employees;
and as far as their fixed-term employment contract was concerned, the Court had this to say:

“After considering petitioners‟ contracts in their entirety, as well as the circumstances
surrounding petitioners‟ employment at INNODATA, the Court is convinced that the terms
fixed therein were meant only to circumvent petitioners‟ right to security of tenure and are,
therefore, invalid.”