Philippines Establishing your startup
Table of Contents:1. Country Overview
2. Numerous amount of national holidays + local holidays
3. The Philippines limits foreign ownership for reasons of national security, defense, and public health. Industries such as the manufacturing of explosives, firearms, and military hardware, as well as the operation of massage clinics, are generally limited to 40% foreign equity.
As mentioned earlier, a significant portion of the country’s GDP is from remittances sent by Filipino overseas filipino workers. All over the world, the Filipino laborers, service workers, and professionals are known to be some of the most industrious, skilled, and congenial people.
Good tech talent in the country is generally harder to come by, compared to that of the Philippines’ Southeast Asian neighbor countries. This is due to the lower standards of education. With a few exceptions, most of the better quality schools and universities tend to be private institutions, affordable only to the well-to-do.
The focus of most educational institutions and families is orienting their children to take on professions that are perceived to be in greater demand overseas (medicine, nursing, marine transportation/engineering, etc.). The perception that tech jobs are well-earning occupations is rapidly gaining ground, however.
There is also the ongoing brain drain that siphons off the best and brightest from the local workforce. To most Filipinos, careers overseas are almost always better in terms of compensation, professional growth, and other opportunities.
Despite the lack of training, experience and quality of education, Filipinos tend to be creative, optimistic, and outgoing.
Philippine Cost of Hire
Who/Where to Hire
BPO businesses, as these job centers have over 50% yearly turnover rates; tech talents with experience are more abundant
Tech talents working in foreign companies that want a new challenge to take on
Freelancers that have extensive experience and positive feedback from past employers
Interns from tech courses (known as OJTs or on-the-job trainees) need work experience in order to graduate; these young people need a lot of training and supervision, and need to be inculcated with good work ethics
Go to university job fairs and the like; school usually ends in March, but job seeking graduates are likely to be aggressively job hunting May onwards
For lower level, rank and file personnel, job postings on newspaper classified ads
referrals from existing employees and contractors
As an employer, be aware and cautious about:
Cash advances/salary loans - Employees that are irresponsible with their finances or have a lot of “family emergencies” (consider that the Filipino extended family is large and close-knit) might take to taking out advances and loans too frequently. There are salary loan facilities provided by SSS and HDMF, so do not be too liberal with cash advances.
Family occasions and other events that cause leaves - Due to Filipinos having close-knit extended families, there will be many reasons to attend birthday parties, baptisms, burials, etc. so plan accordingly and be mindful about the number of allowable leaves. The employees will appreciate your flexibility but be very clear about leave policy.
Understand that with some of them, “yes” actually means “maybe”, and “maybe” might just mean “no”; encourage more communication
While most are fully English literate (but sliding educational standards are causing English-language proficiency to decline), some might have comprehension problems; always ask them to repeat what is instructed to them to make sure they fully understand
Micromanaging is not ideal, but it has to be done at the start; when they are able to fulfill their tasks well enough, that is the time to ease up on them
Always ask for feedback, because some people are afraid to speak up
Where to Incorporate:
Startup companies in the Philippines tend to incorporate their startups in Philippines, United States of America, Hong Kong Special Administrative Region, and Singapore.
Republic of the Philippines - It is a natural location for most of the local founders due to convenience and lower costs. Philippine tax schemes are not particularly startup friendly, and it takes a significant amount of time, money, and patience to incorporate (15 steps, US $465++, and 34 days, according to World Bank). However, as a Filipino founder, the benefit is that you will not likely run into the 60-40 ownership rules which is a hindrance to foreign-owned corporations (though any potential foreign partners might have a problem with it).
Singapore & Hong Kong SAR - These are good locations for startups that are better-funded and for founders that have international connections. The business laws in Singapore and Hong Kong are more concise and up-to-date, and there are tax incentives that can be availed. Singapore and Hong Kong business registration procedures are also way shorter.
United States of America - This is a common option for US founders as well as the very few well-capitalized local founders. It is a costly process, but US-incorporated companies have the easiest time raising money from the big time investors, which are mostly US-based. The US incorporation process is more complicated than Singapore or Hong Kong and the tax implications are higher, but it is still a good tradeoff for a better funding outlook.
There are three general types of visas for entry into the Philippines: non-immigrant, immigrant and special visas. Non-immigrant visas are primarily for temporary visits by foreign nationals for business, pleasure, health, education, or transit. Immigrant visas are intended for those who wish to gain permanent residency. The third category is the special visas, and cover several situations including resident retirees, investors, offshore banking institutions, and most relevant to the startup industry, for foreign nationals that employ Filipinos in a legitimate enterprise or venture.
The SVEG special non-immigrant visa would be the ideal type to apply for if you are a foreign national looking into creating a startup in the Philippines. One of the requirements is that you would need to employ at least 10 Filipino nationals in a sustainable and legitimate business. If you cannot apply for the said special visa, there are other legitimate ways to extend your stay in the Philippines, even with a regular non-immigrant visa.