Moving your Filipino staff to a new EOR? There's no such thing as a "transfer"

Most weeks, an Australian business changing providers asks us the same thing: can we sign a transfer agreement and move our team across?

It sounds sensible. In the Philippines, it doesn't work that way, and trying to make it work can leave someone holding liabilities they never agreed to take on.

Employment doesn't move between employers

Your EOR is the legal employer of your Filipino staff. When you change EOR, you're changing employers.

Under Philippine labour law, an employment relationship doesn't pass from one company to another just because the two companies agree to it. The situations where employment can carry across involve the business itself changing hands, such as a merger or the sale of a business, and even those follow specific rules. Swapping service providers isn't one of them.

Done properly, the move looks like this: the staff member resigns from the old EOR, their final pay is processed there, and they start with the new EOR the next working day. No gap in work, no gap in pay.

Why a transfer agreement is risky

If the paperwork reads as though the new EOR is continuing the old employment, the new EOR can inherit the old employment's history. That can include:

• Unremitted SSS, PhilHealth or Pag-IBIG contributions
• Underpayments of salary, holiday pay or night differential
• Disputes about unused leave
• Separation or retirement pay calculated on the full length of service

A careful EOR will decline a transfer agreement for exactly this reason. One that agrees without asking questions either hasn't thought it through, or will push the risk back onto you through indemnities in your client agreement.

We've written about how this plays out across a whole team in switching offshore staffing providers.

How to keep the staff member whole

A clean legal break doesn't mean your team member starts from zero. The new employment contract can look after them while keeping the facts accurate:

• Waive probation. They've already proven themselves in the role.
• Recognise their original service date for leave and seniority. Write it into the new contract as an express benefit, and state that it's a contractual benefit, not a continuation of the previous employment.
• Keep the actual start date accurate. The contract and certificate of employment should show the real date they started with the new employer.
• Keep everything else the same. Same pay, same hours, same manager. Their SSS, PhilHealth, Pag-IBIG and TIN numbers stay with them; the new employer simply registers as their employer.

Talk to your team before anything lands in their inbox. The word "resign" can worry people, and a five-minute explanation prevents a lot of anxiety.

Who pays the final pay

The old EOR is responsible for closing out the employment it held. That means:

• Salary up to the last day worked
• Prorated 13th month pay
• Payment for unused leave, in line with the law and their contract or policy
• A Certificate of Employment (COE)
• BIR Form 2316 for the period they employed the staff member

DOLE guidance expects final pay to be released within 30 days of separation and a COE to be issued within three days of the employee's request, unless a more favourable policy applies. The new EOR will need the 2316 to get year-end tax right.

Check your current contract too. If you've been paying the old EOR monthly accruals for 13th month pay, that money should already be sitting with them.

The step people forget: your own notice period

Your contract with the old EOR almost certainly has a notice clause, often 30 days, sometimes longer. That notice period, not the staff member's resignation, usually sets the earliest clean start date.

Line the dates up: give your notice, agree the resignation date to match, and schedule the start with the new EOR for the next working day. Don't have anyone start with the new EOR before the old employment has ended.

A checklist before you move

• Notice given to the old EOR, with the end date confirmed in writing
• Resignation letters dated to match that end date
• Final pay, prorated 13th month and leave payments confirmed with the old EOR
• COE and BIR 2316 requested
• New contract shows the actual start date, waives probation, recognises the service date as a contractual benefit, and contains no continuity-of-employment wording
• Government registrations updated with the new employer
• Staff briefed before any paperwork goes out

If you're weighing up a move and want to know what it would look like for your team, book a call or compare EOR providers.

General information, not legal advice. A transition of any size should be reviewed by Philippine counsel against your specific facts.