Is it legal for an Australian business to hire staff in the Philippines? The one question that decides your obligations
This content submission is written by William Smith, Co-founder and CEO of Offshored, a specialized staffing agency that sources and hires professionals from the Philippines for Australian businesses. Its services include recruitment, onboarding, performance reviews, work process optimization and employee training.
The question Australian owners ask most often before they hire offshore is not about cost. It is “Am I allowed to do this?”
This article sets out the three ways an Australian business can engage a person in the Philippines, the two Australian laws that apply, and what an owner should put in writing before anyone starts.
It is general information, not legal, tax or accounting advice, and it draws on a published legality guide, which links to each primary source named below.
Is it legal for an Australian business to hire staff in the Philippines?
Yes. No Australian law prohibits having desk based work done by people overseas.
What the law regulates is how you do it, and almost everything turns on a single question: who employs the offshore worker.
Under the dedicated staffing model, team members are employed in the Philippines by a registered Philippine company, so the Australian client engages a staffing service rather than employing an overseas worker.
The practical difference between the three models below is who carries the employment obligations. Under direct hire, you do, in substance. Under the other two, a Philippine employer does, and your contract is with a supplier.
Three models, three very different risk profiles
Each model below puts the employment obligations in a different place.
1. Direct hire
Your company contracts with an individual in the Philippines, usually under an independent contractor agreement.
It is legal, but if you direct that person’s work day to day, set their hours and supply their tools, Australian law may treat the arrangement as employment whatever the contract says.
That is the misclassification pattern, and it is the one that produces Fair Work claims.
2. Employer of record
An employer of record is a company in the worker’s country that employs the person on your behalf, runs payroll and pays statutory contributions, and charges you the salary plus a margin. You still recruit and manage.
3. Dedicated offshore staffing provider
The provider recruits the candidate, employs them through its own Philippine entity, and provides the person’s work to you as a service under one monthly fee.
The Fair Work Act 2009 does not stop at the border
Owners sometimes assume that because the worker sits in Manila, Australian workplace law cannot reach the arrangement. The Fair Work Commission has shown otherwise.
In Pascua v Doessel Group Pty Ltd [2024] FWC 2669, a worker in the Philippines engaged by an Australian business under a contractor agreement was found to be an employee of that Australian business for the purposes of an unfair dismissal application.
The Act does not reach a person employed in the Philippines by a Philippine company under a Philippine contract, where the Australian business is a client of that company. That is why the “who employs the worker” question matters more than any other.
The Fair Work Ombudsman’s guidance on sham contracting is the other document every owner considering direct hire should read before signing anything.
The Privacy Act 1988 and APP 8: Before customer data goes offshore
If your business is covered by the Privacy Act 1988 (the general threshold is annual turnover above A$3 million, with some businesses covered regardless of turnover), Australian Privacy Principle 8 applies before you disclose personal information to an overseas recipient.
The Office of the Australian Information Commissioner’s guidance says the reasonable step is usually an enforceable contractual arrangement requiring the recipient to handle the information consistently with the Australian Privacy Principles (OAIC, APP guidelines chapter 8).
In practice that means a written contract with your provider covering confidentiality and data handling, and a line in your own privacy policy saying personal information may be disclosed to service providers in the Philippines.
A safer setup has team members work inside the client’s own platforms under logins the client issues and controls, connecting through a VPN or the client’s own systems, so client data stays in the client’s systems.
Every client system login should be removed on the team member’s last day (offshore staff data security).
Tax: What the Australian business pays and does not pay
Under the dedicated staffing model, the Australian business pays one monthly fee to an Australian supplier.
It does not pay superannuation for the team member, because the ATO states that an employer does not have to pay super for non-resident employees who work outside Australia (ATO, work out if you have to pay super), and in any case the team member is not its employee.
It does not operate PAYG withholding, because it pays no wages. Payroll tax is a tax on wages paid by an employer, and the business pays no wages to the team member.
Owners should confirm the treatment of the fee as a business expense with their own accountant.
Ethical employment is part of compliance
Legal is the minimum. A team member employed in the Philippines under Philippine law receives a salary, 13th month pay, SSS, PhilHealth and Pag-IBIG contributions, and can receive HMO health cover after the six month probation.
Businesses with annual consolidated revenue of A$100 million or more also have reporting obligations under the Modern Slavery Act 2018, which is one more reason to know exactly who employs the people in your offshore team and on what terms.
Seven things to put in writing before anyone starts
- Confirm who the employer is in the contract, naming the entity and the law that governs the employment.
- Never rely on a contractor label alone. If you direct the work day to day, assume Australian law may treat the person as your employee unless a Philippine employer holds the contract.
- Check the provider’s Philippine registration with the Securities and Exchange Commission.
- Put an enforceable data handling contract in place before any personal information leaves Australia, and record the reasonable steps you took under APP 8.
- Update your privacy policy.
- Confirm the tax treatment of the fee with your accountant.
- Keep the arrangement simple: one Australian supplier, one monthly fee, one contract. If a provider asks you to pay the worker directly, ask why.
Hiring staff in the Philippines legally from Australia
Offshoring is legal in Australia.
Doing it in a way you can defend to the Fair Work Commission, the OAIC and your own accountant is a matter of choosing the employment structure first and the candidate second.
Before you sign, ask any provider to walk through who employs the person, what sits in the employment contract, and what you put in writing on your side, and compare the offshore staffing pricing bands against what the fee includes.
Independent
