Direct Hire vs EOR vs Staff Augmentation vs Contractor in the Philippines
Compare direct hire, an employer of record, staff augmentation, and contractor engagement for a software engineer in the Philippines, with a worked ₱120,000 cost example.
Permhunt Team
The short answer
Hire directly when you expect the engineer to stay and you can employ them in the Philippines. Use an employer of record when you need an employee and you do not have a local entity. Use a contractor for genuine project work, or a contractor-administration service when you want that flexibility without running payroll. Staff augmentation fits a short burst of capacity. It is an expensive way to keep someone for years, because the markup never stops and the person often stays with the agency.
The four models are different products. One finds a person. One becomes the legal employer. One rents capacity. One engages an individual for a scope of work. Comparing a salary with an all-in agency invoice makes the rented option look simpler than it is.
Figures below use a ₱120,000 monthly basic salary, inside the Metro Manila band for experienced software engineers in our 2026 software engineer salary guide. Dollar fees are shown at ₱58 per US$1 so they can sit next to peso costs. Use your own payroll rate.
What each model actually is
Your entity
Direct hire
Your Philippine entity employs the person. You pay salary, 13th-month pay, and the employer shares of SSS, PhilHealth, and Pag-IBIG. You still have to find the candidate. A specialist search is a separate, one-time fee, paid when someone accepts.
No entity yet
Employer of record
A provider’s Philippine entity is the legal employer. You direct the work. Published 2026 admin fees run from about $190 to $699 per employee per month, on top of salary and contributions. The fee does not recruit a scarce engineer.
Rented capacity
Staff augmentation
A provider employs or contracts the engineer and bills you a rate with a margin, often 30% to 70% of pay, or around $30 to $40 an hour for managed engineering. If you stop paying the provider, you usually lose the person.
Defined work
Contractor
You engage an individual for a scope of work. The legal test is the working relationship, not the contract title. A full-time engineer in your standup, on your accounts, doing your core roadmap, is the profile labour authorities look at as employment. See the 2026 labour-law guide.
Who employs, who finds, who keeps the person
For a foreign company hiring its first Philippine engineer, the practical choice is usually an employer of record or a properly structured contractor arrangement. Direct hire becomes available once an entity exists.
| Direct hire | Employer of record | Staff augmentation | Contractor | |
|---|---|---|---|---|
| Legal employer | Your Philippine entity | The EOR’s entity | Usually the provider | The individual, if the status is genuine |
| Who finds the engineer | You, or a recruiter | You, or a recruiter | The provider | You, a marketplace, or a recruiter |
| What repeats every month | Salary and statutory costs | Salary, statutory costs, and a platform fee | A marked-up bill rate | The agreed fee |
| If the relationship ends | The employee stays with you | Employment has to move | The person usually leaves with the agency | The contract ends |
| Best fit | A role you expect to keep | An employee, and no local entity yet | A short surge of capacity | A defined piece of work |
What the engineer costs before any hiring fee
Hold the person constant. Monthly basic salary is ₱120,000. Employer contributions use the schedules in our SSS, PhilHealth, and Pag-IBIG guide: SSS at 10% of the ₱35,000 monthly salary credit, Employees’ Compensation of ₱30, PhilHealth at 2.5% up to the ₱100,000 ceiling, and Pag-IBIG at ₱200. 13th-month pay is one month of basic salary for a full year at a constant rate.
| Cost | Monthly | Annual |
|---|---|---|
| Basic salary | ₱120,000 | ₱1,440,000 |
| Employer SSS | ₱3,500 | ₱42,000 |
| Employees’ Compensation | ₱30 | ₱360 |
| Employer PhilHealth | ₱2,500 | ₱30,000 |
| Employer Pag-IBIG | ₱200 | ₱2,400 |
| 13th-month pay | ₱10,000 accrued | ₱120,000 |
| Employment cost | ₱136,230 | ₱1,634,760 |
Statutory employer contributions on this salary are ₱6,230 a month, or ₱74,760 a year. Adding 13th-month pay brings the annual employment cost to ₱1,634,760. That is about 13.5% above twelve months of basic salary. It excludes private health cover, equipment, leave above the statutory minimum, overtime, and any recruitment fee.
An employer of record passes this employment cost through and adds its own fee. A direct hire pays the same employment cost once the entity exists. A staff-augmentation invoice replaces this stack with one bill. A genuine contractor rate replaces it with a professional fee, and the individual carries their own contributions.
What you pay on top, and when a search fee is recovered
Permhunt Search is 25% of annual base salary, invoiced when the candidate signs. On ₱1,440,000, that is ₱360,000 once. Permhunt Search+ is 30%, or ₱432,000, for an urgent search. Permhunt Contractors is a separate product: from $299 per person per month, with a six-month minimum, for sourcing plus contractor administration. The $299 is not the engineer’s pay.
| Route | Fee | Months until it passes a ₱360,000 search fee |
|---|---|---|
| Permhunt Search | ₱360,000 once | Paid once, at placement |
| Staff augmentation at a 50% markup | ₱60,000 extra every month | 6 months |
| Global EOR at $599 a month | ₱34,742 every month | About 11 months |
| Permhunt Contractors at $299 a month | ₱17,342 every month, search included | About 21 months |
| Lower-cost EOR at $199 a month | ₱11,542 every month, search not included | About 31 months |
A $199 employer-of-record seat can cost less than a search fee for more than two years if you already have the person. It does not fill a hard-to-find role. If you still need someone who can ship, the search is a separate project, whether you employ them yourself or through an EOR.
Over three years, with the employment cost held at ₱1,634,760 a year, the illustration looks like this. Direct hire plus one Permhunt Search fee: ₱5,264,280. The same employee through a $599 EOR, with no separate search: ₱6,154,992. Through a $199 EOR, still with no search: ₱5,319,792. A 50% staff-augmentation bill of ₱180,000 a month, treated as all-in: ₱6,480,000. From year four the search fee is gone and the monthly platform or markup is not.
The 50% markup and the $30 to $40 hourly rates should not be added together. An hourly managed-team rate already includes margin, and often a different seniority and overhead. Compare that invoice with ₱136,230 a month of employment cost, not with the ₱120,000 salary alone.
Which model fits the hire
- Long-term employee, and you have an entity. Direct hire, and pay for the search once. The fee is recovered inside the first year against ongoing markups.
- The same employee, and you have no entity. Use an employer of record for the legal employment, and a recruiter for the search. Revisit an entity when headcount makes the monthly seat fee the larger number.
- A defined build, cover for leave, or a specialist sprint. A contractor, or staff augmentation, matches the duration. Price the buyout before you start if you may want the person permanently.
- A contractor, without becoming the payroll department. Permhunt Contractors covers the contract, payment, and local admin from $299 per person per month, and the search is part of the engagement.
The expensive mistake is using a rented team as a permanent engineering department. The second is calling an employee a contractor because the invoice is simpler. The third is paying an employer-of-record platform and still spending months on job posts for a role that needed a search.
Where a recruitment fee fits
Permhunt finds the engineer. The employment vehicle stays your choice: your entity, an employer of record you already use, or Permhunt Contractors when you want administration included.
Permhunt Search
25% of annual base salary, invoiced on placement, with a three-month replacement search if the hire leaves.
Permhunt Search+
30%, with a six-month replacement window and payment terms of up to three months from placement, for roles that cannot wait.
Permhunt Contractors
From $299 per person per month, with a six-month minimum and replacement support while the engagement is active.
There is no fee for starting a search. Current packages are on the pricing page. For the wider hiring sequence, see the guide for foreign employers and the cost comparison against a local hire.
Hire in the Philippines
Hire the engineer, then choose how they are employed
Tell us the role, the seniority, and whether you need a permanent employee or a contractor. We will scope the search and show the fee against the model you plan to use.
Quick answers
Frequently asked questions
Which hiring model is cheaper if the engineer stays?
For a long-term employee, direct hire plus a one-time search fee is usually the lowest cost after the first year. In the ₱120,000 example, a 25% search fee is recovered in about six months against a 50% staff-augmentation markup, and in about 11 months against a $599 a month employer-of-record fee. A low-fee employer of record can stay close on admin cost for two or three years if you already have the candidate.
Do I need a Philippine company to hire an employee?
A direct employee needs a Philippine employer. That can be your own entity or an employer of record. A contractor engagement and a staff-augmentation contract do not require your own entity, but a contractor label does not decide employment status.
Is an employer of record the same as a recruitment agency?
No. An employer of record becomes the legal employer and runs payroll, contributions, and contracts. A recruitment agency finds and screens the person. You can use both: the agency fills the role, and an employer of record or your own entity employs them. Permhunt Search is the search. Permhunt Contractors adds ongoing contractor administration.
When does staff augmentation cost more than hiring?
When the person stays. A markup of 30% to 70% on pay continues every month, and the engineer often remains the agency’s person. On a ₱120,000 salary, a 50% markup adds ₱60,000 a month, which passes a ₱360,000 search fee in six months.
Can a foreign company engage a Filipino developer as a contractor?
Yes, for genuine independent work. Philippine employment status follows control, integration, and economic dependence, not the contract title. Someone who works your hours, in your tools, on your core product, can be treated as an employee. Use a contractor for defined work, or employ them through your entity, an employer of record, or a contractor administration arrangement.
How to use these numbers
- Employment contributions follow the rates explained in the SSS, PhilHealth, and Pag-IBIG guide, including the January 2025 SSS schedule and the Pag-IBIG ₱10,000 fund-salary ceiling.
- 13th-month pay follows the one-twelfth rule for covered employees. Confirm coverage before you drop it from a senior-role budget.
- Employer-of-record amounts are published 2026 market ranges, not a quote. Ask the provider whether recruitment, equipment, and private health cover sit inside the fee.
- The 50% staff-augmentation markup is a midpoint of the 30% to 70% band used in employer comparisons. It is not a survey average.
- Permhunt fees are the packages published on the pricing page at the date of this article.
A qualified Philippine employment adviser should review the contract model for your specific role.
About Permhunt Team
Expert in remote hiring and Filipino talent acquisition with over 10 years of experience helping companies build successful remote teams.
