Hiring Filipino virtual assistants gives you access to skilled, English-speaking talent at competitive rates.
One of the biggest advantages? This creates real flexibility in how you scale your business and operations.
There are nuisances however, hiring someone as a contractor when they should be classified as employee, could end up back firing on you ( the IRS is particularly strict about these)
So understanding the key difference between the two is not only necessary but actually money saving (literally).
How to Hire Filipino VAs as Independent Contractors
Contractors operate as self-employed professionals. They run their own business, you’re one client among potentially many, and the relationship centers on deliverables rather than daily supervision.
How contractor relationships typically look:
Payment happens per project, per milestone, or based on invoiced hours. Contractors send you an invoice, you pay it. Simple transaction.
They control their schedule completely. You can set deadlines and expect availability for meetings, but you don’t dictate when they start their day or how many hours they work.
They use their own equipment and tools. Laptop, internet connection, software subscriptions. All on their side unless you choose to provide specific tools.
They handle their own taxes. Filipino contractors file as self-employed and pay income tax on what they earn. You’re not withholding anything (though some overseas clients choose to help with tax planning as a benefit).
You can end the relationship when the project finishes or the contract term ends. No termination process, no severance requirements.
How Taxes Work When You Pay Filipino Contractors
Technically, if you’re paying a Filipino contractor, Philippine tax law says you should withhold 10% or 12% (if they have proper BIR registration) and remit it to the Bureau of Internal Revenue.
In practice, most overseas clients don’t do this. Contractors file and pay their own taxes.
Some clients gross up payments to account for taxes. Others simply pay the agreed rate and leave tax obligations entirely with the contractor. Both approaches work.
What It Means to Hire a Filipino VA as Your Employee
Employee relationships come with more structure and often more commitment. You’re building something longer-term.
What employee relationships look like:
Regular salary payments, usually bi-weekly or monthly. Consistent income creates financial security for the employee.
You typically set work hours. Maybe not rigid 9-to-5, but there’s an expectation they’re available during certain hours and working a standard weekly schedule.
You provide more direction on how work gets done. Training on your processes, detailed feedback on methods, closer collaboration with your team.
You might provide benefits voluntarily. Health insurance stipends, paid time off, bonuses, equipment allowances. These aren’t legally required for overseas employers, but they’re powerful retention tools.
Common Benefits Overseas Employers Offer Filipino Employees
Many overseas employers who hire Filipino VAs as employees provide packages that mirror local expectations without being legally bound to them. This creates a competitive advantage.
Common voluntary benefits include monthly health insurance stipends (₱2,000-5,000), annual 13th-month pay equivalent, 10-15 days paid time off, paid Philippine holidays, internet allowances, and equipment budgets for home office setup.
You’re not required to provide any of this. But Filipino professionals have seen the job market.
They know what the other companies based abroad offer. Matching or beating those standards makes your opportunity more attractive.
How to Decide Between Contractor and Employee for Your Team
The key difference between contractor and employee classification comes down to control and integration into your business.
Ask yourself these questions:
Do you need someone available during specific hours? If you need them online 9am-5pm your time zone for customer support, that’s employee thinking. Contractors work when they want as long as deliverables arrive on time.
Are you training them on your specific processes? Detailed onboarding, standard operating procedures, quality checklists. That’s employee-level integration. Contractors bring their own expertise and methods.
Is this ongoing work or project-based? Contractors handle defined projects with clear endpoints. Employees do continuous operational work.
How closely do you supervise daily work? If you’re checking in multiple times daily, reviewing exactly how they complete tasks, and redirecting methods, you’re managing an employee. Contractors get outcome feedback, not process management.
Could someone else step in easily? Contractors deliver work that could theoretically be done by any qualified professional. Employees become embedded in your operations and harder to replace quickly.
How long do you expect the relationship to last? Contractors work for weeks or months. Employees work for years.
Neither answer is wrong. Match your classification to what you actually need.
Signs You Should Change a Contractor to an Employee
Relationships evolve. Someone who started as a project-based contractor might become crucial to your daily operations.
Converting makes sense when the relationship no longer matches contractor characteristics. You need them working set hours. You’re providing detailed training and process documentation. The work is ongoing with no clear end date. They’re deeply integrated with your team.
Making the switch shows you value the relationship and want to invest in stability.
Steps to Convert a Contractor to Employee Status
Have a direct conversation explaining the change. Frame it as recognizing the evolution of the relationship and your commitment to them.
Draft a new employment agreement that reflects the terms clearly.
Adjust payment structure from invoices to regular salary.
Consider offering benefits if you haven’t already. The conversion is a natural time to introduce PTO, health stipends, or other perks.
Acknowledge their previous work in determining things like PTO accrual or performance review timing.
Conversions done proactively create goodwill. Conversions forced by the worker pushing for classification create tension.
How Hiring Filipino Workers Affects Your Business Taxes
Most overseas businesses paying Filipino contractors or employees don’t deal with Philippine tax obligations directly. You’re not withholding, you’re not filing with the BIR, and you’re not registered with Philippine tax authorities.
Your tax obligations exist in your home country. How you classify workers there matters for your business taxes.
US Tax Rules for Paying Filipino Contractors
Filipino contractors don’t receive 1099-NEC forms because they’re foreign nationals working outside the United States. Instead, you need them to complete a W-8BEN form certifying their foreign status. This prevents automatic 30% withholding on payments.
Without a W-8BEN, you must withhold 30% of each payment and remit it to the IRS, then file Form 1042 annually. With a valid W-8BEN, you pay the full contracted amount and report payments as business expenses on your tax return. No 1099 reporting is required for foreign contractors.
If you hire a Filipino employee working entirely in the Philippines without any US work presence, they don’t create US payroll tax obligations.
Tax Rules in Other Countries
UK, Australian, Canadian, and other employers generally don’t have withholding obligations for foreign contractors working outside their country.
However, reporting requirements vary by jurisdiction. Some countries require disclosure of international contractor payments above certain thresholds.
Consult your accountant about how to properly categorize these payments in your books as “contract labor,” “professional services,” or “international contractor expenses” depending on your local accounting standards and tax requirements.
How to Attract and Keep Quality Filipino Virtual Assistants
Filipino virtual assistants see opportunities from employers worldwide. Standing out means offering arrangements that respect their value.
Smart overseas employers recognize that not being bound by Philippine labor law is an advantage, not a license to exploit. You can structure arrangements flexibly while still offering fair compensation and reasonable working conditions.
Contractors appreciate clear project scopes, timely payment, and respect for their independence. Good rates (typically $5-15/hour depending on skills and experience), reliable communication, and professional treatment keep quality contractors engaged.
Employees want stability. Knowing they have consistent income, understanding their role clearly, and receiving support for professional development creates loyalty. Adding voluntary benefits puts you ahead of competitors who offer bare-minimum arrangements.
Choosing the Right Working Arrangement for Your Filipino Team
Start by asking what you actually need.
Hiring someone to handle a defined project with a clear endpoint? Contractor relationships make perfect sense. You pay for outcomes, they deliver them their way, everyone moves on when it’s done.
Building a customer support team, hiring an executive assistant who’ll learn your business deeply, or bringing on operations help for ongoing work? Employee relationships match what you’re creating.
You can mix both approaches. Some roles naturally fit contracting, others naturally fit employment. Having both contractors and employees on your team creates flexibility.
Whatever you choose, structure it honestly from day one.