Illegal dismissal and money claims
Rightsizing, redundancy and retrenchment
Can you run a business in the Philippines without hiring an employee?
As its dictionary meaning goes, to hire is to employ, to engage, to appoint, to enlist, to sign up or to secure the services of someone. Hiring refers to the process of engaging somebody for his service. Whatever relationship will result from that hiring will depend on the
agreement and its execution. Any businessman can definitely run a business without hiring anyone. It is a given that he and his partners can do everything on their own if they choose to.
But can the businessman run his business with the help of another without
having to be an employer? Still definitely yes.
Hiring somebody in running your business does not necessarily have to be hiring him as an employee. Indeed, the businessman has the prerogative of hiring the services of freelancers and consultants, without having to shoulder the obligations of an employer under the Labor Code. While the relationship between an employer and an employee is specifically governed by the Labor Code, engaging freelancers and consultants should be subject to the provisions of contract law in general.
The only concern is this. How can you tell if the person you are hiring will not be considered by law as an employee? How can you be so sure that he will not come to you later and invoke his rights to labor benefits and to security of tenure?
Employee or not, the person you are hiring, of course, has rights. The only difference is that, in simple terms, the rights of an employee are defined by the Labor Code while the rights of a non- employee are defined by the terms of his contract. In general, we can say that an employment relationship is more restrictive in nature while a consultancy or freelance agreement has more leeway.
Control is the single most important factor in determining whether the person you hired is an employee. This pertains to control over the means and methods of doing the work. Generally, the employee's work performance is subject to your control while a consultant's service is not, except only as to the desired result. While the employee does his work under your supervision, the consultant renders service using his own means, styles and methods, free from your control; your only concern is the delivery of the result. To otherwise ensure which kind of relationship you are getting into, it is important to define everything under a written contract, especially if your intention is to enter into a consultancy agreement. Not only that, you have to make sure that the actual execution is consistent with what is written.
Employee or consultant?
To hire someone as an employee or a consultant will depend on three important factors.
First is control. An employee is someone you supervise from the get go, from the processing of the work all the way up to the delivery of the output. A consultant is someone you control only with respect to the output. An employee reports in your office on a regular basis, say for at least 8 hours, and is subject to your company policy including rules on attendance and punctuality. A consultant is not required to report at your office on a regular basis. He may have his own office and may service other clients. So deciding whether to hire an employee or to engage the services of a consultant depends on how much control you want to exercise.
Second is professional expertise. A consultant is generally perceived to be an expert in a particular area. He is usually a professional with vast experience in his field of expertise, like a lawyer, an accountant, an engineer, etc. While this may also be true with respect to an employee, an employee is usually someone who needs further guidance, training and close supervision.
Third is your hiring goal. What type of service do you want to get by hiring? What particular need do you want to address? If you need someone on a regular basis for at least 8 hours a day under your close supervision, then hire an employee. But if you need someone for his known expertise, without necessarily having to be supervised, then engage a consultant.