Staff leasing in the Philippines explained (and the direct-hire alternative)

Staff leasing in the Philippines is the managed seat model of offshore staffing. A Philippine provider hires the staff member, usually seats them in its office or supports them at home, and makes them available to work full time for your business. You direct the work and pay the provider a monthly fee per person for as long as the arrangement runs. One published rate is A$1,099 per person per month plus A$1,200 per hire.

It is a popular model, and it does solve real problems. It is not the only way to get a dedicated person in the Philippines, though, and the fees add up over time. This guide is for Australian business owners weighing up an offshore team. It explains how staff leasing works, how Philippine law frames it, what it costs, the benefits and drawbacks, and the alternatives.

What is staff leasing?

In a staff leasing arrangement there are three parties:

• the provider, which recruits the person, is their employer, and handles payroll, benefits and HR
• the staff member, who works on your tasks, usually in your systems and during your hours
• you, the client, who directs the day-to-day work and pays the provider

Australian providers use different names for the same thing: managed offshore staffing, seat leasing, dedicated staff or offshore staffing services. The common thread is the monthly per-person fee and the provider standing between you and your staff member.

Staff leasing is also called employee leasing. The provider may be described as a staff leasing company, leasing company or leasing agency, and the people as leased employees or leased staff. Whatever the label, leased employees are not employed by the client company. The provider is their legal employer, which is why you don’t need a local entity in the Philippines to use it.

In the United States, a professional employer organization (PEO) is a related idea: it shares employer responsibilities with the client in a co-employment arrangement. Philippine staff leasing is usually simpler for an Australian business, because the provider holds the employment and you hold the day-to-day direction.

How does staff leasing work?

Staff leasing works in a fairly standard sequence, although each provider runs it slightly differently:

1. You define the role. You set the specific roles, skills, hours and budget.
2. The provider recruits. It advertises, screens and shortlists, and you interview and choose.
3. The provider hires and sets up. It issues the employment contract, and many providers supply the desk, equipment, internet, IT security and system access as part of the service.
4. You direct the daily work. The team member works on your tasks, in your systems, and you manage output, priorities and training on your processes.
5. The provider runs employment. It handles payroll, tax, statutory benefits, leave, HR and compliance with Philippine employment law, and gives ongoing support if issues come up.
6. You pay a monthly fee. You pay the provider a service fee per person, plus or including the salary, for as long as the arrangement runs.

The result is a dedicated person, or dedicated teams if you lease several seats, who work as part of your remote team without you running Philippine payroll or HR in house.

How does Philippine law treat staff leasing?

Philippine law has rules for arrangements where one business supplies workers to another. They sit in Articles 106 to 109 of the Labor Code and in the Department of Labor and Employment’s (DOLE) Department Order No. 174, series of 2017.

The Labor Code

Article 106 allows contracting, but requires the contractor’s employees to be paid in line with the Labor Code. If the contractor fails to pay them, the client is jointly and severally liable with the contractor to the extent of the work performed.

It also defines labor-only contracting: where the person supplying workers lacks substantial capital or investment in tools, equipment, machinery and work premises, and the workers do activities directly related to the client’s principal business. In that case the supplier is treated as merely an agent, and the client is responsible to the workers as if it had hired them directly.

DOLE Department Order No. 174-17

Department Order No. 174-17 implements those articles. Its guiding principle is that non-permissible contracting arrangements undermine workers’ constitutional and statutory right to security of tenure. It applies to all parties in an arrangement where an employer-employee relationship exists, and it bars contractors from recruitment and placement activities.

Section 5 sets out an absolute prohibition on labor-only contracting. An arrangement is labor-only contracting where:

• the contractor lacks substantial capital, or lacks investment in tools, equipment, machinery, supervision or work premises, and its workers do activities directly related to the principal’s main business, or
• the contractor does not exercise the right to control how its employees perform the work

Does Department Order 174 cover offshore staffing for foreign clients?

Not necessarily. In Department Circular No. 001-17, DOLE clarified that the order applies only to the trilateral relationship that characterises contracting or subcontracting. It says the order does not cover information technology-enabled services involving an entire or specific business process, and lists business process outsourcing, knowledge process outsourcing, legal process outsourcing and back office operations, among others.

Many Philippine providers that serve Australian clients describe themselves in those terms. Whether a particular staff leasing arrangement falls inside or outside the order depends on how it is structured and run. That is a question for a Philippine employment lawyer, not a sales page, and we would not rely on a provider’s own description alone.

Why control matters

Whatever rules apply, Philippine courts decide who the employer is by looking at the relationship. In Consulta v Court of Appeals, the Supreme Court set out the four-fold test: the power to hire, the payment of wages, the power to dismiss, and the power to control, with control the most important. In staff leasing you direct the daily work, so a well-run provider needs to keep genuine employer functions such as hiring, pay, discipline and supervision.

For an Australian client, the practical checks are simple. Ask the provider who the legal employer is, whether it is registered and properly capitalised, how it pays statutory benefits, and what happens to the staff member’s employment if you end the arrangement. This is general information, so have any contract reviewed by a qualified adviser.

What does staff leasing in the Philippines cost?

Staff leasing pricing usually has three parts: a one-off setup or recruitment fee, a monthly fee per person, and the staff member’s pay. Providers bundle these differently, so ask exactly what each figure includes.

One published rate is A$1,099 per person per month plus A$1,200 per hire, with no lock-in and 60 days’ notice. Here is what that fee comes to for one person, compared with the alternatives. Salary is not included in any column.

	Staff leasing (one published rate)	Employer of record (Tarino EOR)	Direct hire (Tarino)
Recruitment fee	A$1,200	$5,000 excl. GST	$5,000 excl. GST
Monthly fee	A$1,099	$387	$0
Fees in year one	A$14,388	$9,644	$5,000
Fees over three years	A$40,764	$18,932	$5,000
Who is the legal employer	Provider	EOR	You (or a genuine contractor arrangement)

As a guide to salary, Tarino’s typical monthly figure is about $1,200 for an admin assistant, $1,400 for a bookkeeper and $1,700 for an executive assistant. Over three years, the staff leasing fee in that example is more than twice a bookkeeper’s annual salary. In year one, a bookkeeper through that staff leasing rate costs about A$31,188 in salary and fees ($16,800 plus A$14,388), against about $21,800 through direct hire and $100,800 for a local hire with super on Tarino’s typical figures. Run your own role through the cost calculator.

Staff leasing vs other offshore staffing solutions

Staff leasing sits alongside several other models. The names overlap, so ask any provider which of these it actually offers.

Model	Who is the legal employer	Who directs the daily work	How you pay
Staff leasing	Provider	You	Monthly fee per person, plus salary
Staff augmentation	Provider	You	Monthly fee per person, plus salary. Many providers use this term for the same model
Staffing agency (local)	Agency, for temporary or contract placements	You	Hourly or daily margin on top of pay
BPO provider	Provider	Provider, which delivers a process or outcome	Per seat, per transaction or per outcome
Employer of record	EOR	You	Flat monthly fee, salary at cost
Direct hire	You (or a genuine contractor arrangement)	You	One recruitment fee

Some providers also offer build-operate-transfer, where they set up a team for you and later transfer it to your own entity. That suits larger companies with long-term growth plans in the Philippines, not usually a small team.

What are the benefits and drawbacks of staff leasing?

Benefits

• No local entity. The provider is the employer, so you don’t need to register a Philippine company to have a full-time team member.
• Less administrative work. Payroll, statutory benefits, leave and HR compliance sit with the provider, so you don’t need in-house HR for your offshore staff.
• Office and support included. Many providers include the workspace, equipment, IT and ongoing support in the fee.
• Lower costs than a local hire. On Tarino’s typical figures, a Philippines-based bookkeeper earns about $1,400 a month, against $90,000 a year plus 12% super for a comparable Australian hire. Even with a staff leasing fee on top, the cost savings are large.
• Scale with one provider. If you need several people, one provider can recruit and manage the whole group.

Drawbacks

• The fee never stops. The monthly fee runs for as long as the person stays, so over several years the provider fees can exceed what an EOR or direct hire would cost in total.
• Less control. You direct the work, but the provider controls the contract, pay reviews, discipline and benefits. If you want more control over who is on your team and how they are treated, that’s a limit.
• Less direct communication. Pay, leave and HR conversations go through the provider, not you.
• Dependency. Your staff member’s employment belongs to the provider, so leaving the provider can mean renegotiating or losing the person.

To judge whether staff leasing is viable, compare the total employment cost over the time you expect to keep the role, and decide how much operational control you need.

When is staff leasing the right choice?

To be fair, staff leasing earns its fee in some situations:

• you want your staff member in a supervised office with the provider’s IT and security
• you don’t want to deal with payroll, benefits or HR at all
• you need several people quickly and want one provider to manage them
• you want to be able to end the arrangement on notice

If those matter most, the monthly fee is buying real services. Our direct hire vs offshore staffing agency comparison sets out when an agency is the better fit.

What are the alternatives to staff leasing?

Employer of record

An employer of record (EOR) becomes your hire’s legal employer in the Philippines and handles the contract, payroll, tax, statutory contributions and leave. Unlike staff leasing, the fee is flat and the salary is not marked up. Tarino EOR, powered by Deel, costs $387 per employee per month, and AUD pricing may vary slightly with exchange rates.

Direct hire

With direct hire, a recruiter finds the person and you hire and pay them yourself. There is no monthly fee and no one standing between you and your staff member. You handle equipment and payroll, or add an EOR for the payroll side. Tarino’s fee is $5,000 excl. GST per placement: $250 upfront, credited back when you hire, plus $4,750 on hire.

A contractor arrangement

Some businesses engage a Philippine freelancer as an independent contractor. That can suit genuinely independent, project-based work. It suits a full-time role under your direction far less, because the label does not decide the relationship. Our guide to sham contracting explains why.

How to move from staff leasing to direct hire

If you already lease staff and want to change models, start with your contract. Check the notice period, and any clause about hiring the staff member directly, before you raise it with anyone. Then work out the structure you want for the future with your adviser. Our article on offshore agency markups walks through how to see what you are paying now.

How Tarino works

Tarino is a direct-hire recruiter, not a staff leasing provider. We build a pool of 1,000+ candidates per role, screen them through CV, video, practical and interview stages, and send you a shortlist of 3–4, typically within about 2 weeks. You hire your person directly, with 6-month replacement cover for the same role and no monthly fee unless you add Tarino EOR. See how it works and pricing, or book a 30-minute call.