Foreign Worker Ratio in the Philippines: Is There a Cap, and What the Understudy Rules Require

Is There a Cap on the Foreign Worker Ratio in the Philippines? No Universal Number

There is no statutory numerical cap on the foreign worker ratio applying to Philippine companies generally. No law states that foreign nationals may not exceed a given percentage of an ordinary company's headcount. That runs against most people's intuition, and against a great deal of online material asserting fixed percentages.

So why does the question keep coming up? Because "no universal ratio cap" is not the same as "hire freely". What actually constrains you is four independent gates:

• Gate one: a position-by-position Alien Employment Permit. Every foreign hire requires a separate permit for that role, supported by proof that no suitable local candidate is available. The restriction is applied per position, not per percentage — this is the key to understanding the whole subject;
• Gate two: the Anti-Dummy Law. In activities subject to foreign equity ceilings, foreign nationals are restricted from intervening in management, and board seats track the permitted foreign equity;
• Gate three: sector-specific reservations. Certain professions and industries are reserved by the Constitution or special legislation, and there the ratio is no longer the variable at all;
• Gate four: training obligations attached to incentives. Employers granted fiscal incentives, engaged in priority or strategic areas of investment, or operating a public utility under the Public Service Act must implement a local training programme — the origin of the understudy requirement.

The four gates operate independently. Work out first which of them actually reach you:

The right question is therefore not "how many foreigners can I hire", but "does each of these positions stand up on its own, and does my company fall into one of the three categories that must run a training programme".

The 60:40 Rule Is About Equity, Not Employment

When companies ask about the foreign worker ratio, they are usually thinking of the well-known 60:40 — the requirement in certain activities that Filipinos hold at least 60% of the equity. That is an ownership ratio, not an employment ratio. The two are governed by different bodies of law and solve different problems, and confusing them can put an entire corporate structure on the wrong footing.

• 60:40 governs who owns the company — a foreign equity ceiling in specified activities, arising from constitutional and foreign investment law. See the Anti-Dummy Law and nominee risk;
• The AEP regime governs who works in the company — whether each foreign position is permitted, arising from labour law.

A company that is 100% foreign-owned in a fully liberalised activity still needs an AEP for every foreign employee, and a company with 60% Filipino ownership does not thereby acquire any quota for hiring foreigners. Equity and employment are parallel compliance tracks.

They do intersect in one place: the Anti-Dummy Law (Commonwealth Act No. 108). In activities subject to a foreign equity ceiling, the law restricts foreign nationals from intervening in the management of the enterprise. Foreign nationals may sit on the board in proportion to the permitted foreign participation, while management positions are restricted and in specified circumstances require separate authority. In those industries, the 40% figure does indirectly shape how many foreigners you can place in management. That is the one place a ratio genuinely operates on people rather than shares. See whether a foreign director needs an AEP.

Planning a hiring roadmap on the 60:40 equity figure means using the wrong formula for a whole year — and the error only surfaces when your first foreign hire files for an AEP. Get the equity line and the employment line calculated separately →

Which Rules Apply Now: DOLE Department Order No. 248, Effective 10 February 2025

Any discussion of foreign worker ratios and training obligations has to start with the correct rule version: the Department of Labor and Employment issued Department Order No. 248, series of 2025 — the New Rules and Regulations on the Employment of Foreign Nationals in the Philippines — which took effect on 10 February 2025, and subsequently issued supplemental guidelines clarifying and amending it.

The changes bearing directly on ratios and training include:

• A defined list of employers required to implement a training programme (detailed in the next section);
• Two programme types: the Understudy Training Program (UTP) and the Skills Development Program (SDP);
• A Technical Working Group to assess training plans, checking whether they align with the foreign national's role and genuinely transfer knowledge to Filipino workers;
• Progress reporting — originally required within 5 working days from each periodic evaluation, adjusted by the supplemental guidelines to semi-annual or annual reporting based on permit validity;
• Certificates required even for exempt categories. Foreign nationals falling within exempted or excluded categories must now request the corresponding certificate from DOLE rather than simply assuming the requirement does not apply.

The labour market test is also spelled out in more detail: job advertisements must be published in a newspaper, on PhilJobNet and through PESO or JPO offices, and must state employer details, the position description, qualifications, workplace location, the foreign national's name and the employment duration. Applications must be filed within 15 calendar days of publication, and within 15 calendar days from execution of the employment contract.

⚠️ This area changes frequently and supplemental guidance can displace previous practice. Rely on the current DOLE issuances — see the AEP guide and what to do when an AEP is refused.

Which Employers Must Run a Training Programme? Three Categories

Under the current rules, employers required to adopt and implement a Skills Development Program or an Understudy Training Program are:

• An employer granted fiscal incentives by the government — companies enjoying tax holidays or similar incentives;
• An employer engaged in priority or strategic areas of investment;
• An employer operating a public utility under the Public Service Act.

Note the first two carefully: that is precisely where most PEZA and BOI registered enterprises sit. In other words, the incentives you enjoy carry a price, and part of that price is developing Filipino staff. Many foreign-invested groups budget only for the benefit side at setup and never cost the training obligation into their HR plan, discovering the gap only when an AEP renewal requires a training progress report. See choosing between PEZA and BOI and PEZA and BOI tax incentives.

Conversely, if your company is not in any of the three categories — an ordinary trading or services company taking no fiscal incentives — the training programme obligation generally does not apply. You still face the position-by-position AEP gate, but you are not additionally required to submit a UTP or SDP. Confirming which side of that line you are on is the first cost-saving step, before investing in a training infrastructure you may not need.

This requirement also explains the "certification of foreign to Filipino employee ratio" that appears in the 47(a)(2) document list — visa adjudication and employment compliance are welded together. See the 47(a)(2) visa guide.

How Many Understudies Are Required? The Rules Give a Number: Two

This is the most practically useful section, because DOLE gives unusually specific figures:

• Understudy Training Program: the foreign national must train at least 2 Filipino understudies, who must be regular employees and who are next-in-rank to that foreign national.
• Skills Development Program: at least 2 Filipino regular rank-and-file employees per foreign national.

Read closely and three conditions emerge that companies routinely miss:

• "At least 2" is an obligation per foreign national, not a company-wide total. Five affected foreign employees means 10 Filipino trainees, not 2;
• "Regular employees" excludes probationary staff, project-based hires and agency workers. Filling the requirement with probationary new joiners does not work;
• "Next-in-rank" is the hardest condition in the UTP. It requires your organisational chart to actually contain 2 Filipino regular employees immediately below that foreign manager. If your expatriate executive sits above an empty layer, or several grades removed from local staff, the plan does not stand up on paper.

If there are no 2 Filipino regular employees immediately below your foreign manager, the training plan fails on paper — and that is usually discovered at an AEP renewal refusal. Reconcile the org chart against the training plan before renewal, not after →

UTP or SDP? The definitions reveal the intent: the UTP is about succession — developing people who can take over the expatriate role, hence the next-in-rank requirement. The SDP is about broad capability transfer — diffusing skills and knowledge into the workforce, hence rank-and-file employees. Which applies, and whether the plan itself passes, is assessed by the Technical Working Group against how well it aligns with the foreign national's actual role.

The division of labour between the two programmes, side by side:

Either column multiplies by headcount. Five affected foreign employees means 10 Filipino trainees, not 2 — the single most common miscalculation here.

How Is the Ratio Counted: By Headcount or By Position?

This is the real question behind the search. The answer: the system's main line is per-position adjudication, not a headcount percentage. Understanding that difference redirects your compliance work entirely.

• If it were a headcount ratio, the compliance move would be to hire more Filipinos to enlarge the denominator, thereby earning quota for foreign hires;
• Because it is per-position adjudication, the real compliance move is to build a defensible justification for each foreign position — what qualifications the role demands, why the local labour market cannot supply them, and how this individual's credentials map onto those requirements. Hiring 100 Filipinos will not rescue one weakly justified foreign position.

Where does a ratio genuinely get counted? Three places:

• The training programme ratio — the 2 Filipino trainees per foreign national from the previous section, a real ratio you must compute;
• Workforce composition certifications in visa filings — the 47(a)(2) checklist requires certification of the foreign to Filipino employee ratio, forcing honest disclosure of the structure;
• Board seats and management under the Anti-Dummy Law, allocated in proportion to permitted foreign equity in restricted activities.

What records should you keep? Maintain these continuously rather than assembling them the week before filing:

• An exportable staff roster showing nationality, position, rank, employment type (regular, probationary, project-based) and start date;
• A current organisational chart showing each foreign employee's reporting lines;
• An expiry register for every AEP and visa, with renewal starting 2 to 3 months ahead;
• Training execution records — trainee names, content, dates, evaluation outcomes, and receipts for progress reports filed.

The real value of that register is not surviving an inspection; it is telling you in advance whether your next foreign position will be approved. See the employer's obligations when hiring foreign nationals.

What Happens If You Fail: From AEP Revocation to Site Inspection

The most direct consequence first: under the current rules, failure to implement the training programme constitutes a ground for revocation of the AEP. That is not decorative language — a permit already granted can be withdrawn.

Arranged in the order they detonate, the consequences form a chain rather than a single fine:

• The AEP is revoked or renewal refused. Missing training programmes and unfiled progress reports surface here first;
• The work visa follows. The AEP is a precondition for the work visa, so once it lapses, the basis for a 9G or 47(a)(2) is compromised. At that point the issue escalates from a compliance defect to your employee's right to remain in the country;
• Every subsequent foreign position is affected. A company carrying an adverse compliance record faces stricter scrutiny on its next AEP filing, stalling the whole expatriate hiring plan;
• Individual exposure. Employees whose status fails may face overstay penalties and worse — see the overstay penalties guide;
• Site inspection. Immigration and labour authorities may verify employment on the premises, requiring rosters, contracts, permits and training records together — see handling an immigration raid at your company.

One liability many owners do not know about: employing a foreign national without a valid work authorisation is the employer's responsibility, not merely the employee's problem. "He told me he had a visa" is not a defence. See what happens when someone is caught working on a tourist visa.

Practical advice: treat the training programme as something to actually do rather than a document to file and archive. The Technical Working Group assesses alignment with the role and progress reports fall due on a cycle — the design intent is plainly to prevent paper compliance. Identifying 2 genuine, correctly ranked Filipino employees and running real, documented training is far less work over time than improvising evidence every year.

Exemptions and a Compliance Checklist You Can Follow

Two levels of exemption need separating: people exempt from holding an AEP, and companies exempt from the training obligation.

Level one: foreign nationals exempt from the AEP. The recognised exempted and excluded categories include the dependent spouse of a member of the diplomatic corps, accredited official personnel of international organisations of which the Philippines is a member, officers and employees of a foreign country's embassy in the Philippines, resident visa holders, and recognised refugees or stateless persons. The supplemental guidelines also reference equity holders and shareholders or foreign nationals who are owners or investors with equity participation reflected and reported with the Securities and Exchange Commission, and positions determined by the Technical Working Group to qualify for exemption. ⚠️ The key change: even within these categories, a certificate of exemption or exclusion must now be requested from DOLE.

Level two: companies exempt from the training programme. Employers outside the three categories — fiscal incentive grantees, priority or strategic investment areas, and public utilities — generally carry no obligation to submit a UTP or SDP.

Finally, a checklist you can work through directly:

1. Determine whether the company falls in the three categories. Fiscal incentives, priority or strategic investment area, public utility. This single answer determines all the work that follows;
2. Audit the roster against the organisational chart. Does each foreign employee have 2 next-in-rank Filipino regular employees below them? The UTP is won or lost here;
3. Build an expiry register for AEPs and visas, starting renewals 2 to 3 months ahead;
4. Write the filing deadlines into the process: within 15 calendar days of publication, and within 15 calendar days of contract execution. Both are hard;
5. Make the training plan survive alignment review: regular employees, correct rank, and content genuinely related to the expatriate role's skills;
6. File progress reports on cycle and keep the receipts;
7. Apply for exemption certificates even where exempt;
8. Re-check after every reorganisation — promotions, resignations and restructures can invalidate a previously sound training plan.

Yixing is based in Makati, Metro Manila, supporting foreign-invested companies and Chinese-speaking residents with visa and HR work across AEPs, 9G and 47(a)(2) filings and expatriate employment compliance, alongside company registration and setup. This article is general information and not legal advice; consult a Philippine lawyer on your own case. Fees, timelines and document lists are subject to current BI and DOLE issuances. The rules described here are based on DOLE Department Order No. 248 and its supplemental guidelines; this area changes frequently, so rely on the version current when you file.