Do you pay super or 13th-month pay for offshore staff?

Short answer: you generally don't pay Australian super for a team member who lives and works in the Philippines or Sri Lanka. You do budget for that country's own employer costs, such as 13th-month pay in the Philippines and EPF and ETF contributions in Sri Lanka. Who handles them depends on who employs the person.

Do you pay super for offshore staff?

Generally, no. The ATO's guidance for employers says you don't have to pay super for non-resident employees who work outside Australia. A Filipino or Sri Lankan team member who lives in their home country and works remotely for your business usually fits that description.

That changes if the person works in Australia, for example on a visit that turns into weeks of work here, or if they become an Australian resident. If either happens, check with your accountant before the next pay run.

What employers pay in the Philippines

Philippine employment law gives employees several entitlements on top of salary. The ones that affect your budget most are:

• 13th-month pay. Presidential Decree 851 requires employers to pay rank-and-file employees at least one-twelfth of their basic salary for the year, by 24 December. In practice it adds about one month's basic salary to the annual cost.

• Government contributions. Employers contribute to Social Security (SSS), PhilHealth and Pag-IBIG for each employee, alongside the employee's own share. Rates change from time to time, so use current figures when you budget.

• Paid public holidays. Regular holidays are paid. Agree in the offer which Philippine and Australian holidays your team member works.

What employers pay in Sri Lanka

Sri Lanka has no legal 13th-month payment, although many employers pay an annual bonus. The main statutory costs are:

• EPF. The employer contributes 12% of earnings to the Employees' Provident Fund, and the employee contributes 8%.

• ETF. The employer contributes a further 3% to the Employees' Trust Fund.

• Gratuity. Under the Payment of Gratuity Act, larger employers pay a gratuity, generally half a month's salary for each year of service, when someone leaves after five or more years.

Side by side

Who handles these costs?

That depends on who employs your team member. With Elephant Teams you choose one of three setups:

• You employ them. Your business is the employer, so you run payroll and meet local obligations yourself, usually with a local payroll provider or adviser. There is no monthly fee from us.

• We employ them (EOR). We are the Employer of Record, so we run payroll, contributions and 13th-month pay, and invoice you monthly for salary plus our $350 fee.

• We employ and manage. Part of Managed for You at $1,000 a month per team member. We employ them, handle payroll and compliance, and add onboarding and management support.

Our explainer on who employs your offshore hire compares the three setups in more detail, and what offshore staff cost each month shows how the monthly invoice works.

How to budget for an offshore hire

Work out the true annual cost before you compare offshore and local hiring:

1. Start with the monthly salary. Our salary guides for the Philippines and Sri Lanka give ranges by role.

2. Add the country's employer costs: about one extra month of basic salary for 13th-month pay in the Philippines, or 15% of earnings for EPF and ETF in Sri Lanka, plus government contributions.

3. Add our fee: $5,999 + GST once on Ready for You, then $0 or $350 a month, or $1,000 a month on Managed for You.

4. Add equipment and IT, whichever option you choose.

In a free 30-minute consultation we price a specific role for you, including these costs. Book a consultation or compare our plans.

This article is general information, not legal or tax advice. Employment rules and contribution rates change, so confirm the current position with your accountant or adviser before you hire.