5 Red Flags in Your Employment Contract You Should Never Ignore
These contract clauses could cost you money, rights, or your job. Learn what to watch for before signing.
Not all employment contracts are created equal. Some contain clauses that seem standard but could seriously harm you. Here are five red flags that should make you pause before signing — and what to do about each one.
1. Salary below minimum wage
This might seem obvious, but it's more common than you'd think — especially when salary is stated monthly rather than daily. To check: divide your monthly salary by 26 (the standard working days per month) and compare against your region's minimum wage. If it's below, that's not just a red flag — it's illegal. No contract clause can waive your right to minimum wage.
2. Probation period exceeding 6 months
Under Article 296 of the Labor Code, probationary employment cannot exceed 6 months. Some employers try "extended probation" or "training periods" that push this to 8-12 months. This is a violation. After 6 months of continuous service, you should be regularized. Watch for creative language like "evaluation period" or "apprenticeship" that disguises extended probation.
3. Vague or excessive deductions
Your contract should clearly list all deductions from your salary. Legal deductions include SSS, PhilHealth, Pag-IBIG, and withholding tax. But watch for deductions for "training fees," "uniform deposits," "equipment charges," or "damage penalties." Under the Labor Code, employers generally cannot deduct from wages for losses or damages unless the employee is clearly shown to be responsible through due process.
4. No mention of overtime pay
If your job involves any possibility of working beyond 8 hours, your contract should specify overtime rates. The legal minimum is 25% premium for regular overtime and 30% for rest day/holiday overtime. Contracts that say "salary is inclusive of overtime" or "overtime is compensated through compensatory time off" may be skirting the law. Check that your base salary, even with "built-in overtime," still meets minimum wage for regular hours.
5. Unreasonable non-compete or bond clauses
Non-compete clauses that prevent you from working in your entire industry for years are potentially unenforceable, but they can still be used to intimidate you. Training bonds that require you to repay tens of thousands of pesos if you resign within 1-3 years are increasingly common in BPO and tech. While training bonds can be legal, they must be reasonable and proportional to actual training costs. A PHP 200,000 bond for a 2-week orientation is not reasonable.
What to do if you spot a red flag
Don't panic — and don't sign immediately. Ask the employer to explain or modify the clause. Get a second opinion from a labor lawyer or DOLE. Document everything in writing. If the employer refuses to change clearly unfavorable terms, consider whether this is really where you want to work. You can also upload your contract to PlainDoc for a free analysis that flags these issues automatically.