BIR Form 2307 for Manpower and Staffing Agencies: Full Billing, Not Just the Agency Fee

A client that engages a manpower, staffing, or recruitment agency withholds 2% expanded withholding tax (EWT) on the agency’s entire gross billing — including the portion that funds deployed workers’ wages, benefits, and statutory contributions — not just the agency’s own service margin. This trips companies up because a closely related industry, private security agencies, gets a narrower carve-out under RMC No. 39-2007 that limits withholding to the agency fee alone. That carve-out does not extend to general manpower or staffing agencies, and applying it by analogy under-withholds tax.

This guide is part of the BIR Form 2307 series. It covers why a manpower agency’s full billing — not just its margin — is the withholding base, why security agencies are treated differently, the applicable ATC codes, and a worked staffing-invoice example.

Who withholds on a manpower or staffing agency payment? #

A company that engages a manpower, staffing, or job-contracting agency to deploy personnel — for warehouse labor, back-office support, encoding staff, or similar outsourced roles — is a withholding agent under the same general rule that applies to any other business-service supplier. RR No. 2-98 sets the withholding-agent test this way:

“(A) In general, any juridical person, whether or not engaged in trade or business; (B) An individual, with respect to payments made in connection with his trade or business…”

— RR No. 2-98, Section 2.57.3(A)–(B)

A corporation engaging a staffing agency to supply warehouse packers, or an individual business owner contracting a recruitment agency to fill office roles, is a withholding agent under clauses (A) or (B) respectively, and must withhold and issue BIR Form 2307 on its payments to the agency.

Why the full billing — not just the agency’s margin — gets withheld #

Unlike a private security agency, a general manpower or staffing agency does not get its withholding base narrowed to just its own service fee — the client withholds 2% on the entire gross amount billed, wages and all. This series covers the security-agency exception in detail in BIR Form 2307 for Security Agencies: Why EWT Applies Only to the Agency Fee, Not Guards’ Salaries — and that same guide is explicit that the narrower base does not carry over to other manpower suppliers:

“The BIR has consistently ruled that RMC No. 39-2007 applies only to security agencies, because the mandatory wage-earmarking obligation under RA 5487 is specific to private security agencies. Janitorial agencies and other manpower service providers remain primarily liable for their own workers’ wages, so the client withholds 2% EWT on the full gross payment to the agency under the general contractor rule in RR No. 11-2018 — not on an agency-fee-only base.”

— BIR Form 2307 for Security Agencies, on why the RMC No. 39-2007 carve-out does not extend to manpower agencies

The reason the two are treated differently traces back to who is legally on the hook for the workers’ pay. Republic Act No. 5487 makes the client, not the security agency, primarily liable for guards’ wages, which is why the agency must earmark and segregate that portion as a liability rather than income. No equivalent statute makes a staffing agency’s client primarily liable for a deployed clerk’s or packer’s wages — that remains the staffing agency’s own employer obligation and its own cost of doing business, which is why the full amount the agency bills for, wages included, counts as its gross income and stays inside the EWT base.

What ATC code applies? #

The same general contractor/business-services codes apply as they do throughout this series — the difference from a security agency is entirely in the base, not the code or the rate.

Worked example: a warehouse staffing invoice #

A logistics company engages Prime Workforce Solutions, Inc., a manpower agency, to deploy 15 warehouse packers for a month, billed at ₱450,000 covering the packers’ wages, 13th-month accrual, SSS/PhilHealth/Pag-IBIG employer share, and the agency’s own service margin, all in one invoice.

The logistics company withholds ₱9,000 — 2% of the entire ₱450,000 invoice, not just the agency’s own service margin — and remits it through BIR Form 0619-E monthly and BIR Form 1601-EQ quarterly, listing Prime Workforce Solutions on its Quarterly Alphalist of Payees. Had this instead been a security agency billing under RA 5487’s wage-earmarking rule, only the segregated agency-fee portion of an otherwise similar invoice would have entered the 2% computation — the contrast this worked example is meant to highlight.

Frequently asked questions #

Does a client withhold tax on a manpower agency’s entire billing or just its service fee? #

On the entire gross billing. A manpower, staffing, or recruitment agency’s invoice — including amounts that fund deployed workers’ wages, benefits, and government contributions — is withheld 2% expanded withholding tax in full under RR No. 2-98, Section 2.57.2(E), as amended by RR No. 11-2018. Unlike a security agency, a manpower agency does not get a carve-out limiting the withholding base to its own service margin.

Why do security agencies get a narrower withholding base but manpower agencies don’t? #

RMC No. 39-2007 limits withholding on a security agency’s billing to the agency fee alone because Republic Act No. 5487 makes the client primarily liable for guards’ wages and requires the agency to earmark that portion as a segregated liability, not its own income. No equivalent law imposes that earmarking duty on general manpower, staffing, or recruitment agencies, so their workers’ wages remain the agency’s own cost and stay inside the withholdable income payment.

What ATC code applies to a manpower or staffing agency payment? #

The same general contractor/business-services codes used across this series apply — ATC WI120 for an individually owned staffing agency or WC120 for one organized as a corporation — both at 2%, computed on the full gross billing rather than an agency-fee-only base.

Does it matter whether the agency calls itself a staffing, manpower, recruitment, or job-order agency? #

No. What matters is whether the agency is a private security agency licensed under RA 5487 — the only category with a documented statutory basis for the narrower withholding base. A staffing, manpower, recruitment, or job-contracting agency supplying non-security personnel is withheld on its full billing regardless of what label it uses for itself.

Is a placement or recruitment fee for a one-time direct hire treated the same way? #

Yes. A one-time placement or headhunting fee a company pays a recruitment agency for successfully placing a direct-hire employee is also a service payment to a business, and falls under the same 2% general contractor/business-services bracket, using ATC WI120 or WC120 depending on whether the agency is an individual or a corporation.

Summary #

A manpower, staffing, or recruitment agency is withheld 2% expanded withholding tax on its full gross billing — wages, statutory contributions, and its own margin combined — under RR No. 2-98, Section 2.57.2(E), using ATC WI120 or WC120. The narrower agency-fee-only base that applies to private security agencies under RMC No. 39-2007 rests on RA 5487’s wage-earmarking duty, a statutory obligation that does not extend to general manpower or staffing agencies, so treating them the same way under-withholds tax. See BIR Form 2307 for Security Agencies: Why EWT Applies Only to the Agency Fee, Not Guards’ Salaries for the full contrast, and BIR Form 2307 for Contractors and Subcontractors for the general 2% bracket this rate draws from.