Recruitment Agency BIR Form 2307: Withholding on a Headhunter's Placement Fee

A hiring company that pays a recruitment or headhunting agency a one-time placement fee for successfully filling a direct-hire role generally withholds 2% expanded withholding tax (EWT) on the full fee, under the labor recruiting agency category of contractor payments in Revenue Regulations (RR) No. 11-2018 — not the 5%–15% professional-fee bracket that applies to consultants and licensed professionals. The company then issues BIR Form 2307 to the recruiter as proof of the amount withheld.

This guide is part of the BIR Form 2307 series. It covers why a one-time placement or search fee is a different transaction from an ongoing staffing agency’s billing, which withholding bracket actually applies and when the professional-fee rate can apply instead, the ATC codes, and a worked example computing tax on a percentage-of-salary placement fee.

Why a placement fee is a different transaction from a staffing agency’s billing #

A recruitment or headhunting agency’s placement fee is a one-time success fee for filling a direct-hire position, not a recurring bill that funds an ongoing worker’s wages — a distinction that matters even though both end up taxed at the same 2% rate. Once the hired candidate signs on, they become the hiring company’s own employee on the company’s own payroll; the recruiter has no further payroll role and no wage pass-through in its invoice.

This site’s companion guide, BIR Form 2307 for Manpower and Staffing Agencies, covers a different scenario: a staffing or manpower agency that continues to bill a client every month for deployed personnel, where the invoice bundles the workers’ wages, statutory contributions, and the agency’s own margin into one gross amount. A headhunting placement fee has no such wage component to bundle — it is priced entirely as compensation for the search-and-placement service itself, commonly a percentage of the candidate’s agreed annual salary. The two scenarios reach the same 2% EWT conclusion for different reasons: a staffing agency’s full billing is withheld in full because no carve-out narrows its base, while a placement fee is withheld in full because the entire fee already represents nothing but the recruiter’s own service income.

Which withholding rate applies: 2% contractor or 5%–15% professional fee? #

A recruitment or headhunting agency’s placement fee is classified as a payment to a labor recruiting agency — a category RR No. 11-2018 lists among covered contractors subject to a flat 2% EWT — rather than as a professional fee, because the payee is a recruitment/placement business rather than an individual practicing a licensed profession. The narrower exception is a payment to an individual freelance headhunter who bills personally as a consultant rather than through a registered agency; that payment can instead fall under the tiered professional-fee bracket.

In practice, most placement and executive-search engagements are billed through a registered recruitment or search firm rather than an unincorporated individual, so the 2% labor recruiting agency bracket is the default answer for a typical recruitment-agency invoice. Confirm which situation applies by checking whether the payee holds itself out and invoices as a recruitment/placement business, not by how the fee happens to be calculated — see the next section for why the pricing formula itself doesn’t change the classification.

Does the percentage-of-salary pricing change anything? #

No — a placement fee priced as a percentage of the candidate’s annual salary is withheld exactly the same way as a flat-fee or milestone-based placement fee, because withholding classification depends on what service was paid for and who the payee is, not on how the price was calculated. Recruitment and executive-search firms commonly quote fees as a percentage of a placed candidate’s first-year annual compensation rather than a flat peso amount, but that pricing convention has no bearing on the applicable ATC or rate.

Whether an agency bills ₱200,000 flat for filling a staff-level role or 20% of a director-level candidate’s ₱3,000,000 annual salary, the full amount billed is the withholding base once the payee is classified as a labor recruiting agency. The percentage-of-salary structure only affects how the peso amount is arrived at before withholding is applied — see the worked example below.

Which ATC code applies? #

A recruitment or headhunting agency’s placement fee uses the same general contractor ATC codes applied elsewhere in this series to labor recruiting agencies — WI120 for an individually owned agency and WC120 for a corporation — both at 2%, computed on the full placement fee.

For the full contractor coverage list this bracket draws from, see BIR Form 2307 for Contractors and Subcontractors; for the professional-fee thresholds and sworn declaration requirement behind the narrower individual-consultant exception, see BIR Form 2307 for Professional Fees.

Worked example: an executive-search placement fee #

A manufacturing company engages an executive-search firm to fill a VP of Operations role and pays a placement fee equal to 20% of the placed candidate’s agreed annual salary — the fee is withheld at 2% on the full amount, not on any narrower base.

Solaris Manufacturing Corp. engages Apex Executive Search, Inc., a corporation, to fill a VP of Operations vacancy. Apex successfully places a candidate at an agreed annual base salary of ₱2,400,000, and its engagement letter sets the placement fee at 20% of that annual salary, payable once the candidate completes their probationary period. Because Apex is a corporation performing labor recruiting agency work, ATC WC120 at 2% applies to the full fee:

Solaris withholds ₱9,600 — 2% of the entire ₱480,000 placement fee, none of which funds any wage, since the new VP becomes Solaris’s own employee on Solaris’s own payroll from day one. Solaris remits the amount withheld through BIR Form 0619-E monthly and BIR Form 1601-EQ quarterly, reports the payment on its Quarterly Alphalist of Payees (see How to Convert Excel to BIR DAT File for QAP for how that alphalist is prepared), and issues BIR Form 2307 to Apex showing ₱480,000 as the income payment, ATC WC120, and ₱9,600 as tax withheld. Apex then credits the ₱9,600 against its own income tax due when filing its quarterly and annual returns.

Had Solaris instead engaged an unregistered individual headhunter billing personally rather than through a search firm — and that individual had a sworn declaration on file confirming non-VAT status and gross income under ₱3,000,000 — the same ₱480,000 fee would instead be withheld at 5% under ATC WI010 (₱24,000), because the payee in that scenario is an individual consultant rather than a recruitment agency.

What goes on the BIR Form 2307 issued to the recruiter #

The certificate Solaris issues to Apex follows the same fields used across this series — payor and payee TINs and registered names and addresses, the income payment amount, the ATC code, the tax rate, and the tax withheld, covering the period in which the placement fee was paid or accrued. See What Is BIR Form 2307 and When Must You Issue It? for the field-by-field preparation steps and issuance deadlines that apply to any payment type, including a placement fee.

Frequently asked questions #

What withholding tax rate applies to a recruitment agency’s placement fee? #

A hiring company generally withholds 2% expanded withholding tax on a recruitment or headhunting agency’s placement fee, using ATC WI120 for an individually owned agency or WC120 for one organized as a corporation. This follows the labor recruiting agency category listed among covered contractors under Revenue Regulations No. 11-2018, which amended RR No. 2-98 — the fee is treated as a contractor/business-service payment, not a professional fee, regardless of how it is calculated.

Is a headhunting placement fee withheld the same way as a manpower agency’s staffing billing? #

The rate is the same 2%, but the base is different in character. A manpower or staffing agency’s billing includes deployed workers’ ongoing wages passed through in the invoice, while a headhunting or placement fee is a one-time success fee for filling a direct-hire role and does not fund any wages at all — the recruiter is not the new hire’s employer. Both still fall under the same 2% labor recruiting agency and general contractor bracket in RR No. 11-2018, computed on the full fee billed.

Does a recruitment agency’s placement fee ever qualify for the 5%/10% professional fee rate instead? #

It can, but only when the payee is an individual acting as a personal consultant rather than a registered recruitment or placement business — for example, an unincorporated freelance headhunter billing under their own name rather than through an agency. In that narrower case, the payment may fall under the professional/consultancy fee bracket (5% or 10% for an individual, depending on a sworn declaration and the ₱3,000,000 gross income threshold) under RR No. 11-2018, the same framework applied to consultants generally. A licensed or registered recruitment agency’s placement fee stays in the 2% labor recruiting agency bracket regardless of how the fee is priced.

Is the withholding base the full placement fee or just the agency’s margin? #

The full placement fee. Unlike the narrower agency-fee-only carve-out that applies specifically to private security agencies under RMC No. 39-2007, a recruitment or headhunting agency has no equivalent statutory basis for excluding any portion of its fee from the withholding base. The entire amount billed for the placement — commonly a percentage of the candidate’s first-year annual salary — is subject to 2% EWT.

Does it matter that the placement fee is calculated as a percentage of the candidate’s salary? #

No. The withholding classification turns on what service was paid for and who the payee is — a labor recruiting or placement agency — not on the fee’s pricing formula. Whether a headhunting firm charges a flat retainer, a percentage of the candidate’s annual salary, or a milestone-based success fee, the full amount billed is subject to the same 2% expanded withholding tax under RR No. 11-2018 once the payee is classified as a recruitment/placement agency.

Summary #

A recruitment or headhunting agency’s one-time placement fee — however it is priced, including as a percentage of the placed candidate’s annual salary — is generally withheld 2% expanded withholding tax under RR No. 11-2018’s labor recruiting agency contractor bracket, using ATC WI120 or WC120 on the full fee. This differs from an ongoing manpower or staffing agency’s billing only in what the fee represents, not in the rate: see BIR Form 2307 for Manpower and Staffing Agencies for that comparison. The narrower 5%/10% professional-fee bracket applies only when the payee is an individual consultant billing personally rather than through a registered recruitment agency — see BIR Form 2307 for Professional Fees for that framework, and BIR Form 2307 for Contractors and Subcontractors for the general 2% bracket this rate draws from.