BIR Registration Requirements When You Hire Your First Employee
Hiring your first employee turns you into a BIR withholding agent on compensation, which is a separate registration obligation from simply operating a business — you must update your registration to add withholding tax as a tax type, secure the new employee’s TIN, and begin the recurring monthly and annual withholding filing cycle. This applies whether you’re a sole proprietor already registered for income tax and VAT/percentage tax, a professional taking on an assistant, or a newly incorporated company signing its very first payroll employee.
Set Up Your Withholding Filings FREE →Why hiring an employee is a distinct BIR obligation #
The requirement to withhold tax on an employee’s wages doesn’t come from your existing business registration — it comes from a separate provision of the National Internal Revenue Code (NIRC) that applies the moment you start paying compensation to anyone under an employer-employee relationship. Section 79(A) states the rule directly:
“Every employer making payment of wages shall deduct and withhold upon such wages a tax determined in accordance with the rules and regulations to be prescribed by the Secretary of Finance, upon recommendation of the Commissioner.”
This is why a business that has been registered and filing income tax and VAT returns for years still needs to take an extra registration step the moment it hires its first employee — being a registered taxpayer and being a registered withholding agent on compensation are not the same thing, and the BIR’s system needs to know you’re now the latter.
The registration steps, in order #
Four separate actions make up first-time employer registration, and each one has a different form and a different deadline — missing one doesn’t stop the others from applying.
| Step | Form | Deadline / timing |
|---|---|---|
| 1. Update your own registration to add “withholding tax — compensation” as an active tax type | BIR Form 1905 (existing registrants) or included at initial registration | Before the first payroll run |
| 2. Register the new employee’s TIN, if they don’t already have one | BIR Form 1902 | Within 10 days of the start of employment |
| 3. Remit tax withheld from monthly payroll | BIR Form 1601-C | Generally the 10th day of the following month for non-eFPS filers, staggered for eFPS filers |
| 4. Report and reconcile the full year’s withholding per employee | BIR Form 1604-C, with the Alphalist of Employees, and BIR Form 2316 issued to each employee | On or before January 31 of the following year |
Employers may handle the new employee’s TIN application themselves, submitting BIR Form 1902 to the employee’s RDO — see BIR Form 1902: How a First-Time Employee Gets a TIN in the Philippines for that process in detail. If the employee already holds a TIN from a prior job or a one-time transaction, step 2 changes to confirming and recording that existing TIN rather than applying for a new one — issuing a second TIN would create the problem described in Do You Have Multiple BIR TINs?.
Computing and remitting the actual withholding #
Once registered, the employer must apply the BIR’s compensation withholding tax table to each payroll run and remit the total monthly through BIR Form 1601-C — this is where most of the recurring compliance work sits. See How to Compute Withholding Tax on Compensation Using the BIR Withholding Tax Table for the actual computation mechanics, and BIR Form 1601-C vs 1604-C: What’s the Difference and Do You Need to File Both? for why both the monthly remittance return and the annual information return are required — they aren’t alternatives to each other. Employers should also confirm early on whether the new employee qualifies as a Minimum Wage Earner, since Section 79(A) explicitly exempts an MWE’s basic wage from withholding.
Worked example: a sole proprietor’s first hire #
A freelance graphic designer registered as a self-employed professional decides to hire her first employee — a part-time production assistant — at ₱25,000 a month. Before the assistant’s first payday, she files BIR Form 1905 at her RDO to add “withholding tax on compensation” to her registered tax types. She confirms the assistant has never held a TIN before and processes BIR Form 1902 on his behalf, which the RDO issues within the required timeframe. Applying the BIR withholding tax table to the assistant’s ₱25,000 monthly pay, she computes and withholds the applicable amount, remitting it the following month via BIR Form 1601-C. At year-end, she consolidates the full year’s withholding on BIR Form 1604-C with the Alphalist of Employees, and issues the assistant his BIR Form 2316 by January 31 — his single employer for the year, which means his own filing is likely covered by substituted filing.
Summary #
Hiring your first employee requires registering as a withholding agent on compensation (BIR Form 1905), securing the employee’s TIN if they don’t already have one (BIR Form 1902, within 10 days), computing and remitting withholding monthly (BIR Form 1601-C), and reconciling annually (BIR Form 1604-C and BIR Form 2316). These obligations attach under NIRC Section 79 regardless of your existing registration as a taxpayer — being registered for income tax or VAT doesn’t automatically cover withholding on wages once you become an employer.