Are Employee Referral Bonuses Taxable? Why They're Compensation Income (BIR Form 2316), Not a BIR Form 2307 Payment

No, an employee referral bonus paid by a company to its own employee is not a BIR Form 2307 payment — it’s taxable compensation income. Because the payee already has an employer-employee relationship with the company paying the bonus, the payment gets added to the employee’s regular pay, subjected to ordinary withholding tax on compensation, and reported on BIR Form 2316 at year-end. This is different from a fee paid to an external, non-employee referrer, which does go through expanded withholding tax and BIR Form 2307. Confusing the two leads employers to either issue a certificate that doesn’t apply or, worse, skip withholding on pay that should have been withheld all along.

Why is an employee referral bonus compensation, not a 2307 payment? #

An employee referral bonus is compensation income because the recipient is already an employee of the company paying it — the payment flows through the same employer-employee relationship as their regular salary, not through a separate service-provider arrangement. The National Internal Revenue Code (NIRC) defines gross income broadly enough to capture any payment made on account of employment, whatever form it takes and whatever it’s called:

“Except when otherwise provided in this Title, gross income means all income derived from whatever source, including (but not limited to) the following items: (1) Compensation for services in whatever form paid, including, but not limited to fees, salaries, wages, commissions, and similar items…”

— Section 32(A) of the National Internal Revenue Code (NIRC), as amended.

RR No. 2-98, Section 2.78.1 implements this for withholding purposes, defining compensation subject to withholding tax on compensation as generally covering all remuneration for services performed by an employee for an employer, regardless of the label attached to a given payment. A “referral bonus,” a “spot bonus,” a “performance bonus,” and a base salary are all compensation for the same reason: each is paid because of, and in connection with, the employee’s employment.

This matters because BIR Form 2307 exists for a different category entirely — creditable withholding tax on payments to non-employees for services rendered outside an employer-employee relationship, under RR No. 11-2018. An internal referral bonus never enters that category, because the person being paid is already on the company’s own payroll. There is no separate service contract to withhold against and no BIR Form 2307 to issue — the bonus is simply one more line item in that employee’s compensation for the payroll period it’s paid.

How does this compare to an external referral or finder’s fee? #

The dividing line is the employment relationship, not the size of the payment or how the company labels it. When the referrer is not an employee of the company doing the hiring or paying the fee — a freelance recruiter, a former employee, or an ordinary individual who happens to know a good candidate or a paying client — the payment is compensation for a service rendered outside any employment relationship with the payor. That kind of payment is generally subject to expanded withholding tax and documented on BIR Form 2307, as covered in detail in Referral and Finder’s Fees Paid to Individuals: Withholding Tax and BIR Form 2307.

The two situations can look identical on the surface — both are “a bonus for bringing in a hire” — but the payor-payee relationship, not the purpose of the payment, decides which withholding regime applies. A company that mechanically issues BIR Form 2307 to its own employee for an internal referral bonus has misclassified the payment; the correct treatment is to run it through payroll like any other compensation item.

Why doesn’t a referral bonus qualify as a tax-free de minimis benefit? #

An employee referral bonus is not on the BIR’s de minimis benefits list, so none of it is exempt — unlike 13th-month pay and other bonuses, which at least share a ₱90,000 annual exemption ceiling. The de minimis benefits list under RR No. 5-2011, as amended by RR No. 11-2018, is a closed, specific enumeration of small-value perks — rice subsidy, uniform and clothing allowance, medical cash allowance to dependents, laundry allowance, employee achievement awards, and the other named categories. See De Minimis Benefits in the Philippines: BIR Tax-Free Limits for 2026 for the full current list and ceilings.

A referral bonus doesn’t fit any item on that enumeration — it isn’t a rice subsidy, a uniform allowance, or an achievement award for length of service or safety, and the list does not include a general “any small bonus” catch-all. Because it falls outside the de minimis list entirely, it also isn’t eligible for the separate ₱90,000 combined exemption that covers 13th-month pay and “other benefits” under NIRC Section 32(B)(7)(e) in the way a Christmas bonus or a performance bonus would be — those bonuses are what feed into that ₱90,000 bucket. A referral bonus, being ordinary supplementary compensation rather than a 13th-month-pay-type “other benefit,” is taxed from the first peso, without a ceiling of its own to shelter it.

Worked example: a ₱15,000 referral bonus on top of regular salary #

An employee earning a ₱35,000 monthly salary also earns a ₱15,000 referral bonus in the same month for referring a candidate who got hired. The employer adds the ₱15,000 to that month’s compensation, subjecting the combined ₱50,000 to the BIR withholding tax table for that pay period — no separate BIR Form 2307 is issued.

Maria works as a regular rank-and-file employee earning a monthly salary of ₱35,000. In March, a candidate she referred completes onboarding, triggering her company’s internal referral incentive of ₱15,000. Her employer does not treat this as a separate payment outside payroll:

The full ₱50,000 is run through the BIR’s graduated withholding tax table for that payroll period, the same table used for her ordinary salary — the exact peso amount withheld depends on other factors specific to Maria’s payroll record, such as any exemptions already applied for the year, so it isn’t a fixed figure that can be quoted in isolation. What matters mechanically is this: the referral bonus is combined into regular taxable compensation for that pay period, no separate certificate is generated for it, and at year-end it appears folded into Maria’s total compensation on her BIR Form 2316, exactly like her salary and any other bonus she received during the year. If her employer instead files monthly withholding remittances on BIR Form 1601-C, the bonus is likewise already embedded in that month’s reported compensation, not broken out as a separate line.

Frequently asked questions #

Is an employee referral bonus taxable? #

Yes. When a company pays its own employee a bonus for referring a candidate who gets hired, that bonus is taxable compensation income under NIRC Section 32(A), added to the employee’s regular pay for withholding tax on compensation purposes. It is not exempt and has no special ceiling of its own.

Does an employee referral bonus get reported on BIR Form 2307? #

No. BIR Form 2307 documents expanded withholding tax on payments to non-employees for services rendered outside an employer-employee relationship. A referral bonus paid to the company’s own employee is compensation, not a payment subject to expanded withholding tax, so it is reported on BIR Form 2316 at year-end instead.

Is an employee referral bonus a de minimis benefit? #

No. The de minimis benefits list under RR No. 5-2011, as amended by RR No. 11-2018, is a closed, specific enumeration — rice subsidy, uniform and clothing allowance, medical cash allowance, laundry allowance, and similar named items. An employee referral bonus is not on that list, so it is fully taxable compensation with no exempt portion.

How is an employee referral bonus different from an external referral or finder’s fee? #

An external, non-employee referrer or finder is not part of the payor’s own workforce, so a fee paid for their introduction is a payment for services outside an employment relationship — subject to expanded withholding tax and BIR Form 2307. An employee referral bonus is paid to someone already on the company’s own payroll, so it is simply added to that employee’s compensation instead.

Summary #

An employee referral bonus paid by a company to its own employee is taxable compensation income under NIRC Section 32(A) and RR No. 2-98, Section 2.78.1 — added to the employee’s regular pay, subjected to withholding tax on compensation using the BIR withholding tax table, and reported on BIR Form 2316 at year-end rather than on a separate BIR Form 2307 certificate. This is the opposite treatment from a fee paid to an external, non-employee referrer, covered in Referral and Finder’s Fees Paid to Individuals: Withholding Tax and BIR Form 2307. Because the bonus doesn’t appear on the closed de minimis benefits list detailed in De Minimis Benefits in the Philippines: BIR Tax-Free Limits for 2026, it carries no exempt ceiling — the full amount is taxable from the first peso, folded into regular compensation the same month it’s earned.