Is Holiday Pay Taxable? BIR Withholding Rules for Regular and Special Non-Working Holidays

For a rank-and-file employee who earns above the statutory minimum wage, holiday pay is ordinary taxable compensation income — it is withheld, reported, and taxed exactly like regular salary, with no special BIR exemption. The one exception is a Minimum Wage Earner (MWE), whose holiday pay stays exempt from income tax under Republic Act (RA) No. 9504 for as long as that employee remains an MWE. Confusing the two is a common payroll mistake, since both employees may receive a line labeled “holiday pay” on the same payslip template.

What is “holiday pay” under Philippine labor law? #

Holiday pay is a Labor Code entitlement, not a BIR concept — it’s the premium wage an employee receives for a regular holiday or special non-working holiday, whether or not the employee actually works that day. Under Article 94 of the Labor Code of the Philippines (“Right to Holiday Pay,” renumbered in some compilations following DOLE’s 2015 renumbering advisory), a covered employee who meets the attendance condition (present or on paid leave on the workday immediately before the holiday) receives 100% of the daily wage for an unworked regular holiday, and 200% of the daily wage if required to work that day. A special non-working holiday works differently: the default rule is “no work, no pay” unless a more generous company policy or collective bargaining agreement (CBA) applies, but an employee who does work receives an additional 30% of the daily rate (130% total), rising to 150% total if the special day also falls on that employee’s scheduled rest day.

The BIR has no role in setting these rates — that’s Labor Code and Department of Labor and Employment (DOLE) territory. BIR’s role starts once the peso amount of holiday pay is determined and has to be run through payroll withholding.

Is holiday pay taxable for a regular employee? #

Yes — for an employee who is not a Minimum Wage Earner, holiday pay (unworked or worked, regular or special) is treated as ordinary taxable compensation income, added to the rest of that period’s pay and subjected to withholding tax on compensation under BIR Form 1601-C. There is no BIR revenue regulation that carves out holiday pay from compensation income for a regular employee the way the law does for a Minimum Wage Earner. A supervisor, a managerial employee, or a rank-and-file employee earning above the regional statutory minimum wage all pay withholding tax on their holiday pay the same way they pay it on an ordinary workday’s wage — it simply adds to gross taxable compensation for that payroll period and is run through the BIR withholding tax table like any other pay component.

The one exception: Minimum Wage Earners under RA No. 9504 #

A Minimum Wage Earner’s holiday pay is exempt from income tax — not because BIR treats holiday pay specially, but because Republic Act No. 9504 (2008) extended the existing minimum-wage income tax exemption under NIRC Section 24(A) to also cover an MWE’s holiday pay, overtime pay, night shift differential, and hazard pay. This is the same statutory basis the site’s existing coverage of MWE overtime and holiday pay exemption relies on. The commonly quoted language of that amendment reads:

“…the holiday pay, overtime pay, night shift differential pay and hazard pay received by such minimum wage earners shall likewise be exempt from income tax.”

Two things make this exception narrow rather than general:

1. It only applies to employees who actually qualify as MWEs — those paid the statutory minimum wage set by the Regional Tripartite Wages and Productivity Board for their region and sector. An employee earning even slightly above that rate does not qualify, no matter how small the difference.
2. MWE status is an all-or-nothing, full-period test. The moment an employee’s basic pay rises above the statutory minimum wage, holiday pay earned from that point forward becomes taxable like anyone else’s — see Minimum Wage Earners and Mid-Year Status Changes on BIR Form 2316 for how that transition is handled on the certificate.

Worked example: same holiday, two different tax outcomes #

Two employees of the same company work the same regular holiday. One is a rank-and-file employee earning above minimum wage; the other is a Minimum Wage Earner. Figures are fictional, for illustration only.

Employee A’s ₱1,800 is simply added to whatever else was earned that payroll period and taxed the same way the rest of the pay is taxed. Employee B’s ₱1,290 never enters the withholding computation at all — it’s reported on BIR Form 2316 as exempt compensation, not taxable compensation.

How this shows up on BIR Form 1601-C and BIR Form 2316 #

A non-MWE’s holiday pay is simply part of gross taxable compensation on both the monthly BIR Form 1601-C remittance and the year-end BIR Form 2316 — it doesn’t get a separate line or special treatment. An MWE’s exempt holiday pay, by contrast, is reported as part of exempt compensation on BIR Form 2316, consistent with how Minimum Wage Earners and BIR Form 2316 describes the certificate separating exempt MWE pay from any taxable extras such as commissions. Getting this distinction wrong in either direction — withholding on an MWE’s exempt holiday pay, or failing to withhold on a non-MWE’s taxable holiday pay — creates a reconciliation problem that surfaces at year-end 2316 filing.

Frequently asked questions #

Is holiday pay taxable in the Philippines? #

Yes, for a regular employee who is not a Minimum Wage Earner, holiday pay is ordinary taxable compensation income, fully subject to withholding tax on compensation just like regular salary. The only exception is a Minimum Wage Earner (MWE), whose holiday pay is exempt from income tax under NIRC Section 24(A), as amended by Republic Act No. 9504.

What is the difference between holiday pay on a regular holiday and on a special non-working holiday? #

On a regular holiday, an employee who qualifies receives 100% of the daily wage even without working, and 200% of the daily wage if required to work, under Article 94 of the Labor Code. On a special non-working holiday, the general rule is “no work, no pay” unless a favorable company policy or CBA applies, but an employee who does work is entitled to an additional 30% of the daily rate (130% total), or 50% more (150% total) if that day also falls on the employee’s rest day, under DOLE’s holiday pay guidelines.

Does the BIR give a special exemption for holiday pay the way it does for the minimum wage? #

No separate exemption exists for holiday pay as such. The exemption only reaches holiday pay because RA No. 9504 extended the Minimum Wage Earner exemption on the statutory minimum wage to also cover an MWE’s holiday pay, overtime pay, night shift differential, and hazard pay. An employee who isn’t an MWE gets no exemption on holiday pay at all.

How is holiday pay reported on BIR Form 2316? #

For a non-MWE employee, holiday pay is folded into total taxable compensation for the period and appears within the taxable compensation figures on BIR Form 2316, with tax withheld through BIR Form 1601-C like any other salary component. For a qualifying MWE, holiday pay is reported as exempt compensation, separate from any taxable extras such as commissions.

What happens if an employee stops being a Minimum Wage Earner partway through the year? #

Holiday pay earned while the employee still qualified as an MWE stays exempt for that period, but holiday pay earned after the employee’s basic pay rises above the statutory minimum wage becomes taxable compensation from that point forward, the same as for any other non-MWE employee. See Minimum Wage Earners and Mid-Year Status Changes for how this plays out on BIR Form 2316.

Summary #

Holiday pay is a Labor Code entitlement — 100%/200% of the daily wage for a regular holiday under Article 94, and a different, smaller premium for a special non-working holiday — but its BIR tax treatment comes down to one question: is the employee a Minimum Wage Earner? If not, holiday pay is taxed exactly like regular salary, withheld through BIR Form 1601-C and reported as taxable compensation on BIR Form 2316. If the employee is a qualifying MWE, holiday pay rides along with the exemption RA No. 9504 gives the statutory minimum wage — but only for as long as MWE status holds. See MWE Overtime and Holiday Pay Exemption Under RA No. 9504 for the fuller MWE-side rules this post builds on.