1. Overview and governing framework

In the Philippines, compensation income earned by an employee is generally subject to withholding tax on compensation. The withholding system is designed so that the employer acts as the government’s collecting agent, deducting tax from salaries and remitting it to the Bureau of Internal Revenue (BIR).

Where an employee has multiple employers (whether simultaneously or successively within the same taxable year), withholding becomes more complex because:

each employer typically computes withholding based only on what it pays; and
the employee’s annual income tax is determined on the employee’s total taxable compensation for the year.

As a result, employees with multiple employers frequently face under-withholding (resulting in a year-end tax payable) or over-withholding (resulting in a potential refund, but typically only through employer adjustment or BIR claim mechanisms).

This article discusses the practical and legal implications in Philippine practice, including the distinction between concurrent and successive employers, the effect on substituted filing, year-end annualization, and common compliance pitfalls.

2. Core concepts you must understand

2.1. Compensation income vs. other income

This topic focuses on compensation income—wages, salaries, allowances and similar pay that constitute employer–employee compensation. If the individual also earns business/professional income, different rules apply (and substituted filing is usually off the table).

2.2. Withholding tax on compensation is not the final tax—unless conditions are met

Withholding on compensation is generally creditable against the employee’s final annual income tax. It becomes effectively “final” only in the practical sense if the employee qualifies for substituted filing (discussed below), meaning the employer’s year-end withholding equals the employee’s income tax due and the employee no longer needs to file an annual ITR.

2.3. Why multiple employers matter

Withholding is computed using the BIR-prescribed withholding table/method based on the employee’s compensation from that employer. When there are multiple employers, no single employer (by default) sees the full compensation base—so withholding may not match the tax due on the combined total.

3. Types of “multiple employers” scenarios

3.1. Successive employers (one after another in the same year)

Example: Employee resigns in April and starts a new job in May.

Key issue: The new employer must compute year-end tax considering current employer compensation plus prior employer compensation for proper annualization—if the employee provides documentation (typically the prior employer’s certificate of compensation and tax withheld).

3.2. Concurrent employers (two or more at the same time)

Example: Employee is employed full-time by Company A and part-time by Company B, both treating the person as an employee for compensation tax purposes.

Key issue: Each employer withholds independently. Unless one employer is designated/able to annualize the entire year’s combined compensation (which is not the default withholding design), combined withholding may not equal the final tax due. This scenario almost always pushes the employee into mandatory personal filing of an annual ITR.

3.3. Special but common variations

Two employers due to payroll outsourcing/secondment: The legal employer and paying entity might differ; facts matter, but withholding generally follows the entity paying compensation as employer/withholding agent.
Employment plus corporate directorship or consultancy: Director’s fees and professional fees may be treated differently depending on classification; mixing types of income affects filing obligations.
Government + private employment: Similar principles apply; substituted filing is typically affected by multiple employers.

4. The “substituted filing” rule—and why multiple employers usually disqualify it

4.1. What substituted filing means in practice

Substituted filing is an administrative arrangement where the employer files the required annual information return and issues the employee a certificate of tax withheld, and the employee is no longer required to file an annual income tax return, provided conditions are met.

4.2. Effect of having multiple employers

As a rule of thumb in practice, an employee with two or more employers during the taxable year is generally not qualified for substituted filing, because the annual tax computation must reflect total compensation from all employers and withholding is fragmented.

For successive employment, if the final employer properly annualizes using prior employer compensation details, the employee may still end up properly taxed by year-end. However, qualification for substituted filing is still commonly treated as unavailable once there are two employers in the year, even if successive, because the statutory/administrative conditions usually contemplate a single employer for the year and/or proper consolidation through annualization under the final employer’s payroll. In practice, many employers and payroll systems treat “multiple employers within the year” as an automatic trigger for the employee to file.
For concurrent employment, substituted filing is practically not workable unless one employer can and does annualize the entire combined compensation and the other employer’s income is properly consolidated—something employers generally cannot do reliably without full and timely disclosure and payroll coordination.

4.3. Practical consequence

Employees with multiple employers should assume they will need to file an annual ITR (typically BIR Form 1700 if purely compensation, subject to applicable rules/forms in force), unless they are specifically confirmed to qualify for substituted filing under the prevailing BIR rules and their year-end tax was correctly annualized.

5. Annualization: the critical mechanism for successive employers

5.1. What is annualization?

Annualization is the year-end process where compensation tax is recalculated based on the employee’s total taxable compensation for the year (or at least for the period relevant to the employer), then compared with tax withheld to date; any difference is withheld in the final pay period (or refunded/adjusted through payroll rules).

5.2. Annualization with a prior employer

In a successive employer scenario, the current employer can only annualize correctly if it receives accurate data about:

prior compensation, and
prior tax withheld.

This information is usually supported by the certificate of compensation and tax withheld (commonly referred to in practice as the BIR certificate issued by the employer at year-end or upon separation).

5.3. What happens if the employee does not provide prior employer data?

If prior compensation is not consolidated:

the current employer’s year-end annualization will be based only on current compensation, and
the employee may end the year under-withheld (owing tax upon filing).

5.4. Final pay, backpay, and separation benefits

Final pay often includes:

unpaid salary,
prorated 13th month pay and other bonuses,
leave conversions, and
possibly separation pay.

Tax treatment depends on whether the amounts are taxable compensation or exempt under specific rules (e.g., qualified separation benefits, de minimis, etc.). Misclassification here is a major source of withholding errors.

6. Concurrent employers: why under-withholding is common

6.1. Independent withholding computations

Each employer withholds based on its own payroll, applying the withholding schedule as if it is the only compensation source. But the employee’s tax bracket is determined by total taxable compensation.

6.2. The progressive tax effect

Because Philippine income tax is graduated, combining two salaries can push the employee into a higher bracket. If each employer withholds as though the employee only earns from them, overall withholding can fall short of the correct combined tax.

6.3. Who bears the risk?

Employee: ultimately liable for the correct income tax due for the taxable year.
Employer(s): liable as withholding agents for correct withholding on amounts they pay, but they cannot generally be expected to withhold on income paid by other employers without clear legal mechanisms and documentation.

6.4. Practical compliance approach

Employees with concurrent employers should:

monitor total earnings and withholding, and
prepare for year-end filing and potential additional tax payment.

7. Certificates, records, and employer–employee coordination

7.1. Certificates of compensation and tax withheld

Employees should secure and keep certificates from each employer showing:

total compensation paid,
taxable vs. non-taxable components (as shown), and
tax withheld and remitted.

These certificates are essential for:

consolidation in the annual ITR, and
supporting claims if there is a mismatch.

7.2. Information to provide to a new employer (successive employment)

Upon joining a new employer within the same year, the employee should provide:

prior employer compensation details, and
tax withheld amounts,

so the new employer can annualize accurately at year-end.

7.3. Disclosure and data privacy

Employers typically require only compensation and withholding figures—not necessarily full payslips—though internal policies vary. Employees should provide what is necessary to comply while observing lawful confidentiality expectations.

8. Common tax components that affect withholding computations

8.1. 13th month pay and other benefits

Certain benefits (notably 13th month and other benefits) may be excluded from taxable income up to a statutory ceiling; amounts beyond the ceiling become taxable compensation. Where multiple employers exist, the threshold is not multiplied by the number of employers—it is generally applied to the employee’s benefits in the year in aggregate, which can create issues if each employer independently applies the threshold without consolidation.

8.2. De minimis benefits

De minimis benefits, when compliant with rules and limits, are typically excluded from taxable compensation. However, multiple employers can lead to classification differences and documentation inconsistencies.

8.3. Allowances and reimbursements

Whether an allowance is taxable often depends on its nature and substantiation (e.g., whether it is a reimbursement for business expenses with proper documentation). Mislabeling taxable allowances as reimbursements (or vice versa) affects withholding.

8.4. Non-taxable statutory contributions

Employee contributions to SSS/GSIS, PhilHealth, and Pag-IBIG typically reduce taxable compensation in payroll computations, subject to the rules and how payroll is structured.

9. Filing obligations when you have multiple employers

9.1. General rule: expect to file your annual ITR

Employees with multiple employers during the year should generally expect to file an annual ITR consolidating all compensation and withholding from each employer.

9.2. Which form and classification (high-level)

Typically, purely compensation earners file the return for compensation income earners (commonly Form 1700 in many regimes), but the exact form usage can depend on the current BIR rules, the presence of other income, and whether the taxpayer is mixed-income.

9.3. Consequences of not filing when required

Failure to file when required can lead to:

penalties, surcharges, and interest, and
practical issues such as difficulty securing tax clearances or supporting financial documentation (depending on the context).

10. Refunds, deficiencies, and adjustments

10.1. Under-withholding (tax still due)

Common with concurrent employers or when prior employer data wasn’t annualized. The employee pays the balance upon filing.

10.2. Over-withholding

Can happen if one employer over-withholds, or if taxable benefits were overstated.

Remedies vary by timing and facts:

Payroll adjustment within the year (most practical if discovered early and employer policies allow).
Claiming refund or tax credit through filing, subject to procedural rules, documentation, and BIR processing realities.

10.3. Year-end adjustment by the last employer

In successive employment, a properly informed last employer can sometimes correct under/over-withholding through year-end annualization. This is less feasible in concurrent employment.

11. Employer liabilities and payroll compliance considerations

11.1. Employer as withholding agent

Employers are required to:

compute withholding tax on compensation they pay,
deduct and remit it to the BIR, and
file required withholding returns and issue employee certificates.

11.2. Limits of employer knowledge

An employer generally cannot compute correct annual tax on combined multi-employer income without complete information. This reality is why Philippine practice places the consolidation burden on the employee through annual filing.

11.3. Audit and substantiation risks

BIR audits often focus on:

correct classification of taxable vs. non-taxable compensation items,
correct application of thresholds/exemptions, and
consistency between payroll records, withholding returns, and certificates.

Multiple employers increase the chance of:

duplicated application of thresholds,
inconsistent classification, and
mismatched totals in the employee’s ITR if documents are incomplete.

12. Special situations

12.1. Minimum wage earners and other preferential treatments

Where an employee qualifies for special statutory tax treatment (e.g., minimum wage earners under certain conditions), the presence of another employer or additional compensation can negate qualification. Careful evaluation of the nature of compensation and statutory conditions is required.

12.2. Part-year residency or overseas assignment

If the employee’s tax status changes (e.g., non-resident citizen, OFW classification, etc.), the taxability of compensation and withholding approach can differ. Multiple employers during a transition year amplifies complexity and often necessitates professional review.

12.3. Employee misclassification risks

If one “employer” treats the person as an employee while another treats the person as an independent contractor (subject to withholding on professional fees), the taxpayer becomes mixed-income or mixed characterization, and filing/withholding rules diverge substantially.

13. Practical compliance checklist (Philippine setting)

List all employers for the taxable year (including short stints).
Secure a certificate of compensation and tax withheld from each employer.
For successive employment, provide the new employer the prior employer certificate/details as early as possible.
Track whether 13th month/other benefits thresholds were applied by more than one employer; prepare to reconcile in the annual return.
If you have concurrent employers, assume withholding will not perfectly match your final tax and plan for an annual filing and possible top-up payment.
Keep supporting documents for non-taxable items (de minimis, reimbursements, statutory exemptions, separation benefits).
Ensure your annual return (if required) matches the certificates and withholding returns information to reduce mismatch flags.

14. Key takeaways

The employee’s final income tax is based on total taxable compensation for the year, not per-employer amounts.
Multiple employers often cause under-withholding because each employer withholds based only on what it pays.
Successive employers can be handled through annualization by the later employer, but only if prior compensation/withholding data is provided and properly integrated.
Concurrent employers almost always require the employee to file an annual ITR to reconcile total income and total withholding.
Proper documentation—especially certificates of compensation and tax withheld from all employers—is the backbone of compliance and dispute avoidance.