Payroll Year-End Checklist & Deadlines

Closing the year is one of the busiest times for HR and payroll teams. Aside from processing the last payroll runs, employers must finalize 13th-month pay, convert unused leaves, and prepare compliance reports for both the BIR and DOLE. To help you stay compliant and organized, here is a clear, actionable Payroll Year-End Checklist and Deadlines for Philippine businesses.

• Payroll Year-End Checklist & Deadlines
  1. Release 13th Month Pay (On or Before December 24)
  2. Process Unused Leave Conversion (December to Early January)
  3. Apply Tax Annualization on the Last Payroll of the Year
  4. Submit 13th-Month Pay Compliance Report to DOLE (On or Before January 15)
  5. Distribute BIR Form 2316 to Employees (On or Before January 31)
  6. Submit BIR Form 1604-C and Alphalist of Employees (On or Before January 31)
  7. Submit BIR Form 2316 (Employer Filing) to BIR (On or Before February 28)
• Year-End Payroll Deadlines Summary
• What if I Missed the Computation in the Last Payroll Period of the Year?
• Final Tips for a Smooth Year-End

Payroll Year-End Checklist & Deadlines

Following a structured year-end payroll checklist ensures that employees receive all required benefits and on time while keeping your business compliant with government regulations. Missing deadlines or making calculation errors can result in penalties, delayed tax filings, audit risks, and employee dissatisfaction.

This guide provides a step-by-step overview of all essential payroll tasks you need to complete from December through February, helping you close the year smoothly and confidently.

1. Release 13th Month Pay (On or Before December 24)

Under Presidential Decree 851, employers are required to grant 13th-month pay to all rank-and-file employees not later than December 24 each year.

This should be computed based on the employee’s total basic salary earned within the year.

Important Note: Ensure proper documentation of released 13th month pay for employees who resigned mid-year.

For more details refer to How to compute 13th month pay.

2. Process Unused Leave Conversion (December to Early January)

For companies offering convertible leave credits such as SIL or company-provided leaves, the year-end or the last payroll of the year is the ideal time to compute and convert unused credits.

Key reminders:

• The DOLE mandated 5 SIL (Service Incentive Leave) must be converted to cash if unused.
• Company-specific leave policies differ – ensure accuracy based on your HR/employee handbook or HRIS settings and convert any convertible company-provided leave if applicable.
• Converted leaves may be taxable or non-taxable depending on the classification.

For more details refer to Unused Leave Conversion – FAQ

3. Apply Tax Annualization on the Last Payroll of the Year

Annualization ensures employees have correct final tax withholdings for the year. This includes:

• Adding all compensation earned throughout the year
• Deducting applicable non-taxable benefits
• Adjusting any under – or over-withheld taxes

This helps avoid tax deficiencies and ensures accurate 2316 issuance.

For more details refer to Payroll Tax Annualization and Year-end Reporting

4. Submit 13th-Month Pay Compliance Report to DOLE (On or Before January 15)

Companies must file the 13th-Month Pay Report with DOLE using DOLEs online portal. This report documents the 13th-month payments granted to employees for the previous year.

You can submit your report in DOLEs Online Compliance Portal.

5. Distribute BIR Form 2316 to Employees (On or Before January 31)

All employers must provide each employee (including terminated or resigned employees) a signed copy of BIR Form 2316:

• This certifies the employee’s total compensation, tax withheld, and tax exemptions for the year.
• Both employer and employee copies must be signed.

For more details refer to BIR Form 2316

6. Submit BIR Form 1604-C and Alphalist of Employees (On or Before January 31)

Employers are required to file BIR Form 1604-C (Annual Information Return of Income Taxes Withheld on Compensation) together with the Alphalist of Employees no later than January 31 of the following year.

These submissions summarize:

• Total compensation paid to employees for the year
• Total taxes withheld and remitted
• Detailed employee data matching issued BIR Form 2316

Important reminders:

• Data submitted in Form 1604-C and the Alphalist must exactly match the information shown on employees’ 2316 forms to avoid validation errors and BIR penalties.
• Make sure you validate your Alphalist of Employees using BIRs Alphalist Validation module to ensure that you are submitting the correct format

Late or incorrect submission may result in penalties, compromise your annual compliance, and cause issues during BIR audits – so accuracy and timely filing are critical.

For more details refer to BIR Form 1604C

7. Submit BIR Form 2316 (Employer Filing) to BIR (On or Before February 28)

Aside from distributing Form 2316 to employees, employers must also submit the consolidated 2316 forms to the BIR:

• Must be signed by employer and employees
• Should match the information previously reported in 1604-C and alphalist of employees

For more details refer to BIR Form 2316

Year-End Payroll Deadlines Summary

What if I Missed the Computation in the Last Payroll Period of the Year?

If the tax annualization or any required year-end payroll computation was not completed during the last payroll period of the year, it can still be corrected afterward. Employers should immediately perform the missed calculation and issue the necessary adjustments through a special or off-cycle payroll run.

Any resulting tax deficiency must be withheld from the employee and remitted to the BIR as soon as possible, while any tax over-withholding should be refunded to the employee before finalizing BIR Form 2316.

What’s important is that all corrections are completed before issuing and submitting compliance reports, particularly:

• Distribution of BIR Form 2316 to employees (on or before January 31)
• Filing of BIR Form 1604-C and the Alphalist of Employees (on or before January 31)

Both filings must reflect the final, accurate annualized tax computation. Submitting incorrect figures increases the risk of penalties, employee disputes, and potential issues during BIR audits.

In short, while you can still fix missed computations after the year ends, they should be addressed immediately so all statutory reports and submissions remain accurate and compliant.

Final Tips for a Smooth Year-End

• Start preparing as early as November to avoid last-minute rush.
• Verify employee records, tax statuses, and compensation adjustments.
• Keep the documents of all separated employees within the year for easier submission at year end
• Keep the monthly 1601C payment receipts as these are needed in filing BIR form 1604C
• Keep copies of all submissions and acknowledgement receipts from BIR and DOLE, these will be useful in case of future audits
• Automate these tasks with MPM Payroll so you have more time to enjoy the holidays