A Quick Guide to 13th Month Pay

What is 13th month pay?

The 13th month pay is a mandatory benefit provided to employees pursuant to Presidential Decree No. 851, which requires employers to grant 13th month pay to all its rank and file employees.

Who is supposed to receive 13th month pay?

All employers in the private sector are required to give 13th month pay to rank-and-file employees who have worked for at least one month during the calendar year, regardless of resignation or termination.

The following is a list of employers who are not required to give 13th month pay under PD 851:

• Government
• Employers already giving their employees 13th month pay or its equivalent
• Employers of household helpers and persons in the personal service of another
• Employers of those who are paid on commission, boundary, or task basis, and those who are paid a fixed amount for specific work

13th month pay should be given on or before December 24. Alternatively, it can be given in two batches: one half before the school year starts, and the remaining half before December 24.

What happens when employers don’t comply?

As proof of having handed out 13th month pay, employers have to submit compliance reports to DOLE on or before January 15 of the succeeding year.

Employees who don’t receive their rightful 13th month pay can file a formal complaint and even sue in court.

How do you compute it?

To calculate 13th month pay, get your basic salary for the entire calendar year and divide it by twelve.

For example, if your total basic salary is P50,000:

P50,000 / 12 = P4166.67

If you don’t know your total basic salary, you can come up with an approximation by taking your basic salary per month, multiply by how many months you’ve been working in the company, and divide by 12. So if your basic salary is P10,000 per month and you’ve been in the company for 3 months:

P10,000 * 3 months / 12 =  P2500

Getting the correct amount can be a source of confusion, mostly because people aren’t sure about what basic salary consists of. According to PD 851, basic salary consists of “all renumerations or earnings paid by an employer for services rendered.” However, it doesn’t include:

• Cost-of-living allowance
• Profit-sharing payments
• Cash equivalent of unused leave and vacation credits
• Overtime pay
• Premium pay
• Night shift differential
• Holiday pay
• Other allowances and monetary benefits that aren’t considered part of the basic salary

This graphic from the National Wage and Productivity Commission gives an example of how to compute for basic salary:

Based on the graphic, leaves without pay, undertime, and tardiness have a negative effect on your basic salary (and thus your 13th month pay); maternity leave benefits are also not included.

On the bright side, taxes are not deducted from 13th month pay, unless it goes past P82,000.  

Isn’t this the same as Christmas bonus?

Nope—13th month pay is mandatory, but employers can choose whether to give Christmas bonus or not. Additionally, Christmas bonus can be handed out anytime—there’s no strict deadline. It’s possible for (lucky) employees to get both 13th month pay and Christmas bonus.

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