With the holiday season approaching, it’s fair to assume that nearly every worker in the Philippines is looking forward to receiving their 13th-month salary and a Christmas bonus from the company they work for. Workers here and there are eager to receive a supplement of their income, either to start a business, to pay bills, or to give back to the community. With that out of the way, let’s talk briefly about what a 13th-month pay is and how it’s calculated in the Philippines.

What is a 13th-Month Pay in the Philippines?

A 13th-month salary is a statutory incentive that all businesses in the Philippines are required to offer to their regular staff on an annual basis. Based on the guidelines set by the Department of Labor and Employment (DOLE), every business is required by law to provide wages to each of its workers.

What are the Eligibility Requirements for the 13th-Month Pay?

Employees in the private industry who have been employed for a minimum of one month throughout the course of the year are eligible for 13th-month compensation, irrespective of their job, status as a worker, or wage type. 

It ought to be emphasized, nonetheless, that 13th-month pay is calculated on a rolling basis, which means that workers have to work for a minimum of one month in a given year to be qualified to receive a 13th-month salary.

Computation for the 13th-Month Pay in the Philippines

Under the DOLE rules, a worker’s 13th-month compensation ought to constitute no less than one-twelfth (1/12) of their overall basic income for the entirety of the year. If you’re wondering how to calculate your 13th-month compensation, simply add up your complete year’s paycheck and divide it by the length of the year.

Sample Computation:

PHP 13,000 x 12 months = 156,000

156,000/ 12 = PHP 13,000

In this sample computation, the base salary is PHP 13,000, and this will be multiplied by 12, which corresponds to the number of months in the calendar year. The resulting number will then be divided by 12 (calendar year), and the resulting number will be the amount in pesos to be paid for the 13th-month salary.

Who is Exempted from Receiving a 13th-Month Pay?

• For enterprises that operate primarily as private subsidiaries of the government, the government is not entitled to a 13th-month salary. However, they do receive a different form of bonus compensation.
• Employees who are paid based on commission
• Freelance employees
• Contract-based compensation workers

Employer Deadline for Sending-out 13th-Month Salaries

Employers are required to send out their employees’ 13th-month salary before or on December 24 of each year. Businesses must notify the Department of Labor and Employment (DOLE) of their compliance with the 13th-month wage settling. This can be accomplished by submitting an Online Establishment Report Form by January 15 of the following year.

Liabilities of Not Sending-out 13th-Month Salaries

Employers who neglect their responsibilities of paying the mandatory 13th-month pay Workers will be subject to violating Presidential Decree 851 with the Regional Arbitration Branch of the Department of Labor and Employment. Hence, workers may submit a complaint against their employers should they be in violation of this law. 

Nonpayment or delays thereof with the 13th month’s pay is treated as a money claims lawsuit. Employers who are found to be in violation of the legislation will face fines and must compensate the employees impacted.

What is the Pro-rated 13th-Month Pay?

Employees employed in the latter part or towards the conclusion of the year are normally subject to the prorated 13th-month salary calculation. Please keep in consideration that the annual benefit does not immediately equal your one-month pay. 

Your 13th-month compensation shall be adjusted if you were employed for fewer than 12 months during the past year. This implies that it will be calculated solely according to the months you have really worked for the organization.

How is a Pro-rated 13th-month Pay Computed?

Workers who have been employed for no more than one year or fewer than a year and a half will be paid for the 13th month on a pro-rated basis. To calculate your pro-rated 13th-month compensation, multiply your monthly basic income by the sum of the number of months you worked this year, followed by dividing by 12.

Sample Computation:

PHP 13,000 x 3 months (number of months employed) = 39,000

39,000/12 (months in the calendar year) = PHP 3,250

An employee with a base salary of PHP 14,000 who has worked for a company for only three months will have their base salary multiplied by the number of months they have worked. Following the formula set by the Department of Labor and Employment, the sum will be divided by the number of months in the calendar year, which is 12. The resulting number will be the employee’s 13th-month salary.

What does the 13th-month Salary Include?

To keep matters intact, employees ought to know their rights and the receivables they are entitled to when they are employed. Among these is a 13th-month pay, which is a sole salary that is computed based on the number of months an employee has worked within a period of one calendar year. 

A 13th-month pay does not include unused vacation leaves, sick leaves, reimbursable benefits, and other incentives that a company offers. Additionally, unused incentives and benefits are not to be used as a substitute for the 13th-month salary. Companies ought to be reminded that mandatory benefits cannot be negotiated as this is according to the laws of the country.

Christmas Bonuses and Incentives

A Christmas bonus is not required, and each firm has the option of giving or not giving one to its workforce. Businesses may pay a Christmas bonus as a gesture of gratitude for the dedication of a worker during the year. In this season, incentives are also sent out; these may include unused vacation leaves, sick leaves, commissions, and other forms of allowances.

FAQs about the 13th-Month Pay in the Philippines

Do owners and managerial personnel receive a 13th-month pay?

The 13th-month mandatory legislation only applies to rank-and-file staff members. However, it is up to the business whether to provide this yearly bonus to personnel in positions of management.

Is the 13th-month pay taxable?

According to the regulations of DOLE, if the 13th-month compensation exceeds PHP 90,000, it is taxed. Therefore, any amount below PHP 90,000 is non-taxable; however, this only applies to the 13th-month salary.

Do resigned employees receive a 13th-month pay?

The 13th month of compensation for a resigned or terminated employee is frequently included in their back pay or final pay. The limits of this mandatory benefit are also computed within the period of months the employee has worked with the company.

Are government employers entitled to a 13th-month pay?

According to Presidential Decree No. 851 Section 3, government employees, freelancers, contractual workers, home aids, and personnel paid purely on commission are ineligible.

What if I have overtime pay? Will this double my 13th-month pay?

Overtime and other forms of time-excess compensation are not included in the computation of the 13th-month salary. These types of payments are due in the monthly, weekly, or bi-monthly arrangement of a worker’s salary. This means that time-excess payments and commissions ought to be disbursed regularly according to the contract.

What is a base salary?

The phrase “basic salary” refers to any remuneration paid to a worker by their employer in exchange for services performed for the company. Keep in mind that one’s basic salary is not inclusive of the following…

• Overtime Pay
• Premium Pay
• Holiday Pay
• Cash Equivalent of Leave Credits (Sick Leave, Vacation Leave, Maternity, Mental Health, and other forms of leave)
• Shift Differentials
• Dividends/ Commissions
• Allowances (food, clothing, transportation, etc.)

What if I get a salary increase? Will this be included in my 13th-month pay?

The salary increase will be considered for calculating the 13th-month pay as long as the additional salary is applied before the disbursement of the 13th-month pay in the Philippines on every 14th of December. The additional salary increase will be applied on the implementation date and will be added to the final computation of your 13th-month pay.

Can my company convert the 13th-month pay to tangible items or promotions?

This monetary incentive must be made in cash exclusively, without any other type of bonus or advantage.  Businesses are not permitted to provide you with substitutes for cash. These may include vouchers for complimentary healthcare, gift baskets, discounted accommodation, and so on. 

Furthermore, promotions or year-end awards for diligence and service are not acceptable substitutes for the 13th-month pay. According to the Department of Labor and Employment, company stocks and any other perks that the employee regularly gets are likewise forbidden under the Act.

The holidays are rapidly approaching, and it is becoming increasingly vital to properly manage your finances. One approach to achieve this is to be aware of the exact 13th-month salary you will receive. When you receive your 13th-month income, you can invest it into ventures or secure solutions. Some of these solutions may be businesses that you can open. These ideas can span from traditional to digitized businesses. In this holiday season, it might be difficult not to splurge. But the beauty of obtaining financial security for individuals and businesses lies in investments.