Understanding 13th Month Pay in the Philippines

John Cruz
Published on
November 29, 2023
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The 13th Month Pay in the Philippines is not just a financial bonus; it's a significant part of the holiday season, eagerly awaited by employees. In this comprehensive guide, we will delve into every aspect of 13th Month Pay, ensuring you have a thorough understanding of its eligibility, computation, and other crucial details.

Who is Eligible for 13th Month Pay in the Philippines?

The 13th Month Pay is a source of joy for many employees and their families during the holiday season. It is a government-mandated benefit, but there are exemptions. According to the Department of Labor and Employment (DOLE) guidelines:

  • Government employees
  • Employees paid purely on commission, task, or fixed amounts irrespective of time involved
  • Managerial employees (though some employers may still provide it)
  • Employees who have worked less than one month

If you don't fall into one of these exempted categories, you are entitled to receive the 13th Month Pay.

Is 13th Month Pay Mandatory?

Yes, the 13th Month Pay is a mandatory benefit. It is a government-mandated employee benefit pursuant to Presidential Decree No. 851. All qualified employers must provide this benefit to their employees.

When Should 13th Month Pay be Given?

Typically, the 13th Month Pay is given during December, considered the most festive month of the year. According to DOLE rules, it should be given on the 24th of December each year. While it can be partially advanced, the full payment should not be later than this date. There are instances, such as in the education sector, where one-half of the 13th month is given before the opening of the regular school year, and the remaining half on or before December 24.

What is the 13th Month Pay Computation in the Philippines?

The computation of 13th Month Pay is relatively straightforward. It is 1/12 of the total basic salary earned by an employee in one calendar year. For example, if an employee's total basic salary for the year is 87,210 pesos, the 13th Month Pay would be calculated as 87,210 / 12 = 7,267.50 pesos.

What Forms Part of the Basic Salary in the 13th Month Pay Calculation?

The basic salary used for 13th Month Pay calculation is strictly the basic salary. Other allowances, such as cost of living allowance (COLA), profit-sharing payments, cash benefits of unused vacation and sick leave, maternity leaves, overtime pay, holiday pay, night shift differential, and other allowances, are not included in the computation. This is in line with DOLE 13th Month Pay Rules.

There can be exceptions if certain allowances are explicitly stated in the employment contract as part of the basic salary. It's crucial to consult the employment contract or agreement to understand what is included in the 13th Month Pay computation.

Is Overtime Included in the 13th Month of Pay in the Philippines?

No, overtime pay is not included in the 13th Month Pay computation unless explicitly stated in the employment contract. It is essential to ensure that the terms of the contract are considered in the calculation.

How to Compute Absences, Leaves, and Salary Increases in 13th Month Pay?

When it comes to absences without pay, only the basic salary for days worked should be included in the 13th Month Pay calculation. Leaves with pay, on the other hand, are considered part of the computation. When there's a salary increase, the calculation remains the same, factoring in the new basic salary.

Are Contractual and Probationary Employees Entitled to 13th Month Pay?

Yes, both contractual and probationary employees are entitled to 13th Month Pay. According to DOLE Overtime Pay Rules, as discussed in DO 174, contractual employees are entitled to security of tenure and all rights and privileges, including the payment of the 13th month pay. Similarly, probationary employees are entitled to this benefit as long as they have worked for at least one month.

Difference Between 13th Month Pay and Christmas Bonus

While 13th Month Pay is a mandatory benefit, a Christmas bonus is at the employer's discretion and is not obligatory. The 13th Month Pay is based on a specific computation, whereas the Christmas bonus is a discretionary amount that employers may choose to provide.

Is 13th Month Pay Taxable in the Philippines?

Yes, 13th Month Pay is taxable. If the total amount of the 13th Month Pay, along with other benefits, exceeds Php 90,000, the excess amount is taxable. It's important to be aware of the tax implications and consult with a Philippine Labor Lawyer for guidance.

In conclusion, understanding 13th Month Pay in the Philippines is essential for both employers and employees. It's a mandated benefit that brings holiday cheer to many households, and being well-informed ensures a smooth and fair distribution of this extra income during the festive season.