Computing 13th Month Pay

The 13th-month pay is a form of monetary benefit required by Philippine law to be given to employees by their employers no later than the December 24 of every year. An employer, however, may give employees one-half (1/2) of the 13th Month Pay before the opening of the regular school year and the remaining half on or before December 24 of every year.

It was first signed into law by former President Ferdinand Marcos in 1975 via Presidential Decree No. 851. In its original version, the benefit was limited to employees receiving a basic salary of less than PHP 1,000 a month.

In 1986, President Corazon Aquino issued Memorandum Order No. 28 removing the salary ceiling of PHP 1,000 and revising other guidelines.

Who is eligible for a 13th month pay?

According to the Labor Code of the Philippines, all non-managerial employees who have worked with a company for no less than one month qualify for the 13th-month pay.

The benefit extends to every employee regardless of the nature of their employment and the method in which they are paid. That means it doesn’t matter if you’re a regular employee or a contractual employee or if you’re paid in cash, check, bank deposit, etc.

You are eligible for a 13th-month pay as long as:

  • You’re not in a managerial position
  • You have rendered a minimum of one month of service to the company

Are there exemptions?

According to revised guidelines in Memorandum Order No. 28, the following are exempted from paying or receiving the 13th-month benefit:

  • Employers with a similar monetary benefit amounting to more than 1/12 of an employee’s basic salary. The monetary benefit includes:
    • Christmas bonus
    • Mid-year bonus
    • Cash bonuses
    • Other payments amounting to but don’t include cash and stock dividends, cost of living allowances, and every other allowance regularly enjoyed by the employee, including non-monetary benefits
  • The government and any of its political subdivisions.
  • Government-owned and controlled corporations.
  • Domestic workers or employers of household helpers and persons in the personal service of another.
  • Employers of workers on commission, boundary, or task-based work, including those paid a fixed amount for doing specific work regardless of the time consumed in the performance. The exemption to this exemption are workers paid on a piece-rate basis who must be given their 13th-month pay.

Computing your 13th month pay

The 13th Month Pay is computed based on 1/12 of the total basic salary of an employee within a calendar year, or basic monthly salary for the whole year divided by 12 months. By law, an employee’s 13th-month pay cannot be less than 1/12th of their overall basic salary within a 12-month calendar year.

Below is the formula and illustration on how to compute the 13th Month Pay:

Total basic salary earned during the year
12 months
= Proportionate
13th Month Pay

Illustration

January no absence PhP18,000.00
February no absence PhP18,000.00
March 1 day leave with pay PhP18,000.00
April 1 day leave with pay PhP18,000.00
May 2 days leave with pay PhP18,000.00
June 2 days leave with pay PhP18,000.00
July no absence PhP18,000.00
August 2 days leave with pay PhP18,000.00
September on maternity leave no salary
October on maternity leave no salary
November no absence PhP18,000.00
December 5 days leave without pay PhP13,862.07
 Total basic salary earned for the year  PhP175,862.07

 

PhP175,862.07
12 months
= PhP14,655.18 is the proportionate
13th Month Pay

 

Unless stated in an employee’s collective bargaining agreement, the basic salary does not include allowances and other monetary benefits such as the following:

  • The cash equivalent of unused vacation and sick leave credits
  • Overtime pay
  • Premium pay
  • Night differential and holiday pay
  • Cost-of-living allowances
  • Profit sharing

Are you in need expert legal advice?

Are there conflicts about your 13th month pay or other employee or employer concerns?

Follow this link to get in touch with Duran & Duran-Schulze Law and get the expert legal representation you deserve.