PRESIDENTIAL DECREE NO. 851 REQUIRING ALL EMPLOYERS TO PAY THEIR EMPLOYEES A 13th-MONTH PAY Sec.1.

All employers are hereby required to pay all their employees receiving a basic salary of not more than P1,000 a month, regardless of the nature of their employment, a 13th-month pay not later than December 24 of every year. Sec. 2. Employers already paying their employees a 13th-month pay or its equivalent are not covered by this Decree. Sec. 3. This Decree shall take effect immediately.

PRESIDENTIAL DECREE NO. 851 RULES AND REGULATIONS IMPLEMENTING PRESIDENTIAL DECREE NO. 851

By virtue of the powers vested in me by law, the following rules and regulations implementing Presidential Decree No. 851 are hereby issued for the guidance of all concerned. Section 1. Payment of 13th-month Pay. - All employers covered by Presidential Decree No. 851, hereinafter referred to as the "Decree" , shall pay to all their employees receiving a basic salary of not more than P1,000 a month a thirteenth-month pay not later than December 24 of every year. Sec. 2. Definition of certain terms. - As used in this issuance: (a) "Thirteenth-month pay" shall mean one twelfth (1/12) of the basic salary of an employee within a calendar year; (b) "Basic salary" shall include all remunerations or earnings paid by an employer to an employee for services rendered but may not include cost-of-living allowances granted pursuant to Presidential Decree No. 525 or Letter of Instructions No. 174, profit-sharing payments, and all allowances and monetary benefits which are not considered or integrated as part of the regular or basic salary of the employee at the time of the promulgation of the Decree on December 16, 1975.

whether from donations. and those who are paid a fixed amount for performing a specific work. 4. As used herein. including government-owned and controlled corporations. has consistently declined by more than forty (40%) percent of their normal income for the last two (2) years. Employers covered.Except as provided in Section 3 of this issuance. regardless of their position.Sec.000 a month. mid-year bonus. boundary. cost of living allowances and all other allowances regularly enjoyed by the employee. workers paid on piece-rate basis shall refer to those who are paid a standard amount for every piece or unit of work produced that is more or less regularly replicated.The Decree shall apply to all employers except to: (a) Distressed employers. or task basis. Employees covered. subject to the provision of Section 7 of this issuance. and irrespective of the method by which their wages are paid. except where the workers are paid on piece-rate basis in which case the employer shall be covered by this issuance insofar as such workers are concerned. contributions. irrespective of the time consumed in the performance thereof. except those corporations operating essentially as private subsidiaries of the Government. designation or employment status. profit-sharing payments and other cash bonuses amounting to not less than 1/12th of the basic salary but shall not include cash and stock dividends. . . the employer shall pay the difference. without regard to the time spent in producing the same. all employees of covered employers shall be entitled to benefit provided under the Decree who are receiving not more than P1. The term "its equivalent" as used in paragraph c) hereof shall include Christmas bonus. such as (1) those which are currently incurring substantial losses or (2) in the case of non-profit institutions and organizations. (b) The Government and any of its political subdivisions. as well as non-monetary benefits. . and (e) Employers of those who are paid on purely commission. where their income. Sec. 3. (c) Employers already paying their employees 13-month pay or more in a calendar year or its equivalent at the time of this issuance. grants and other earnings from any source. provided that they have worked for at least one month during the calendar year. Where an employer pays less than 1/12th of the employees basic salary. (d) Employers of household helpers and persons in the personal service of another in relation to such workers.

the periodicity or frequency of payment of the 13th-month pay may be the subject of agreement. . Address 3.Every covered employer shall make a report of his compliance with the Decree to the nearest regional labor office not later than January 15 of each year. . medicare and private welfare and retirement plans. In any establishment where a union has been recognized or certified as the collective bargaining agent of the employees therein. Special feature of benefit. Petitions for exemptions may be filed within the nearest regional office having jurisdiction over the employer not later than January 15.Sec. Nothing herein shall prevent employers from giving the benefits provided in the Decree to their employees who are receiving more than One Thousand (P1. 851 1. Amount granted per employee 7. . Name. Sec. Report of compliance. Option of covered employers. The regional offices shall transmit the petitions to the Secretary of Labor within 24 hours from receipt thereof. 6. Total number of workers benefited 6. Total amount of benefits granted 8. 7.D. as well as premium contributions to the State Insurance Fund. of person giving information Sec. Exemption of Distressed employers. 9.Distressed employers shall qualify for exemption from the requirement of the Decree upon prior authorization by the Secretary of Labor. Name of establishment 2. position and tel.The benefits granted under this issuance shall not be credited as part of the regular wage of the employees for purposes of determining overtime and premium pay. no. social security. The report shall conform substantially with the following form: REPORT ON COMPLIANCE WITH P.000) Pesos a month or benefits higher than those provided by the Decree. Principal product or business 4. fringe benefits.Non-payment of the thirteenth-month pay provided by the Decree and these rules shall be treated as money claims cases and shall be processed in accordance with the Rules Implementing the Labor Code of the Philippines and the Rules of the National Labor Relations Commission. 5. . . Adjudication of claims. NO. Total employment 5. Sec. Sec. 8. . 1976.A covered employer may pay one-half of the 13th-month pay required by the Decree before the opening of the regular school year and the other half on or before the 24th day of December of every year.

. Sec. Prohibition against reduction or elimination of benefits. including Security and Watchman Agencies. 1976 except in private schools where compliance for 1975 may be made not later than 30 June 1976. 5.These rules and regulations shall take effect immediately and for purposes of the 13th-month pay for 1975. or diminish in any way. 4. are exempt for the year 1975 subject to the following conditions: (a) that the contracts of such enterprises were entered into before December 16. 2. 1975. 851 To insure uniformity in the interpretation. 11. 1975.D. (b) that such enterprises have complied with all labor standards laws during the year. 10. NO. compliance and reporting of compliance with this Decree are hereby extended up to March 31. Overtime pay. SUPPLEMENTARY RULES AND REGULATIONS IMPLEMENTING P. and (d) that the contract does not provide for cost escalation clause. are entitled to 1/12 of their annual basic pay regardless of the number of months they teach or are paid within a year. supplements. 851 and its Rules and the unavailability of adequate cash flow due to the long holiday season. 3. . the following clarifications are hereby made for the information and guidance of all concerned: 1.Nothing herein shall be construed to authorize any employer to eliminate. including faculty members of colleges and universities. In view of the lack of sufficient time for the dissemination of the provisions of P. or other employee benefits or favorable practice being enjoyed by the employee at the time of promulgation of this issuance. Private school teachers. 851 and its implementing regulations. application and enforcement of the provisions of Presidential Decree No. . the same shall apply only to those who are employees as of December 16.Sec. earnings and other remunerations which are not part of the basic salary shall not be included in the computation of the 13th-month pay. (c) that the contract cannot really accomodate 13-month pay or its equivalent.D. Contractors and Subcontractors. This exemption is without prejudice on the part of the workers to negotiate with their employers or to seek payment thereof by filing appropriate complaints with the Regional Offices of the Department of Labor. New establishments operating for less than one year are not covered except subsidiaries or branches of foreign and domestic corporations. Transitory Provision. No.

Department of Trade.D. Wage Commission and the duly designated staff. such as the Securities and Exchange Commission. The petition shall contain a sworn statement on the inability to implement the Decree and the reasons. (c) A detailed sworn statement of the actual monthly losses not covered by the report required under paragraph (b) above and such other proofs or documents as may be required by the Chairman. . Wage Commission with comments and recommendations. Nothing herein shall sanction the withdrawal or diminution of any compensation. and complaint for non-compliance shall be held in abeyance pending the disposition or resolution of the petition for exemption. 851 and its implementing rules and regulations.6. and shall be accompanied by the following documents and statements: (a) A certified true copy of the income tax returns for the last two (2) years. Wage Commission to establish such exemption. 2. The Chairman. SERIES OF 1976 In the interest of public service and efficiency. Petition for exemption 1. the following guidelines shall be followed: I. Whenever a petition for exemption has been filed. complaints. benefits or any supplements being enjoyed by the employees on the effective date of this issuance. Department of Industries and Board of Investments. therefore. The Regional Office concerned shall transmit immediately the petition for exemption to the Chairman. if any. 2. enforcement and implementation of P. shall evaluate all petitions for exemption and make appropriate recommendations within 20 working days from receipt of the petition to the Secretary of Labor. ADMINISTRATIVE ORDER NO. No. more particularly to facilitate the disposition of cases involving petitions for exemption. (b) A certified copy of the financial reports for the last two (2) years filed with the Government entities. 3.

The Regional Office shall compile. 2.D. 851 is hereby modified to the extent that all employers are hereby required to pay all their rank-and-file employees a 13th month pay not later than December 24 of every year. (b) total number of workers benefited. 851 excludes from entitlement to the 13th month pay those employees who were receiving a basic salary of more than P1. REVISED GUIDELINES ON THE IMPLEMENTATION OF THE 13TH MONTH PAY LAW. all rank and file employees are now entitled to a 13th month pay regardless of the amount of basic salary that they receive in a month if their employers are not otherwise exempted from the application of P.D. P.D. The Regional Director shall direct the said Division to conduct an inspection and investigation in connection with the complaint filed. On August 13. The Field Service Division of the Regional Office concerned shall see to it that all covered employees comply with P.00 a month. provided that they have worked for at least one (1) month during a calendar year. and shall contain the following: (a) The total number of establishments. The Regional Director shall submit a monthly progress report of compliance with the Decree. . and (c) total amount of benefits paid. Complaint. 1.00. With the removal of the salary ceiling of P1. 1986. instruction or memorandum or parts thereof. No. circular. analyze and evaluate compliance reports and update the listing of establishments on the basis of the reports submitted.000." Before its modification by the aforecited Memorandum Order.II. No. 851. and irrespective of the method by which their wages are paid. 28 which provides as follows: "Section 1 of Presidential Decree No. 851. enforcement and/or implementation 1. Removal of Salary Ceiling. No. Any prior order. Aquino issued Memorandum Order No. Such employees are entitled to the benefit regardless of their designation or employment status. inconsistent herewith are hereby revoked. All complaints for non-payment of the 13th-month pay shall be filed with the Field Services Division of the Regional Office concerned. 3. President Corazon C.000. The reports of the Regional Offices shall be submitted to the LSS and BLS.

the computation of the 13th month pay shall include the cost of living allowances (COLA) integrated into the basic salary of a covered employee pursuant to Executive Order 178. without regard to the time spent in producing the same. as well as nonmonetary benefits. lay-off. The above distinction shall be used as guide for the purpose of determining who rankand-file employees are entitled to the mandated 13th month pay. cost of living allowances and all other allowances regularly enjoyed by the employee. c. and those who are paid a fixed amount for performing specific work. including government-owned and controlled corporations. and d. the employer shall pay the difference. mid-year bonus.2. recall discharge. For the year 1987. The Labor Code distinguishes a rank-and-file employee from a managerial employee. suspend. 4. boundary. Employers already paying their employees a 13th month pay or more in a calendar year or its equivalent at the time of this issuance. or to effectively recommend such managerial actions. except where the workers are paid on piece-rate basis in which case the employer shall grant the required 13th month pay to such workers. transfer. 851: a. 3. excepts those corporations operating essentially as private subsidiaries of the Government. The Government and any of its political subdivisions.D. irrespective of the time consumed in the performance thereof. workers paid on piece-rate basis shall refer to those who are paid a standard amount for every piece or unit of work produced that is more or less regularly replicated. Who are Rank-and File Employees. cash bonuses and other payments amounting to not less than 1/12 of the basic salary but shall not include cash and stock dividends. Where an employer pays less than required 1/12th of the employees basic salary. No. — The minimum 13th month pay required by law shall not be less than one-twelfth of the total basic salary earned by an employee within a calendar year. As used herein. Amount and payment of 13th Month Pay (a) Minimum of the Amount. . Employers of those who are paid on purely commission. or task basis. The term "its equivalent" as used on paragraph (b) hereof shall include Christmas bonus. All employees not falling within this definition are considered rankand-file employees. assign or discipline employees. b. It provides that a managerial employee is one who is vested with powers of prerogatives to lay down and execute management policies and/or to hire. Employers of household helpers and persons in the personal service of another in relation to such workers. The following employers are still not covered by P. Exempted Employers.

if they have rendered service for at least one (1) month within a year. and the remaining P8. on both their fixed or guaranteed wage and commission. An employer. among other things. — Government employees working part time in a private enterprise. 13th Month Pay for Certain Types of Employees. — Private school teachers. the same are treated as part of the basic salary of the employees.00 for non-agricultural workers shall be integrated into the basic pay of covered employees effective 1 May 1987. The "basic salary" of an employee for the purpose of computing the 13th month pay shall include all remunerations or earning paid by this employer for services rendered but does not include allowances and monetary benefits which are not considered or integrated as part of the regular or basic salary.O. i. and P8. may give to his employees one half (½) of the required 13th month pay before the opening of the regular school year and the other half on before the 24th of December of every year. premium. Employees who are paid a fixed or guaranteed wage plus commission are also entitled to the mandated 13th month pay. The frequency of payment of this monetary benefit may be the subject of agreement between the employer and the recognized/collective bargaining agent of the employees. overtime.50 effective on 1 May 1987.00 effective 1 October 1987. including private educational institutions. whether on full or part time basis.00 daily COLA was integrated effective 1 May 1987 or earlier the inclusion of said COLA as part of the of the basic pay for the purpose of computing the 13th month pay shall be reckoned from the date of actual integration. company practice or policy. night differential and holiday pay.. Thus. the integration of COLAs shall be as follows: P4. (c) Private School Teachers. such as the cash equivalent of unused vacation and sick leave credits. however. are entitled to the required 13th month pay from all their private employers regardless of their total earnings from each or all their employers. (b) Those with Multiple Employers. these salary-related benefits should be included as part of the basic salary in the computation of the 13th month pay if by individual or collective agreement. — Employees who are paid on piece work basis are by law entitled to the 13th month pay. — The required 13th month pay shall be paid not later than December 24 of each year. that the P9. and cost-of-living allowances. P4.50 on 1 October 1987. (b) Time of Payment. Where the total P17. including faculty members of universities and colleges. However. the COLAs integrated into the basic pay shall be included as of the date of their integration. based on their total earnings during the calendar year. No. as well as employees working in two or more private firms. regardless of the number of months they teach or are paid within a year.e.00 effective 1 January 1988. are entitled to the required 13th month pay. For establishments with less than 30 employees and paid-up capital of P500.00 of the daily COLA of P17. in the computation of the 13th month pay for 1987. 5. 178 provides.E.000 or less. . (a) Employees Paid by Results.

Thus.6. fringe benefits insurance fund. The mandated 13th month pay need not be credited as part of regular wage of employees for purposes of determining overtime and premium pays. Non-inclusion in Regular Wage. Social Security. if he worked only from January up to September his proportionate 13th month pay should be equivalent of 1/12 his total basic salary he earned during that period. . Prohibitions against reduction or elimination of benefits. Nothing herein shall be construed to authorize any employer to eliminate. The payment of the 13th month pay may be demanded by the employee upon the cessation of employer-employee relationship. supplements. An employee who has resigned or whose services were terminated at any time before the time for payment of the 13th month pay is entitled to this monetary benefit in proportion to the length of time he worked during the year. so can the employee demand the payment of all benefits due him upon the termination of the relationship. or other employee benefits or favorable practice being enjoyed by the employee at the time of promulgation of this issuance. Medicare and private retirement plans. or diminish in any way. This is consistent with the principle of equity that as the employer can require the employee to clear himself of all liabilities and property accountability. 8. 13th Month Pay of Resigned or Separated Employee. 7. reckoned from the time he started working during the calendar year up to the time of his resignation or termination from the service.

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