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13th Month Pay Law
13th Month Pay Law
AN ACT ADJUSTING THE 13TH MONTH PAY AND OTHER BENEFITS CEILING
EXCLUDED FROM THE COMPUTATION OF GROSS INCOME FOR PURPOSES OF
INCOME TAXATION, AMENDING FOR THE PURPOSE SECTION 32(B), CHAPTER VI
OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED
SECTION 1. Section 32(B), Chapter VI of the National Internal Revenue Code of the
Philippines (Republic Act No. 8424) is hereby amended as follows:
“x x x
“(B) Exclusions from Gross Income. — The following items shall not be included in gross
income and shall be exempt from taxation under this Title:
“xxx
“(e) 13th Month Pay and Other Benefits. — Gross benefits received by officials and
employees of public and private entities: Provided, however, That the total exclusion under
this subparagraph shall not exceed eighty-two thousand pesos (P82,000) which shall cover:
“xxx
“(iv) Other benefits such as productivity incentives and Christmas bonus: Provided, That
every three (3) years after the effectivity of this Act, the President of the Philippines shall
adjust the amount herein stated to its present value using the Consumer Price Index (CPI),
as published by the National Statistics Office (NSO).”
SEC. 3. Repealing Clause. — All laws, orders, issuances, circulars, rules and regulations
or parts thereof which are inconsistent with the provisions of this Act are hereby repealed or
modified accordingly.
SEC. 5. Effectivity. — This Act shall take effect fifteen (15) days following its publication in
at least two (2) newspapers of general circulation.
A: 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.
Answer
No, they are different.
The 13th month pay is mandatory. The Christmas bonus is a gift or reward
givenvoluntarily by an employer outside of an employee’s regular compensation
for his or her industry and/or contribution to making the employer’s enterprise
successful or profitable. Some companies give this when business has been good
during the year, and do not if business has been slow.
Question
How long does an employee have to stay in the company to qualify for the
13th month pay?
Answer
An employee who has worked in a company for at least one month is entitled to a
proportion of the pay. In this case, 1/12 of 1/12 of the basic annual pay.
Question
Are there companies/organizations exempted from paying the 13 th month pay?
Answer:
The following companies/organizations/employers are not required to pay 13th
month pay under P.D. 851, unless the grant thereof have become a policy or
practice:
Employers of household helpers and persons in the personal service of
another in relation to such workers.
Employers of those who are paid on purely commission, boundary, or task
basis, and those who are paid a fixed amount for performing specific work,
irrespective of the time consumed in the performance thereof, 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.
The PDI also exempts government organizations from paying the 13 th month pay.
However, this have been effectively rescinded by Budget Circular No. 2010-1,
issued April 28, 2010, indicating that government officials and employees are
entitled to a year-end bonus equivalent to one month of pay (plus a cash gift of
P5,000).
Question
What about employees who work part-time? Employees who hold two or more jobs
at the same time?
Answer:
Workers who work part-time or who work for two or more companies or private
employers, whether on full or part time basis, are entitled to the 13th month pay from
all their private employers regardless of their total earnings from each or all their
employers.
Question:
What about professionals (accountants, lawyers, etc.) who are paid monthly
retainers?
Answer:
This may be a gray area that may be discretionary to the company.
Ina Teves, an organization development consultant has this to say about the matter:
REVISED GUIDELINES
ON THE IMPLEMENTATION OF THE 13TH MONTH PAY LAW.
1. Removal of Salary Ceiling.
On August 13, 1986, President Corazon C. Aquino issued Memorandum Order No.
28 which provides as follows: chanroblesvirtualla wlibrary
"Section 1 of Presidential Decree No. 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." chan robles virtual law
library
Before its modification by the aforecited Memorandum Order, P.D. No. 851
excludes from entitlement to the 13th month pay those employees who were
receiving a basic salary of more than P1,000.00 a month. With the removal of the
salary ceiling of P1,000.00, 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. No. 851.
Such employees are entitled to the benefit regardless of their designation or
employment status, and irrespective of the method by which their wages are paid,
provided that they have worked for at least one (1) month during a calendar year.
2. Exempted Employers.
The following employers are still not covered by P.D. No. 851: chanroblesvirtuallawlibrary