13 th Month Pay

13TH MONTH PAY BEGAN AS A TRADITION IN THE PHILIPPINES TO HELP

FAMILIES DURING THE HOLIDAY SEASON. A SIMILAR TRADITION KNOWN AS
THE THIRTEENTH SALARY IS ALSO POPULAR IN SEVERAL OTHER COUNTRIES:
ARMENIA, ARGENTINA, URUGUAY, BRAZIL, GERMANY, AUSTRIA, ITALY,
SINGAPORE, GUATEMALA, MEXICO, COSTA RICA AND NEPAL.
 What is “13th month pay”?

 It is a mandatory benefit provided to employees pursuant to

Presidential Decree No. 851 which requires employers to grant 13th
month pay to all its rank and file employees.
 What is “bonus”?

 Bonus is an amount granted to an employee in excess of what the law

requires as a reward or incentive for achieving a goal and/or
contributing to the success of the employer’s business. Unlike 13th
month pay, a bonus is given out of the employer’s generosity and is not
a demandable and enforceable obligation, unless when it has been
made part of the wage or made the subject of an express agreement.

 Sec. 2. Definition of certain terms. - As used in this
issuance:chanroblesvirtuallawlibrary
(a) "Thirteenth-month pay" shall mean one twelfth (1/12) of the
basic salary of an employee within a calendar year;

 Sec. 3. Employers covered. - The Decree shall apply to all employers

except to
 Distressed employers, such as (1) those which are currently incurring
substantial losses
 Who are covered or entitled to the 13th month pay?

 All rank-and-file employees who have worked for at least one (1)
month during the calendar year, are entitled to receive 13th month
pay regardless of the nature of their employment and irrespective of
the methods by which their wages are paid.
 How is 13th month pay computed?

 The 13th month pay shall not be less than 1/12 of the total basic
salary earned by an employee within a calendar year. To illustrate:

Total basic salary earned for the year = proportionate 13th month
pay

 12 months
When should the 13th month pay be paid?

It should be paid not later than December 24 of each year. An

employer, however, may give to his employees one-half of the 13th
month pay before the opening of the regular school year and the
other half on or before the 24th day of December of every year.
 Are resigned or separated/terminated employees entitled to 13th month pay?

 Yes. An employee who has resigned or whose services were terminated at any
time before the time for payment of 13th month is still entitled to the benefit.

 How much is the 13th month pay of a resigned or separated/ terminated

employee?

 The 13th month pay of a resigned or separated/terminated employee is in

proportion to the length of time he or she has worked during the year, reckoned
(a) from the time she has starting working during the calendar year or (b) the
time the last 13th month pay was given, up to the time of his/her resignation or
separation/termination from the service.

 Thus, if he/she worked only from January to September, his/her 13th month pay
shall be equal to 1/12 of his total basic salary earned during that period
 Is 13th month pay taxable?
 Pursuant to Republic Act 10653, the 13th month pay and other
benefits, including productivity incentives and Christmas bonuses,
not exceeding P82,000 provided to both government and private
sector employees are exempted from tax.
 Your 13th month pay may not be equivalent to your monthly basic
salary.
 According to the law, your basic salary should only be earnings or
primary payment paid to an employee for services rendered. On the
other hand, basic salary does not include:

 cash equivalent of unused vacation and sick leave credits;

 cost-of-living-allowances (COLA) granted pursuant to President Decree
No. 525 or Letter of Instructions no. 174;
 overtime;
 premium;
 night differential, and
 holiday pay.
 Example:
 Juan earns a basic salary at Php15,000 per month at company ABC.
He has been working for 10 months in the company. As such, Juan
stands to receive:

 (Php15,000 X 10 months) / 12= Php12,500.00

 If Juan has any absences or lates during the month, the pay
equivalent of those should be deducted from basic salary first
before determining the 13th month pay.
 You can actually view how much you stand to redeem your 13th month
pay on your payslip.
 Depending on how the payment has been set up, the 13th month
redeemable is taken from 1/12th of your monthly basic pay worked. The
figure from the previous month is them added to next month’s
redeemable, and the next month and so on.
 On the second payslip, the redeemable is then added to the
computed redeemable for the second month, as shown here: