Entitlement and Computation of 13th Month Pay

PUBLISHED ON: August 11, 2019
LAST UPDATED ON: May 1, 2021

13th Month Pay is a mandatory benefit in the Philippines which is paid to rank-and-file employees computed at 1/12 of the proportionate basic salary earned by an employee during the calendar year. It is mandated to be released not later 24 December of every year. It was made into a mandatory benefit under Presidential Decree No. 851 and implemented by the Department of Labor and Employment (DOLE).

Defining 13th Month Pay

What is 13th Month Pay?

The thirteenth-month (13th Month) pay is defined by the law as:

"Thirteenth-month pay shall mean one twelfth (1/12) of the basic salary of an employee within a calendar year

There are two (2) important concepts here to consider here: 1.) Basic Salary and 2.) Calendar year

Definition of Basic Salary

"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, profit-sharing payments, cash equivalent of unused vacation and sick leave credits, overtime pay, premium pay, night shift differential, holiday pay, and all allowances and monetary benefits which are not considered, or integrated as part of the regular or basic salary of employee

Definition of Calendar Year

”Year” shall be understood to be twelve calendar months

Section 31, Chapter 8, of Executive Order 292

Entitlement to 13th Month Pay

Who are entitled to 13th Month pay?

All employers are required to pay their rank and file employees thirteenth month pay, regardless of the nature of their employment and irrespective of the methods by which their wages are paid, provided they worked for at least one (1) month during a calendar year. The thirteenth month pay should be given to the employees not later than December 24 of every year.

Worker’s Statutory Benefits 2019 (emphasis supplied)

In summary, the following is a checklist for you to be eligible for the 13th month pay, you need to be a Rank-and-File employee that has been employed with the company for at least one (1) month during a calendar year.

Is 13th Month Pay mandatory in the Philippines?

Yes, 13th Month Pay is mandatory in the Philippines provided that they are not in the list of exempted employers or employees as stated in the law.

Who are exempted from 13th Month pay?

  • Distressed employers
  • Government Agencies
  • Employers who are already paying 13th-month pay or its equivalent
  • Commission-basis, boundary-basis and task-basis

Are managerial and supervisory employees covered by 13th Month pay?

No, they are not covered. If a managerial employee receives such benefit, The provision specifically states that rank-and-file employees are to be paid the 13th Month Pay. it is simply above what is required by labor law. Although due to how common 13th Month pay is, it would be competitive for the company to still provide such benefit to managerial and supervisory employees.

Are piece-rate workers eligible to 13th Month pay?

Yes, piece-rate workers are eligible to 13th Month pay.

Is an employee with multiple employers entitled to 13th Month pay?

Yes, an employee who has multiple employers, given that the said person is eligible to 13th Month pay to each respective employer, is entitled to 13th month pay.

Are employees who are paid with a regular wage plus commission entitled to 13th Month pay?

Yes, they are entitled to 13th-month pay with the computation including their regular wage and commission earned.

Should I receive my 13th Month Pay even if I resigned from the company?

As long as they are eligible, e.g. worked for at least one (1) month in the company, an employee is still entitled to his or her 13th month pay even if the person has resigned from the company regardless of the mode of termination. The 13th month pay shall be a part of Final Pay that would be received by the employee.

Computation of 13th Month Pay

How to compute 13th Month Pay in the Philippines?

Total Basic salary earned during the year/12 months = proportionate 13th month pay

It is computed in a pro-rated basis based from actual days worked by the employee in the year.

What is not included in the computation of the 13th Month Pay

  • Cost of Living Allowance
  • Profit-Sharing Payments
  • Cash equivalent of unused vacation and sick leave credits
  • Overtime pay
  • Premium Pay
  • Nightshift Differentials
  • Holiday Pay
  • Allowances and Monetary Benefits which are not considered or integrated as part of the basic salary

How to compute for prorated 13th month pay?

Prorated computation means that the computation is proportionate to the period rendered.

For example, if an employee is paid with a daily salary rate of ₱537.00 with a five (5) day work week which would amount to PhP2,685 and PhP10,740 per month. Below is a sample computation with all months with 30 days, 22 work days and 8 non-working days:

MonthWork renderedSalary Received
JanuaryEmployment started on 16th day of the monthPhP 5,907.00
FebruaryNo absencePhP 10,740.00
MarchApproved 2 day Service Incentive LeavePhP 10,740.00
AprilMaternity LeavePhP 0.00
MayMaternity LeavePhP 0.00
JuneMaternity LeavePhP 0.00
JulyMaternity Leave and reported for work on 16th day
(2nd work day of the 3rd work week)
PhP 5,907.00
AugustApproved 3 day Service Incentive LeavePhP 10,740.00
September21 days and 4 hours workedPhP 10,471.5
October20 days workedPhP 9,666.00
NovemberResigned effective 16th of NovemberPhP 5,907.00
DecemberNo longer employedPhP 0.00
Total Basic SalaryPhP 70,078.50

Total Basic salary earned during the year/12 months = proportionate 13th month pay
PhP 70,078.5 / 12 months = PhP 5,839.88

With the sample computation above, the employee shall receive PhP 5,839.88.

When should the 13th Month Pay be released?

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

Should maternity leave be considered in the computation of the 13th Month pay?

Maternity Leave may not be considered in the computation of the 13th month pay as the person did not work during the period as the employee did not render work.

In connection to this, why is Service Incentive Leave (SIL) or its equivalent such as Vacation/Sick Leave included in the computation of the 13th month pay? The revised guidelines on the implementation of the 13th Month Pay law promulgated in 1987 states that the cash equivalent of unused vacation and sick leave credits is not included in the computation of the basic salary. Likewise in the definition, remunerations or earnings paid by an employer to an employee for services rendered would be included in the basic salary. Maternity Benefit is however not paid by the employer but only advanced by them and reimbursed by the Philippine Social Security System (SSS).

Does the company need to provide 13th Month pay even if the company is already providing other bonuses?

Yes, providing other bonuses does not negate the payment of the benefit. In addition and for clarification, the following provision of the Implementing Rules of 13th Month pay is only aimed at those company existing in 1956 that provide such benefit.

(c) Employers already paying their employees 13-month pay or more in a calendar year of its equivalent at the time of this issuance;

Section 3 of the Implementing Rules of Presidential Decree No 851 regarding 13th month pay

What if I am less than a month in my company within the cut-off of “not later than December 24 of every year”?

You are not entitled to be paid your 13th month pay to be released on the 24 December of the year when you were employed if you are less than a month, or 30 days to be specific

However, if you reach a month, or 30 calendar days, within the calendar year then you are entitled to 13th month pay. The provisions explicitly states that the release of the 13th month pay is not later than 24th December however you have only reached after the date but within the calendar year.

The primary concern is when should the 13th month Pay be released as you reach your 30th day within the company after the 24th of December.

There is no specific implementing rules or judgement within the scope of this circumstance, as far as I have read or know.

For this specific circumstance, there may be two (2) periods for the release of the 13th Month Pay, 1.) the 13th Month Pay may be released at the succeeding pay day after you have reached your 30th day; or 2.) the 13th Month Pay may be released to next year's "not later than 24th of December".

For the first process for the period of release of the 13th Month Pay after you reach your 30th Day, this would create a uniform computation for the next year's payment of 13th Month Pay as the previous year's entitled is already considered. This period of release would be held as this is favorable to the employee being that the Philippines' stand is pro-labor.

For the second period of release of 13th Month Pay which it would be included in the next year's computation, this creates varying computations of the dates to be included in the employee's 13th Month Pay. However it is consistent with the provision that it shall be released not later than the 24th of December. The courts are not necessarily anti-employers.

The aspect of "shall not be released not later than" means that the 13th Month Pay may be released earlier. An employer is not expected to include computations in advance where there is no basis of basic salary is to be made. To require an employer to make repeated computations with only varying periods for it to coincide specifically that only basic salary dividend of the 13th month pay be reckoned on 24th of December may be cumbersome to mandate on what could be simple yearly computation and release.

It is important to note that this specific circumstance of events would only be clarified if it is raised to the Courts as they would give their judgment on it and would form as part of the jurisprudence on the matter.

Regardless of the time of release used, the important aspect is that all periods, days or months wherein the person has worked or earned basic salary should be included in the computation of 13th Month Pay, whether the release is in the previous year or in the succeeding year. Provided that, the employee has rendered at least a month, or 30 days, within that calendar year.

In addition, it would be helpful if policies and computation in the processing of 13th Month Pay should be consistent such as the date of release and computations, specifically the period used. A simple explanation of the process would help clarify the concerns of the employee.

If you have found my articles helpful, share them to your friends and follow me on my socials
to be updated with my latest posts and insights!

error: Content is protected !!