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13th Month Pay: Everything You Need to Know

It's that time of the year.
by Arianne Merez
Nov 19, 2020
Photo/s: Jerome Ascaño

Despite the ongoing COVID-19 pandemic, all employers in the Philippines are required to pay their employees their 13th month pay.

Here's everything you need to know about it, from the what to how it should be computed:

1. What is the 13th month pay?

As mandated by Presidential Decree No. 851, the 13th-month pay is a monetary benefit given to all rank-and-file employees provided that they have worked for at least a month in the company.

2. Who is entitled to it?

According to the Department of Labor and Employment, rank-and-file employees in the private sector shall be entitled to 13th month pay regardless of their position, designation, or employment status as long as they have rendered at least a month of service in the company.

3. How much should the 13th month pay be?

If you worked for a full year without any unpaid absences, your 13th-month pay should be equivalent to a month's salary. Otherwise, it will be pro-rated.

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As required by law, the minimum 13th-month should not be less than a twelfth (1/12) of the total basic salary earned for the year.

To compute for your 13th-month pay, you divide your total basic salary earned for the year by 12. Take note that your basic salary excludes other earnings such as allowances, and overtime pay.

As long as your 13th-month pay does not exceed P82,000, it will be tax-free.

4. When should you receive your 13th month pay?

Employers should pay the 13th month pay on or before Dec. 24 according to the labor department.

5. Are resigned or terminated employees entitled to 13th month pay?

Yes, resigned or terminated employees are entitled to their 13th month pay. This will be computed using their total earnings for the time they worked in the company for the said calendar year.

The labor department has barred employers from seeking a deferment or exemption from paying the 13-month pay of their workers so this means that you should receive yours before Christmas.

Continue reading below ↓
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