13th month

In the Philippines, the sound of Christmas bells not only evokes the feeling of Christmas cheer but also signals for the payment of the 13th month pay for employees.


Under Presidential Decree 851, all rank-and-file employees are entitled to the 13th month pay regardless of the amount of basic salary that they receive in a month.  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. It must however be noted that managerial employees are NOT entitled to the 13th month pay.


Not all employers are obliged to pay 13th month pay to their employees namely:


a.  The Government and any of its political subdivisions, including government-owned and controlled corporations, excepts those corporations operating essentially as private subsidiaries of the Government;

b.  Employers already paying their employees a 13th month pay or more in a calendar year or its equivalent at the time of this issuance of PD 851; and

c.  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.


What about bonuses or other compensation given by the employer which is more than the mandated 13th Month Pay?


If the employer has been giving its employees a bonus which is equivalent to the 13th month pay and is more than the amount mandated by law, such bonus may be considered as compliance with the grant of the 13th Month Pay. The term “its equivalent” shall include Christmas bonus, mid-year bonus, profit-sharing payments and other cash bonuses amounting to not less than 1/12th of the basic salary. However, it bears great emphasis that if the bonus clearly show that it is in addition to the 13th month pay and that there are certain conditions imposed, it may not be credited as part of the 13th month pay.


How is the 13th Month Pay computed?


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


The “basic salary” of an employee for the purpose of computing the 13th month pay shall include all remunerations or earnings paid by his 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, such as the cash equivalent of unused vacation and sick leave credits, overtime premium, night differential and holiday pay, and cost-of-living allowances (COLA).  However, these salary-related benefits should be included as part of the basic salary in the computation of 13th month pay if by individual or collective agreement, company practice or policy, the same are treated as part of the basic salary of the employees.


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, reckoned from the time he started working during the calendar year up to the time of his resignation or termination from the service.


When should the 13th month pay be given?


The 13th – month pay should be paid not later than December 24 of every year. Some employers prefer to give half of the 13th month pay in June and the balance before the 24th of December.


Nicolas & De Vega Law Offices is a full-service law firm in the Philippines.  You may visit us at the 16th Flr., Suite 1607 AIC Burgundy Empire Tower, ADB Ave., Ortigas Center, 1605 Pasig City, Metro Manila, Philippines.  You may also call us at +632 4706126, +632 4706130, +632 4016392 or e-mail us at [email protected] .