The 13th-month pay is a government-mandated benefit for employees in the Philippines,
intended as a bonus and extra financial support at the end of the year. It is essential to
understand how to compute this payment to ensure both employers and employees are aligned with the law. This guide will explain the steps involved in calculating 13th-month pay, who is eligible, and the legal framework surrounding it.
What Is 13th Month Pay?
The 13th-month pay is a monetary benefit equivalent to one-twelfth (1/12) of an employee’s total basic salary earned within a calendar year. It was first introduced through Presidential Decree No. 851 in 1975. The decree aimed to provide workers with a year-end bonus to support their needs during the holiday season.
Unlike performance-based bonuses or incentives, the 13th-month pay is a mandatory benefit,
not subject to the discretion of the employer.
Who Is Eligible for 13th Month Pay?
Under Philippine law, all rank-and-file employees in the private sector are entitled to receive
13th-month pay, provided they have worked for at least one month during the calendar year.
This applies whether the employee is paid daily, weekly, or monthly.
Key Points to Remember:
Rank-and-file employees are eligible.
Employees who worked for at least one month are entitled.
Employers are required to pay this benefit on or before December 24 each year.
How to Calculate 13th Month Pay?
Basic Formula for 13th Month Pay
The formula for computing the 13th-month pay is straightforward:
This formula takes the total basic salary the employee earned over the year and divides it by 12 to determine the 13th-month pay.
Step-by-Step Calculation Example
Let's break down the computation process.
Identify the Total Basic Salary: The basic salary is the compensation an employee
receives for services rendered, excluding allowances, overtime pay, and other monetary
benefits such as the de minimis benefits. In this case, we focus purely on the regular
monthly salary.
Sum the Total Basic Salary for the Year: Add up the total basic salary earned by the
employee for the entire year. If the employee has not worked the full year, compute
based on the actual months worked.
Example:
If an employee’s monthly salary is ₱20,000 and they worked the full year (12
months), their total basic salary would be:
Divide the Total Basic Salary by 12: Divide the total basic salary by 12 months to get the 13th-month pay:
This means the employee is entitled to a 13th-month pay of ₱20,000.
How to Calculate 13th Month Pay for Employees Who Did Not Work the Full Year
For employees who have not completed 12 months of service, the computation is prorated.
Here's how to calculate the 13th-month pay for someone who has worked less than a year.
Formula:
Example: If an employee earns ₱20,000 monthly and only worked for eight months, their total salary earned for the year would be:
Then, the prorated 13th-month pay would be:
Inclusions and Exclusions in the 13th Month Pay Calculation
When computing for the 13th-month pay, it’s crucial to understand what is included in the
calculation.
Included in Basic Salary:
Regular monthly wages
Salaries earned during leaves (such as sick leave or vacation leave)
Not Included in Basic Salary:
Overtime pay
Night differential
Holiday pay
Commissions
Other bonuses or incentives
Profit-sharing payments
13th Month Pay for Freelancers
Freelancers, independent contractors, and those who are self-employed are not covered by the 13th-month pay law. This benefit is exclusive to regular employees in the private sector.
However, some companies may voluntarily offer bonuses or incentives to freelancers, but this is not a legal requirement.
13th Month Pay Law in the Philippines
As mentioned earlier, the 13th-month pay was mandated by Presidential Decree No. 851. The decree requires all employers to provide their eligible employees with a 13th-month pay on or before December 24 of each year.
Employers who fail to comply with this law may face penalties, including fines or imprisonment. The Department of Labor and Employment (DOLE) is responsible for enforcing this provision.
Penalties for Non-Compliance
Employers who fail to provide the 13th-month pay face legal consequences under Philippine
labor laws. The Department of Labor and Employment (DOLE) oversees the enforcement of this benefit. Employers who violate this regulation may be fined, required to compensate affected employees, or even face legal action.
Employee Benefits in the Philippines
In addition to the 13th-month pay, employees in the Philippines are entitled to various other
benefits, such as health insurance (PhilHealth), retirement benefits (SSS), and paid leaves.
These benefits are part of the overall compensation package that companies offer to comply
with Philippine labor laws.
Understanding the process of computing 13th-month pay in the Philippines is essential for both employers and employees. This government-mandated benefit ensures that employees receive a year-end bonus as a reward for their hard work. By following the correct 13th-month pay computation formula, employers can fulfill their legal obligations and foster a positive work environment.
If you are unsure about the specifics of your 13th-month pay calculation, consider consulting a
professional or contact us today to ensure accurate results of your payroll
Comments