13th-Month Pay in the Philippines

March 12th 2024

The 13th-month pay in the Philippines is a mandated monetary benefit eagerly anticipated by employees. It is valued for its role as both a financial boost and a symbol of the government’s commitment to recognizing employee contributions and ensuring fair labor practices.

Employers must understand the importance of honoring their workforce and adhering to labor laws, while employees need to grasp its details to ensure fair compensation. This article aims to provide comprehensive insights about 13th-month pay in the Philippines. By exploring its computation method and eligibility criteria, both employees and employers will have the necessary knowledge to navigate this important provision of labor law in the Philippines.

This article covers:

What is the 13th-Month Pay in the Philippines?

The 13th-month pay is a type of monetary benefit in the Philippines that the government mandates under Presidential Decree No. 851. As per the DOLE Advisory No. 25, Series of 2023, employees are entitled to receive at least 1/12th of their basic salary earned during the calendar year.

It is important to note that the 13th-month pay and Christmas bonus are separate benefits with different rules. While the 13th-month pay is mandatory, the Christmas bonus is not. Employers can choose whether or not to include a Christmas bonus in their employee benefits package.

Why Does the 13th-Month Pay Exist in the Philippines?

The 13th-month pay in the Philippines finds its origins in the legislative efforts of the late President Ferdinand Marcos Sr., who codified the policy into law in 1975. This legislation marked a significant milestone in the country’s labor history, setting an example for equitable compensation practices. Inspired by this initiative, several former Spanish colonies, including various countries in Latin America, have also adopted the 13th-month pay to provide additional support to their workers.

Originally, the 13th-month pay was meant as a Christmas bonus to alleviate financial burdens during the holiday season, ensuring that workers could celebrate without the added stress of bills and expenses. Since then, it has evolved into a fundamental aspect of labor laws in the Philippines, symbolizing the government’s commitment to promoting social welfare and recognizing the invaluable contributions of employees.

When is the 13th-Month Pay in the Philippines Given?

In the Philippines, employers must provide their employees with a 13th-month payment, which should be given on or before December 24 of each year. For employers who follow a bi-weekly payment scheme, they should distribute the 13th-month pay from November 16 to November 30 to ensure that their employees receive the 13th-month benefit within the first weeks of December.

Alternatively, employers can opt to pay the 13th-month pay biannually. Instead of settling the value of 12 months once in December, employers may pay the sum of 6 months twice.

Who is Eligible for the 13th-Month Pay in the Philippines?

In the Philippines, all rank-and-file employees who have worked for at least a month within the calendar year are entitled to receive the 13th-month pay. Rank-and-file employees refer to workers holding regular positions within an organization and do not hold any supervisory or managerial roles. These employees include administrative staff, clerks, technicians, production workers, sales representatives, customer service agents, and others in similar positions.

Who are Exempted from Receiving the 13th-Month Pay in the Philippines?

It is important to note that not all employees in the Philippines are eligible for the 13th-month pay. Specifically, government employees, workers in government-owned controlled corporations (GOCCs), and employees of private subsidiaries of the government are excluded from this benefit. The reason behind this exemption is the diverse compensation structures and bonus schemes that public or government sector employees follow.

Other exemptions apply to the 13th-month pay, including:

  • Freelancers
  • Task-based employees
  • Commission-based employees
  • Contractual workers
  • Household helpers and persons in personal service
  • Employees who are paid a fixed amount for specific work

Although managers are typically exempt from the 13th-month pay, some employers still provide this benefit to their managerial employees.

Who Qualifies for Exemption from Providing the 13th-Month Pay in the Philippines?

Certain employers in the Philippines are exempt from paying the 13th-month pay benefit to their employees. The exempt employers are:

  • Distressed employers, such as those currently incurring substantial losses or non-profit institutions and organizations whose income has consistently declined by more than 40% of their normal income for the last two years. Distressed employers must secure authorization from the Secretary of Labor.
  • Government entities, including their political subdivisions and government-owned and controlled corporations (GOCCs).
  • Employers already pay employees the equivalent of 13th-month pay or more in a calendar year.
  • Employers of household helpers or personal service.
  • Employers are those who are paid on a purely commission, boundary, or task basis. However, employers of workers paid on a piece-rate basis must grant such workers 13th-month pay.

Calculating 13th-Month Pay in the Philippines

Employers can calculate the 13th-month pay in two ways, depending on the employee’s duration of employment. Regular employees receive the full amount of the 13th-month payment, while employees who have worked less than a year only receive a prorated sum based on their tenure. 

Calculating 13th-Month Pay for Regular Employees

According to DOLE, the 13th-month pay must be at least 1/12th of the total basic salary earned by an employee within the calendar year. To compute, employers can follow this formula:

Total basic salary earned during the year / 12 months = 13th-month pay

Calculating 13th-Month Pay for Prorated Employees

However, the 13th-month pay is not automatically equivalent to an employee’s one-month salary. Prorated employees, or those workers who have worked less than 12 months within a calendar year, will receive a prorated 13th-month pay. The computation of the prorated 13th-month pay is based only on the months you have worked for the company.

Total basic salary earned during the year / months worked = prorated 13th-month pay

Generally, a prorated 13th-month pay is given to employees hired by a company in the middle or toward the end of the year.

Here is a sample computation of a prorated 13th-month pay:

Month Status Basic Salary
January Unemployed PHP 0.00
February Unemployed PHP 0.00
March Employed, no absence PHP 14,867.50
April Employed, no absence PHP 14,867.50
May Employed, no absence PHP 14,867.50
June Employed, no absence PHP 14,867.50
July Employed, 1 day leave without pay PHP 14,297.50
August Employed, no absence PHP 14,867.50
September Employed, no absence PHP 14,867.50
October Employer, 10 day leave without pay PHP 9,167.50
November Employed, no absence PHP 14,867.50
December Employed, no absence PHP 14,867.50

Based on the table above, the employee’s total basic salary of the year is PHP 142,405.

Using the computation formula:

PHP 142,405 / 10 months = PHP 14,240.5

The employee will receive a prorated 13 month pay of PHP 14,240.5.

How Does the DOLE Enforces the 13th-Month Pay in the Philippines?

The Department of Labor and Employment (DOLE) monitors all employers’ compliance with the 13th-month pay. Employers in the Philippines are required to file a compliance report with the DOLE Establishment Report portal. The report must be submitted on or before January 15 and must contain the following information:

  • Name of the establishment
  • Address of the establishment
  • Principal product or business
  • Total number of employees
  • Total number of eligible employees
  • Amount granted per employee
  • Total amount of benefits granted to employees
  • Name, position, and contact information of the person making the report

Penalties for Violating the 13th-Month Pay in the Philippines

Employers in the Philippines are required by law to pay their employees a 13th-month salary. Failure to comply with this law may result in various legal consequences for the employer, such as administrative sanctions or even criminal liability. The specific penalties may vary depending on the situation and can include fines, imprisonment, or both.

Learn about Labor Laws in the Philippines through our detailed guide.

Important Cautionary Note

When making this guide we have tried to make it accurate, but we do not give any guarantee that the information provided is correct or up-to-date. We therefore strongly advise you seek advice from qualified professionals before acting on any information provided in this guide. We do not accept any liability for any damages or risks incurred for use of this guide.