10 THINGS YOU NEED TO KNOW ABOUT 13TH MONTH PAY

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1 COVERAGE

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.

2 DEFINITION OF RANK-AND-FILE EMPLOYEES

The Labor Code, as amended, distinguishes a rank-and-file employee from a managerial employee. A managerial employee is one who is vested with powers or prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, layoff, recall, discharge, assign, or discipline employees, or to effectively recommend such managerial actions. All employees not falling within this definition are considered rank-and-file employees.

3 MINIMUM AMOUNT

The thirteenth-month pay shall not be less than one-twelfth (1/12) of the total basic salary earned by an employee in a calendar year.

The “basic salary” of an employee for the purpose of computing the thirteenth-month pay shall include all remunerations or earnings paid by his or her employer for services rendered. It 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 shift differential and holiday pay, and cost of living allowance (COLA). However, these salary-related benefits should be included as part of the basic salary in the computation of the thirteenth-month pay if these are treated as part of the basic salary of the employees, through individual or collective agreement, company practice or policy.

4 FORMULA AND COMPUTATION OF 13TH MONTH PAY

5 TIME OF PAYMENT OF THIRTEENTH-MONTH PAY

The thirteenth-month pay shall be paid not later than December 24 of every year. An employer, however, may give to his or her employee s one half (1/2) of the thirteenth-month pay before the opening of the regular school year and the remaining half on or before December 24 of every year. The frequency of payment of this monetary benefit may be the subject of an agreement between the employer and the recognized/collective bargaining agent of the employees.

6 THIRTEENTH-MONTH PAY FOR CERTAIN TYPES OF EMPLOYEES

  1. Employees who are paid on piecework basis are entitled to the thirteenth-month pay.
  2. Employees who are paid a fixed or guaranteed wage plus commission are also entitled to the thirteenth-month pay, based on their earnings during the calendar year (i.e., on both their fixed or guaranteed wage and commission).
  3. Employees with multiple employers Government employees working part-time in a private enterprise, including private educational institutions, as well as employees working in two or more private firms, whether on full-time or part-time basis, are entitled to the thirteenth- month pay from all their private employers, regardless of their total earnings from each of their employers.

7 THIRTEENTH-MONTH PAY OF RESIGNED OR SEPARATED EMPLOYEE

An employee who has resigned or whose services are terminated at any time before the time of payment of the thirteenth-month pay is entitled to this monetary benefit in proportion to the length of time he or she has worked during the year, reckoned from the time he or she has started working during the calendar year up to the time of his or her resignation or termination from the service. Thus, if he or she worked only from January to September, his or her proportionate thirteenth-month pay should be equal to one-twelfth (1/12) of his or her total basic salary earned during that period.

8 NON-INCLUSION IN REGULAR WAGE

An employee who has resigned or whose services are terminated at any time before the time of payment of the thirteenth-month pay is entitled to this monetary benefit in proportion to the length of time he or she has worked during the year, reckoned from the time he or she has started working during the calendar year up to the time of his or her resignation or termination from the service. Thus, if he or she worked only from January to September, his or her proportionate thirteenth-month pay should be equal to one-twelfth (1/12) of his or her total basic salary earned during that period.

9 COVERAGE FROM INCOME TAX OF THE 13TH MONTH PAY

13th month pay and other benefits, such as productivity incentives and Christmas bonus, not exceeding Eighty-Two Thousand Pesos (P82.000.00) are exempt from taxation.

Revenue Regulations No. 3-2015, which implements R.A. No. 10653, emphasized that the amount of P82,000.00 shall only apply to the 13th month pay and other benefits prescribed under the provisions of Section 2.78.1 (B) (11) of RR No. 2-98, as amended, and shall in no case apply to other compensation received by an employee under an employer-employee relationship, such as basic salary and other allowances.

10 PRESIDENTIAL DECREE 851

The payment of 13th month pay is pursuant to Presidential Decree 851.

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