13 Month Pay Computation in the Philippines [Complete Guide]

Last Updated – Feb 7, 2023 @ 9:34 am

Christmas is not the only thing Filipinos look forward to every December.

In the Philippines, the holiday spirit means a few things: Jose Mari Chan playing in the background, kids caroling every night, and of course, the highly anticipated “13th month pay,” – a welcome bonus usually used to pay for Christmas gifts for our loved ones.

While most local businesses are already familiar with this government-mandated perk, this concept may be new for international companies.

If you want to know more about 13th month pay, including how to compute it, and other nitty-gritty details about this law, this guide is for you.

Contents

What is 13th Month Pay in the Philippines?

13th-month pay is a government-mandated compensation companies give to employees at the end of the year. Although many people think of 13th-month pay as a Christmas bonus, it isn’t actually one. Instead, it’s part of the country’s employment law.

In comparison, a Christmas bonus can be any amount given to employees as an incentive for their exemplary performance. 13th month pay was passed into law on December 16, 1975, when former President Ferdinand Marcos signed Presidential Decree No. 851.

Companies must pay all their eligible employees their 13th month salary on or before December 24th of each year. Most companies pay this in one lump sum, although there are others that pay in two installments (one in June, and one in December).

Because it is mandated by law, employees can take legal action against employers that do not pay the 13th salary.

Who Is Entitled to Receive 13th Month Pay DOLE?

Based on guidelines by DOLE, all private sector “rank-and-file” employees must receive 13th month pay as a benefit. These employees must have rendered services for the company for at least one month during the calendar year.

But what exactly are rank-and-file employees?

It includes workers who are not serving in managerial positions. Therefore, it does not include those who have the authority to discipline, hire, or discharge employees that are entitled to the said pay.

As long as these conditions are met, employees must receive the 13th month pay even if they were terminated before the payment, or they resigned.

How Much is 13th Money Pay Philippines?

According to DOLE, the minimum 13th month pay required by the law should not be less than 1/12 of the total basic salary earned by workers within one calendar year.

Basic 13th Month Pay Formula in the Philippines

You don’t have to be a math expert to know how to compute 13th month pay. Keep in mind that basic salary is only limited to the regular earnings of employees.

It does not include allowances and other monetary benefits that are not part of regular pay such as sick leave, holiday pay, and overtime. Maternity leave benefits are not excluded.

For the formula, all you need is the basic salary, and then simply divide it by 12.

Total basic salary per year / 12 = 13th month pay.

For example, if an employee earns Php14,000 per month and doesn’t have unpaid days off, it would be:

Php168,000 / 12 = Php14,000

How to Compute Prorated 13th Month Pay

How do you compute the 13th month pay for employees who left the company mid-year, or have worked for less than 12 months?

For these cases, you need to divide their accrued salary to date by 12 instead of dividing it by the total annual salary. This is called prorated 13th month pay.

Let’s go back to the previous example. If an employee earns Php14,000 per month but only worked for the company for five months by December 31, here’s how their 13th month pay would be computed:

Php70,000 / 12 = Php5,833.3

Frequently Asked Questions About 13^th Month Pay

Still got questions about 13^th month pay? We’ll answer them below.

Is 13th Month Pay Taxable?

Yes, but not all the time. If the 13th month pay exceeds Php90,000, only then can it be taxable. But if the amount is less than Php90,000, employees will receive their 13th month pay tax-free. The threshold used to be Php82,000 before the Tax Reform for Acceleration and Inclusion (TRAIN) law was issued in 2018.

When will I receive my 13th Month Pay?

Companies are required to give the 13th month pay on or before December 24 of each year. There are also companies that give out 13th month pay in two installments throughout the year, both 50-50.

What’s the difference between a 13th Month Pay and a Bonus?

As stated above, 13th month pay is mandated by law. Meanwhile, bonuses are a way for employers to show appreciation to their employees.

Are maternity leaves included in the 13th month pay computation?

No. Maternity leaves, as well as other parental leaves are not included.

Are managers entitled to a 13th Month Pay?

No. According to the law, the mandated monetary benefits are only for rank-and-file or non-managerial employees.

Are government employees entitled to 13th month pay?

Currently, government employees are not entitled to receive 13th month pay. This covers those who work for government-owned and controlled corporations, but not corporations that operate essentially as a private subsidiary of the government.

That said, under Section 8 of Republic Act No. 11466, or the Salary Standardization Law of 2019, government employees are entitled to the following:

Mid-year bonus equivalent to 1 month basic salary
Year-end bonus equivalent to 1 month basic salary
Cash gift of Php5,000 every November

If I resigned or was terminated from my company, am I still entitled to 13th month pay?

Yes. Even if you’ve left your company, you will still receive 13th month pay.

When is the 13th month pay given to resigned/terminated employees?

Just like for employees that still work for the company, the 13th month pay for terminated or resigned employees should be given on or before the 24th of December.

I’ve never received my 13th month pay. How do I report it?

Because the 13th month pay is mandatory, employees who have not received it must report their employers to the DOLE Regional Office in their area before January 15 of the following year.

7 Smart Ways to Spend your 13th Month Pay

Receiving extra money, especially during the Holidays, is always exciting. But before you spend all your money mindlessly, take note of some of the smartest ways you can spend your 13th month pay below.

Some of these tips may not be as exciting as checking out orders on Shopee or Lazada, or getting the newest iPhone model, but these will surely give you more peace of mind that you’re investing in your future.

Add it to your emergency fund

If you’re a fresh grad who’s still starting your career, you may add that extra money to your emergency fund. You can never predict what’s going to happen in the future, so better start saving up for a rainy day as early as you can.

Generally, your emergency fund should be at least 6x your monthly salary.

This fund is essential for financially empowering yourself in case you encounter any setbacks due to unexpected events like losing your job, a major illness, or damage to your home.

Buy dividend stocks

Dividend stocks are mature and stable companies that pay out regular earnings to shareholders. This investment vehicle usually has a proven track record when it comes to paying dividends throughout the years.

Dividend stocks are an amazing long-term investment vehicle that will surely make your money grow over time. There’s no one-day gain when it comes to investing in dividend stocks. You just have to be wise enough and wait for the right time to sell your stocks to maximize your profits.

Curious about dividend investing? Check out our in-depth guide about it here.

Use it to pay off debts

Doesn’t the idea of being debt-free before the new year bring you joy? After all, nobody wants to be stuck with high-interest loans.

Simply check your outstanding balances and pay more than the minimum monthly payment you’re currently paying.

You may also pay off high-interest loans first. This could be your credit card balance or auto loan. It’s never too late to start making a difference in your financial future.

Learn More: Debt Management – How to Get Out of Debt Guide

Invest in health insurance

We may not be able to predict what’s going to happen in the future, but one thing’s for sure – most health problems don’t happen with a warning, and they always come with a hefty price tag.

That’s why investing in health insurance is a smart move. You can purchase an annual plan for a couple of thousand pesos, but it’s worth it since you’re covering a big chunk of your medical expenses.

Use it to travel

If you have a dream destination, why not just spend your 13th month pay to make your dream vacation happen, or at least add to your trip savings?

Traveling is an amazing way to relax and rejuvenate yourself so treat it as an investment. After your vacation, you’ll be more energized and productive.

It’s also a great way to immerse yourself in new cultures, or bond with your family and loved ones.

Related Guide: 40+ Travel Saving Tips

Donate it

Donating to charity is always a good deed, and this is why it’s one of the best ways you can spend your 13th month pay.

You don’t have to donate massive amounts. Even a little will make a big difference. Remember that it’s always better to give than to receive, and this is one way to make you feel good.

You can choose to donate to a local or international NGO. Take a look at our list of charitable institutions in the Philippines to give you an idea of which organization you can donate to. You may even find a new cause you can advocate for.

Treat yourself

Frugal fatigue is real. It means being so tired of pinching pennies and not treating yourself. If you’re feeling this way, why not relieve your weariness through your 13th month pay?

There are so many ways you can treat yourself, and you should make this decision depending on your needs.

For instance, if you’ve had your phone for years and it’s already very slow, maybe it’s time to get yourself a new one. After all, phones are no longer a luxury, but a necessity.

You may also combine this tip with any of the ideas listed above. For example, if you use the majority of your 13th month pay to pay off debts, you can reward yourself with a nice dinner to celebrate the end of your debt cycle.

A little reminder: Your 13th month pay is truly an incredible year-end treat. However, becoming too reliant on this can lead to problems down the line.

Instead of relying on your 13th month pay, use it as an opportunity to spend on something meaningful. Don’t treat it as a lottery prize that you weren’t expecting because let’s be honest, you were probably looking forward to it since September.

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