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FAQS ON 13TH MONTH PAY

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Written by Bureau of Working Conditions Category: FAQs Hits: 49997

What is “13th month pay”?

It is a mandatory benefit provided to employees pursuant to Presidential Decree No. 851 which
requires employers to grant 13th month pay to all its rank and file employees.

What is “bonus”?

Bonus is an amount granted to an employee in excess of what the law requires as a reward or incentive
for achieving a goal and/or contributing to the success of the employer’s business. Unlike 13th month
pay, a bonus is given out of the employer’s generosity and is not a demandable and enforceable
obligation, unless when it has been made part of the wage or made the subject of an express
agreement.
Who are covered or entitled to the 13th month pay?

All rank-and-file employees who have worked for at least one (1) month during the calendar year, are
entitled to receive 13th month pay regardless of the nature of their employment and irrespective of the
methods by which their wages are paid.

Who are rank-and-file employees?

All employees not considered managerial employees are considered rank-and-file employees. 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, lay-off, recall, discharge, assign or discipline
employees, or to effectively recommend such managerial actions.

Are there employers who are exempted from paying 13th month?

Yes. The following employers are exempted from paying 13th month pay under PD 851:

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

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

c) Employers of persons in the personal service of another in relation to such workers; and
 d) 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 those workers who are paid on piece-rate basis, in which case the employer shall grant
such workers the required 13th month pay.

How is 13th month pay computed?

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

Total basic salary earned for the year = proportionate 13th month pay

12 months

Are maternity leave benefits included in the computation of 13th month pay?

No. Maternity leave benefits are not included in the computation of 13th month pay.

To illustrate, assuming that a female employee is receiving a monthly salary of P10,000.00 and was on
maternity leave from June 1 to July 31, 2013:

January - P10,000.00 P100,000.00 = P8,333.33

February - P10,000.00 12 months

March - P10,000.00

April - P10,000.00

May - P10,000.00

June - on maternity leave

July - on maternity leave

August - P10,000.00

September - P10,000.00

October - P10,000.00

November - P10,000.00

December - P10,000.00

P100,000.00

P8,333.33 is the proportionate 13th month pay of a female employee who was on maternity leave
from June 1 to July 31, 2013.

What does “basic salary” comprise of?

 “Basic salary” shall include all remunerations or earnings paid by an employer to an employee 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 include cost-of-living
allowances. However, these salary-related benefits should be included as part of the basic salary in the
computation of the 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.

When should the 13th month pay be paid?

It should be paid not later than December 24 of each year. An employer, however, may give to his
employees one-half of the 13th month pay before the opening of the regular school year and the other
half on or before the 24th day of December of every year.

Are resigned or separated/terminated employees entitled to 13th month pay?

Yes. An employee who has resigned or whose services were terminated at any time before the time
for payment of 13th month is still entitled to the benefit.

How much is the 13th month pay of a resigned or separated/ terminated employee?

The 13th month pay of a resigned or separated/terminated employee is in proportion to the length of
time he or she has worked during the year, reckoned (a) from the time she has starting working during
the calendar year or (b) the time the last 13th month pay was given, up to the time of his/her
resignation or separation/termination from the service.
Thus, if he/she worked only from January to September, his/her 13th month pay shall be equal to 1/12
of his total basic salary earned during that period