The 13th Month’s pay facility is available for all employees whether they are Govt servants or private sector employees. All the employees received the extra amount equal to one-twelfth of their basic salary not later than December. November and December are the months of Christmas when people spend lots of money on enjoyment, therefore this 13th Month’s pay provides extra support to the needy people for enjoyment like the wealthy people.
The 13th Month’s pay is the extra compensation for the employees to attend the parties, and especially enjoy the holidays, and the 13th Month’s pay depends on the basic salary of the employee.
Legal Basis for 13th Month Pay
The main legal basis of the 13th Month’s pay is to give an extra amount equal to at least one-twelfth of the basic salary, this is a legal order issued by the President of Philippines under the decree no: 851. The main of this is to provide financial support to employees during the holidays and Christmas events. Every rank-and-file employee whether they are regular, contract, daily or monthly worker, or any type of employee, is eligible for this 13th Month’s Pay. This 13th Month Pay is based on basic salary and must be released before December 24 each year.
Who is Entitled to 13th Month Pay?
According to Decree No: 851 all rank-and-file employees (Worked as subordinates or under the managerial staff) who have worked at least one month are eligible for this compensation of 13th Month’s Pay. Any rank-and-file employee regardless of their designation, nature of employment, the status of employment, or anyone who has just worked for one month is eligible for a 13th Month’s Pay.
The probationary employees are also eligible for the 13th Month’s Pay just like other regular employees regardless of their designation, employment status, and any other factor.
Who are rank-and-file employees?
Rank-and-file employees are those who work under the supervision of the managerial staff. These employees are low-rank workers to fulfill day-to-day tasks and work.
Computation of 13th Month Pay
The computation of the 13th Month Pay is very easy, the 13th Month Pay is based on the basic pay received by the employee in the calendar year and the 13th Month Pay is equal to one-twelfth of the basic pay in the calendar year. Bounces, incentives, commissions, allowances, overtime pay, holiday pay, unpaid leaves, night differential, unused vacation, and sick leaves are not included in the salary for the calculation of the 13th month’s pay.
| Months Covered | Basic Pay | Late | Absences | Undertime |
| April | 8,000.00 | 0 | 0 | 0 |
| May | 8,000.00 | 100 | 200 | 0 |
| June | 8,000.00 | 0 | 0 | 0 |
| July | 8,000.00 | 0 | 0 | 0 |
| August | 8,000.00 | 0 | 0 | 0 |
| September | 8,000.00 | 0 | 0 | 0 |
| October | 8,000.00 | 0 | 0 | 0 |
| November | 8,000.00 | 0 | 0 | 0 |
| December | 8,000.00 | 0 | 0 | 0 |
| Total | 72,000.00 | 100 | 200 | 0 |
13th Month Pay Calculation:
(72,000−(100+200))/12=5,975
| Formula: |
| Total basic salary earned during the year / 12 months = proportionate 13th mo. pay |
| Sample computation: |
| Php314,000.00 / 12 = Php26,166.17 |
Coverage and Exemptions
There are some exemptions in the rule i.e.
What is Prorated 13th-Month Pay?
Prorated means you will receive the 13th Month Pay on the basis of basic salary of the months in which you worked as private employee. For example, if you worked just 4 months as a private employee you will receive the 13th month’s pay on the basis of that four months’ basic salary. To compute your 13th month pay just sum up all the four month’s basic salary and divide it by 12.
Payment Deadline and Frequency
The payment must be given before December 24 each year, and they also can give this amount in installments, one in the month of June and another in the month of December, but it is mandatory to give the full amount to employees.
Non-compliance and Penalties
The 13th-month pay is mandatory, if anyone fails to pay this pay to their employee, they will be penalized by the Department of Labor and Employment.
Exceptions and Special Circumstances
- Anyone who is on maternity is eligible for the 13th Month’s pay, but only for those months they worked
- Resigned or separated employees are also eligible for 13th Month’s Pay
- Temprory laid-off or suspended employees are eligible for the 13th Month’s pay
Tax Treatment of 13th Month Pay
The 13th Month Pay is tax exempted, which means that there is no tax on this amount to be paid to the Govt of the Philippines.
Conclusion
13th Month Pay is the extra compensation for the Philippines citizens working in the private sector as rank-and-file workers. This financial support is legalized by the Presidential Order 1975 decree no: 851.
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