13th Month Pay in the Philippines

The 13th month pay in the Philippines is equivalent to 1/12 of the basic salary received by an employee within the year. If a Filipino employee worked for less than a year (regardless of the cause for the termination of his employment), the amount due to him is determined by dividing the total salary he received by the number of months he was employed. The computation of the basic salary does not include allowances and monetary benefits that are not considered or integrated as part of the employee’s regular compensation.

The items that are taken off the list are: cash equivalent of unused vacation and sick leave credits; overtime, premium, night differential and holiday pay, and cost-of-living allowance. If, however, these benefits are, by agreement company practice or policy treated as part of the basic salary, then they shall be included in the computation of an employee’s 13th month pay. Although the law requires that the extra pay be given not later than Dec. 24, the employer may give 50 percent before the opening of the regular school year and the balance on the cut-off date mentioned.

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13th Month Pay Coverage

The 13th month pay should not be confused with the bonus which is not part of the benefit mandated by Philippine law. It is already discretionary on the part of the employers to give a bonus to their employees on top of the 13th month pay which is mandatory. The early in December an employer can provide 13th month pay for its Filipino employees, the more the employees will appreciate it. Not releasing 13th month pay by December 24 could result in sanctions of law and VERY disgruntled Filipino employees.

When the 13th month pay decree came out in the Philippines, those who were already receiving a Christmas bonus from their employer thought the extra pay decreed by the government would be in addition to their company benefit. However, the decree states that employers already paying their employees the equivalent of a 13th month pay are exempted from its coverage. Some companies though chose to maintain their Christmas bonus on top of the obligatory 13th month pay in the Philippines.

13th Month Pay Tax Obligation

The recipient of the 13th month pay is not the only beneficiary of that Christmas-related gesture. The Philippine government shares in it by way of income tax. Under existing tax regulations, up to a maximum of P60,000 of that additional income is exempt from the income tax due from fixed wage earners. Anything beyond that cut-off amount must be included in the computation of the employee’s gross income for the applicable taxable year. Ordinarily, the tax due for income received by an employee should be withheld by the employer and later remitted to the Bureau of Internal Revenue, before he gets his pay check.

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4 thoughts on “13th Month Pay in the Philippines

  1. James

    Hi Sir,
    I have a question regarding 13th month pay. I filed an illegal dismissal case last yr. Decision came out last month and I won. I was reinstated 2 weeks ago even pending appeal. My question is how is the computation of my 13th month pay this yr? Our hr mentioned it will only be pro rated since I just started working again last month. But isn’t that a violation of the order of the LA ordering reinstatement under the same terms and conditions? In other words should I get the whole 13th month pay this year? Thank you.

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    1. You are correct, you should get your 13th month pay for the whole year, especially if you were awarded back wages from the time of dismissal to the date of reinstatement. Your HR is wrong, as you did not “just start working” again last month. The reinstatement means you were never terminated, and your tenure continues without interruption. I would suggest that you go above the head of your HR to more senior management to discuss this issue, as HR generalists are not normally lawyers and will not understand the requirements of the reinstatement.

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      1. James

        Appreciate your response sir. I have a follow up question if you don’t mind. We have what we call a Timebank. Its basically the number of VL and SL allotted every year. I’ve worked in the company for 3 yrs and am entitled to 40 annual timebank. The unused timebank is convertible to cash every year. Is it safe to assume that I should also earn the accrued timebank since the time of my dismissal until actual reinstatement? Hence I can request it to be converted into cash? I was dismissed Dec 2020 and reinstated Aug 2022. I’ve requested a re-computation of my timebank from the HR and they only mentioned it was going to be pro rata. Again I think its a violation of the terms and conditions set by the LA for reinstatement with full backwages and other benefits without loss in seniority and rights. Thank you.

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      2. Most of the time, the Arbiters award is based solely on pay slips, and any monetary benefits and allowances included therein are also included in the award of back wages. Non-monetary benefits, however, must actually be named as awarded for the claim to be valid. In the case of Timebank days, these are leave allowances provided over and above the standard five days given in the law under the Service Incentive Leave. In your claim, did you include leave accrual? And does the Decision of the Arbiter include non-monetary benefits? Go by what the dispositive portion of the decision states, nothing more. If it is not included, you are not entitled to claim it.

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