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How to Compute 13th Month Pay in the Philippines

One of the few reasons why many Filipinos get excited about the holidays – aside from the gift-giving, plethora of food, the holiday break, and family reunions – is most the 13th-month pay.

Even if there’s a pandemic right now, many workers look forward to their year-end bonuses, including the 13th-month pay, especially for larger companies and organizations. With this in mind, we will discuss all there is to know about this favorite benefit among employees and workers in the Philippines. Keep reading below to find out more!

13th Month Pay (Christmas Bonus) in the Philippines: Here’s Everything You Need To Know About It

Here’s Everything You Need To Know About 13th Month Pay in the Philippines

 

Despite the long and difficult year that we had in 2021, the 13th-month pay is still something that most of us look forward to, especially now that we are slowly easing our way back to normalcy.

For those who may not know, the 13th-month pay is a Christmas bonus that’s computed monthly. It’s also the same as regular pay. Below, we will outline everything there is to know about this year-end bonus:

What is The 13th Month Pay In The Philippines?

13th-month pay is compensation that employees in the Philippines receive at the end of the year. It’s a benefit that employees are required to take advantage of regardless of their work conditions or how they are compensated.

13th Month Pay Computation

To calculate your 13th-month pay, simply multiply your basic monthly wage by the number of months you worked for the full year, then divide the result by 12 months.

Formula: Monthly Basic Salary x Employment Length ÷ 12 months

13th Month Pay Prorated Computation

Employees who worked for the company for less than 12 months will get a prorated 13th-month salary based on the number of months worked.

For example, if your basic monthly compensation is PHP 15,000 and you started working for your company in September, your 13th-month calculation should be as follows:

Formula: (PHP 15,000 x 3 months) ÷ 12 months = PHP 3,750

Who can Receive the 13th Month Pay?

All employees who have worked for more than one month during the previous calendar year are entitled to receive the thirteenth-month pay regardless of their work conditions.

Who are Rank-and-File Employees?

Non-management employees are considered as rank-and-file workers. A managerial employee has the authority to lay down rules and regulations, hire, transfer, suspend, or discipline employees.

When Can I Expect to Receive the 13th Month Pay?

It should be paid on or before December 24th of each year. An employer, on the other hand, may pay his employees half of the 13th-month wage before the start of the ordinary year and the other half on or before the 24th of December of each year.

Can the 13th Month Pay Be Considered As A “Bonus”?

No. A bonus is an amount that an employee receives that is above the minimum wage that the law requires. This bonus is not a requirement or an incentive to work hard and contribute to the company’s success.

Frequently Asked Questions

Here are other Frequently Asked Questions and answers about the 13th month pay rule in the Philippines?

1. Is the 13th-month pay taxable?

13th-month pay is now subject to taxation if it exceeds PHP 90,000 as per the TRAIN law. This amount is higher than the previous tax-free rate of PHP 82,000.

2. Why do employees receive a 13th-month pay?

The law requires you to get a monetary benefit in the form of 13th-month pay no later than December 24. Section 1 of Presidential Decree No. 851 states:

“All employers are hereby required to pay all their employees receiving a basic salary of not more than P1,000 a month, regardless of the nature of their employment, a 13th month pay not later than December 24 of every year.”

3. What’s the difference between a 13th-month pay and a bonus?

Unlike your monthly pay, a Christmas bonus isn’t government-mandated. It’s simply a bonus that’s given to everyone at the company.

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

No, maternity leaves are not factored into the 13th-month wage calculation. For example, if you missed two months of the calendar year due to maternity leave, you should only record the months in which you were present.

Therefore, using the same example as before, your computation should be as follows:

(PHP 15,000 x 10 months) ÷ 12 months = PHP 12,500

5. Are managers entitled to a 13th-month pay?

The 13th-month law only applies to rank-and-file employees; nevertheless, it is up to the corporation to decide whether or not to provide this yearly benefit to personnel in managerial positions. If you’re a manager, validate this with your office’s human resources department.

6. Are government employees entitled to 13th month pay?

Aside from government workers, freelancers and contractual workers are also not allowed to work for the government. They are instead subjected to the commission system.

According to the law, the 13th-month wage law should apply to all types of employers, with the exception of the following:

(b) 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;

(c) Employers already paying their employees 13 month pay or more in a calendar year of its equivalent at the time of this issuance;

(d) Employers of household helpers and persons in the personal service of another in relation to such workers; and

(e) Employers of those who are paid on purely commission, boundary, or task basis, and those who are paid a fixed amount for performing a specific work, irrespective of the time consumed in the performance thereof, except where the workers are paid on piece-rate basis in which case the employer shall be covered by this issuance insofar as such workers are concerned.

Aside from getting a holiday bonus, government employees also receive two different types of bonuses each year. These are the mid-year and year-end bonuses.

Each of these bonuses is equivalent to a month’s basic salary. Government employees also receive a cash gift of 5,000.

Under the Salary Standardization Law, these bonuses are given to government employees who are full-time, part-time, or regular.

7. If I resigned/was terminated from my company, am I still entitled?

Many employees who were terminated or resigned during the previous month still receive their 13th-month pay. This is because they worked for the company for at least a month during the previous year

A terminated or resigned employee’s 13th month is typically part of their back pay. This typically takes a month or two after their resignation date.

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

You can reach the DOLE’s 24-hour hotline at 1349. Alternatively, you can use the DOLE’s online query form.

9. Where Can I Invest My 13th Month Pay In?

There are actually lots of smart ways you can invest your 13th-month pay in. they are as follows:

  • Financial Investments: With holiday pay, you can invest it in stocks and mutual funds on a regular basis to boost your passive income. It’s also a great way to save for retirement.
  • Business Capital: You can also use your thirteenth-month pay to fund your small business. This idea is a great way to get started and avoid getting stuck with a bad business idea that doesn’t require much capital.
  • Real Estate: One of the best ways to save for retirement is by investing in real estate. This can be a great way to start building a nest egg and pay off a downpayment for a house or a rent-to-buy condo.

Even if you don’t plan on living in the house, you can still lease it and earn money from the rental payments. This can be done even if you’re not planning on buying it.

  • Insurance Policy: Aside from being a vital investment, insurance is also often overlooked by most Filipinos. Since it’s not an immediate need, most people do not realize that they can afford it.
  • Savings and Emergency Fund: If you don’t want to pay for anything during the 13th month, then start building up your savings and emergency fund. It will allow you to save without spending any money.
  • Travel and Leisure: You can always count on saving for your dream travel. This is one of the best 13th-month pay investments you can make.

Take the time to include your family in your travel plans this holiday season. It’s a great way to spend Christmas with the people that you love the most.

  • Family Matters: One more thing to consider when it comes to investing your 13th-month pay is investing in the needs of your family. This will allow you to spoil them without spoiling yourself.

If they’re not in need of urgent medical care, then don’t spend a dime on their regular check-ups. As long as they’re healthy, then investing in their future is as good as saving for them.

Summary

The 13th-month pay is a special cash benefit that should be used wisely. It can be used as a lump sum or it can be set aside as required savings. It should be put aside as required savings or invest it in a small business or insurance. It should also be used for unexpected expenses.

It’s always a good idea to save for a rainy day. Even if it’s not raining, make sure to stash some of your hard-earned money aside for emergencies.

Due to the 13th month pay period, Filipinos are allowed to celebrate Christmas and New Year properly. This means that they can plan their expenses and save enough for the future.

READ NEXT: Understanding Separation Pay Computation in Philippines

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