How to Calculate 13th Month Pay

What is the 13th Month Pay?

13th Month Pay

The 13th month pay is a mandatory financial benefit that employers in the Philippines are required to provide to their employees. It is an additional payment equivalent to one month’s basic salary that all employees should receive before the year ends. This extra compensation aims to help Filipino workers cope with the increased expenses incurred during the holiday season, such as buying gifts, hosting family gatherings, and other festive activities.

The computation of the 13th month pay is governed by Presidential Decree No. 851, which mandates its payment to all rank-and-file employees, regardless of their employment status, designation, or method of payment. The law ensures that all employees receive this extra benefit, as it is considered a fundamental right in the employment sector.

Considering the importance of the 13th month pay, it is crucial for both employers and employees to understand how it is computed accurately. This ensures that employees receive the correct amount they are entitled to, and employers comply with the legal requirements set forth by the government. The computation varies depending on the employee’s salary structure and employment period within the calendar year.

For employees who have worked for at least one month during the calendar year, regardless of whether they are still employed or have resigned, retired, or terminated, they are entitled to the full 13th month pay. This means that their basic salary for the whole year, including any adjustments or increases, will be divided by twelve months to determine the amount of their 13th month pay.

On the other hand, for employees who have not completed the entire calendar year or have not worked for a full twelve months, a proportional computation is applied. The amount will be based on their total basic salary earned during the employment period divided by twelve months, which will result in their prorated 13th month pay.

It is important to note that the 13th month pay is subject to statutory deductions such as taxes and other authorized deductions. These deductions are calculated and withheld based on the employee’s gross income and applicable tax rates as defined by the Bureau of Internal Revenue (BIR) and other relevant government agencies.

Moreover, employers have the option to provide the 13th month pay in two installments. The first installment should be given no later than June 30th, while the second installment must be provided no later than December 24th of each year. However, if the employee requests in writing and there is an urgent need, the employer may provide the full amount earlier or on a different date, as long as it falls within the same calendar year.

In conclusion, the 13th month pay is an essential financial benefit for employees in the Philippines. It ensures that workers receive an additional month’s worth of salary to aid them during the holiday season. Understanding how to compute the 13th month pay accurately is vital for both employers and employees to fulfill their legal obligations and rights. By adhering to the prescribed computation methods and complying with the necessary deductions, employers can fulfill their duty to provide fair compensation, fostering goodwill and employee welfare in the workplace.

Who is Eligible for the 13th Month Pay?


All rank-and-file employees in the public and private sectors, regardless of their employment status or length of service, are entitled to receive the 13th month pay.

The 13th month pay is a mandatory benefit given to employees in the Philippines, which aims to provide them with additional income during the holiday season. This extra payment helps employees meet their financial obligations, such as buying gifts, paying bills, or supporting their families.

How is the 13th Month Pay Computed?

13th Month Pay Calculation

The computation of the 13th month pay is relatively straightforward. The basic formula used is as follows:

Monthly Basic Salary x Number of Months Actually Worked = 13th Month Pay

It is important to note that the “monthly basic salary” used in the computation does not include allowances, bonuses, or overtime pay. Only the employee’s basic salary is considered. This ensures that the computation remains fair across different employees, regardless of their additional benefits.

The “number of months actually worked” refers to the number of months an employee has worked during the calendar year. This includes any leaves of absence with pay, such as sick leaves or vacation leaves. However, if an employee has taken leaves without pay, those months are not included in the computation.

For example, if an employee has a monthly basic salary of $1,000 and has worked for the full 12 months in a year, their 13th month pay would amount to $12,000. This payment is usually given in full before the end of the year or can be prorated and given in installments throughout the year, depending on the employer’s preference.

It is important for employers to ensure accurate and fair computation of the 13th month pay to maintain a good working relationship with their employees and to comply with labor laws and regulations.

Common Issues and Concerns

Common Issues and Concerns

While the computation of the 13th month pay is generally straightforward, there are some common issues and concerns that may arise:

1. Part-Time Employees: Part-time employees are also entitled to receive the 13th month pay. Their payment is prorated based on the number of months they have worked compared to a full-time employee.

2. Probationary and Seasonal Employees: Probationary and seasonal employees are also eligible for the 13th month pay, as long as they have worked for at least one month in a calendar year. Their payment is computed using the same formula mentioned earlier.

3. Resignation or Termination: If an employee resigned or was terminated before receiving the 13th month pay, they are still entitled to receive this benefit. The payment should be made upon separation from the company, along with any other due benefits.

4. Exemptions: Certain types of employees, such as managerial or confidential employees, are exempted from receiving the 13th month pay. However, this exemption should be based on their job functions and responsibilities, not just their job titles.

5. Legal Disputes: In case of any disputes regarding the 13th month pay computation or non-payment, employees can seek assistance from the Department of Labor and Employment (DOLE) or consult with a labor lawyer for further advice and resolution.

Overall, understanding and properly computing the 13th month pay is crucial for both employers and employees. It promotes fair compensation practices and helps ensure that employees receive their well-deserved benefits during the holiday season.

How is the 13th Month Pay Computed?

13th Month Pay Computation

Calculating the 13th month pay requires dividing the total basic salary an employee earned within a calendar year by 12. This computation method ensures that employees receive an additional salary equivalent to one month’s pay.

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