13th Month Pay in the Philippines: What employees and employers should know

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13th month pay in the philippines
The 13th month pay is a labor standard provision of the law that the Department of Labor and Employment (DOLE) does not compromise as to its payment. It is defined as 1/12 of the basic salary of an employee within a calendar year.

Since it is Christmas season people are busy to buy gift items, attend parties, think of what food to prepare and more. But there’s one thing that people are excited about, most especially employees, and that is their 13th month pay.

The 13th month pay is a labor standard provision of the law that the Department of Labor and Employment (DOLE) does not compromise as to its payment. It is defined as 1/12 of the basic salary of an employee within a calendar year. Basic salary include remunerations paid by an employer to an employee for services rendered but may not include cost-of-living-allowances (COLA) granted pursuant to President Decree No. 525 or Letter of Instructions no. 174.

The 13th month pay is considered a bonus mandated by law, while Christmas bonus varies depending on the company.

• Under the Labor Code, every covered employer is required to make a report of compliance to the nearest DOLE regional office not later than 15th of January each year.

• It is an obligation of every employer to give the 13th month pay not later than December 24.

• If employers failed to pay the 13th month benefit are accountable to money claim cases that aggrieved employees may file with any DOLE regional offices.

• In computing the 13th month pay, the total basic salary is multiplied by the employment length and is divided by 12 months.

Example: ₱15,000 x 10 months ÷ 12 months = ₱12,500.00

• An employee who resigned within the year shall be entitled to 13th month pay, as long as he/she has worked with the company for at least 1 month.

• As stated in the Republic Act No. 10653, 13th month pay is excluded from the computation of gross income for purposes of income taxation. However, the total exclusion shall not exceed eighty-two thousand pesos (₱ 82,000).

• Maternity leave benefits are not included in the computation of 13th month pay.

The following employers are exempted to pay 13th month under PD 851:

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

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

(c) Persons in the personal service of another in relation to such workers; and

(d) Employers 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 grant the required 13th month pay to such workers.

Moreover, the purpose of 13th month pay is for the employees to properly celebrate their Christmas and New Year with their loved ones. And probably, their time to spend some leisure times somewhere and an opportunity as well to save/invest.

In an interview with labor Secretary Silvestre Bello III he said that all rank-and-file employees should receive 13th month pay nevertheless of the nature of their employment and regardless of the methods by which their wages are paid as long as they worked for at least one month in a year.

Initially, Presidential Decree No. 851 states that only employees receiving a basic salary of not more than ₱1,000 a month were entitled to 13th month pay. But when President Corazon Aquino took the lead, she revised memorandum order 29, which entitled all employees to receive the benefit, regardless of how much basic salary they get.