What is “13th month pay”?

It is a mandatory benefit provided to employees pursuant to Presidential Decree No.

851 which requires employers to grant 13th month pay to all its rank and file employees.

What is “bonus”?

Bonus is an amount granted to an employee in excess of what the law requires as a

reward or incentive for achieving a goal and/or contributing to the success of the
employer’s business. Unlike 13th month pay, a bonus is given out of the employer’s
generosity and is not a demandable and enforceable obligation, unless when it has
been made part of the wage or made the subject of an express agreement.

Who are covered or entitled to the 13th month pay?

All rank-and-file employees who have worked for at least one (1) month during the
calendar year, are entitled to receive 13 th month pay regardless of the nature of their
employment and irrespective of the methods by which their wages are paid.

Who are rank-and-file employees?

All employees not considered managerial employees are considered rank-and-file

employees. A managerial employee is one who is vested with powers or prerogatives to
lay down and execute management policies and/or to hire, transfer, suspend, lay-off,
recall, discharge, assign or discipline employees, or to effectively recommend such
managerial actions.

Are there employers who are exempted from paying 13 th month?

Yes. The following employers are exempted from paying 13 th month pay under PD
851:

a) 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;

b) Employers who are already paying their employees 13 th month pay or more in a
calendar year or its equivalent at the time of the issuance of PD 851;

c) Employers of persons in the personal service of another in relation to such workers;

and

d) Employers of those who are paid on purely commission, boundary, or task basis,
and those who are paid a fixed amount for performing specific work, irrespective of the
time consumed in the performance thereof, except those workers who are paid on
piece-rate basis, in which case the employer shall grant such workers the required
13th month pay.

How is 13th month pay computed?

The 13th month pay shall not be less than 1/12 of the total basic salary earned by an
employee within a calendar year. To illustrate:

Total basic salary earned for the year = proportionate 13th month pay

12 months

Are maternity leave benefits included in the computation of 13 th month pay?

No. Maternity leave benefits are not included in the computation of 13 th month pay.

To illustrate, assuming that a female employee is receiving a monthly salary

of P10,000.00 and was on maternity leave from June 1 to July 31, 2013:
 January - P10,000.00 P100,000.00 = P8,333.33
February - P10,000.00 12 months
March - P10,000.00
April - P10,000.00
May - P10,000.00
June - on maternity leave
July - on maternity leave
August - P10,000.00
September - P10,000.00
October - P10,000.00
November - P10,000.00
December - P10,000.00
P100,000.00

P8,333.33 is the proportionate 13th month pay of a female employee who was on
maternity leave from June 1 to July 31, 2013.

What does “basic salary” comprise of?

“Basic salary” shall include all remunerations or earnings paid by an employer to an

employee for services rendered but does not include allowances and monetary benefits
which are not considered or integrated as part of the regular or basic salary, such as the
cash equivalent of unused vacation and sick leave credits, overtime, premium, night
differential and holiday pay, and include cost-of-living allowances. However, these
salary-related benefits should be included as part of the basic salary in the computation
of the 13th month pay if by individual or collective agreement, company practice or
policy, the same are treated as part of the basic salary of the employees.

When should the 13th month pay be paid?

 It should be paid not later than December 24 of each year. An employer, however, may
give to his employees one-half of the 13 th month pay before the opening of the regular
school year and the other half on or before the 24 th day of December of every year.

Are resigned or separated/terminated employees entitled to 13 th month pay?

Yes. An employee who has resigned or whose services were terminated at any time
before the time for payment of 13th month is still entitled to the benefit.

How much is the 13th month pay of a resigned or separated/ terminated

employee?

The 13th month pay of a resigned or separated/terminated employee is in proportion to

the length of time he or she has worked during the year, reckoned (a) from the time she
has starting working during the calendar year or (b) the time the last 13 th month pay was
given, up to the time of his/her resignation or separation/termination from the service.

Thus, if he/she worked only from January to September, his/her 13 th month pay shall be
equal to 1/12 of his total basic salary earned during that period