How to Compute 13th Month Pay in the Philippines

(Eligibility, Computation, Deadline, and Penalties)

No time to read? Click here for basic formula

What Is 13th Month Pay?

The 13th Month Pay is a significant benefit mandated by the Philippine government, providing employees with an additional financial bonus. In this guide, we will cover all the essential details, including how to compute the 13th month pay, eligibility criteria, payment deadline, and penalties for non-compliance by employers.

Understanding the 13th Month Pay

The 13th month pay is governed by Presidential Decree No. 851 and is a mandatory benefit for all eligible employees in the Philippines. It is equivalent to one-twelfth (1/12) of the employee’s basic salary within a calendar year.

Eligibility Criteria for the 13th Month Pay

13th Month Pay Sample Computation

Let’s compute the 13th month pay using an example where the monthly salary is P20,000 and the employee has been with the company for 5 months.

1. Determine the Basic Salary
Basic salary = P20,000.
2. Identify the Reference Period
Reference period = January 1 – December 31
3. Calculate the Pro-rated Basic Salary
Pro-rated Basic Salary = P20,000 / 12 (months) = P1,666.67
4. Determine the Total Basic Salary Earned
Total Basic Salary Earned = P1,666.67 (Pro-rated Basic Salary) x 5 (Number of Months Worked)
P1,666.67 x 5 = P8,333.33 (Total Basic Salary Earned)
5. Exclude Unpaid Leaves and Absences Without Pay
6. Compute the 13th Month Pay
13th Month Pay = Total Basic Salary Earned = P8,333.33

Remember that this is a simplified example, and there may be other factors to consider. It’s always advisable to consult the Department of Labor and Employment (DOLE) or seek legal advice for any specific concerns or updates regarding the computation of the 13th month pay in the Philippines.

Computing the 13th Month Pay

Time needed: 3 minutes.

How To Compute 13th Month Pay?

Determine the Basic Salary
The basic salary is the fixed amount agreed upon by the employer and employee, excluding allowances, overtime pay, and additional compensation.
Identify the Reference Period
January 1st to December 31st of the same year.
Calculate the Pro-rated Basic Salary:
Divide the basic salary by 12 to obtain the pro-rated basic salary for each month.
(Pro-rated Basic Salary = Basic Salary / 12)
Determine the Total Basic Salary Earned:
Multiply the pro-rated basic salary by the number of months the employee has worked within the reference period, including regular and authorized absences with pay.
(Total Basic Salary Earned = Pro-rated Basic Salary x Number of Months Worked)
Exclude Unpaid Leaves and Absences Without Pay
Exclude unpaid leaves, absences without pay, and other periods when the employee did not render service
Compute the 13th Month Pay
The 13th month pay is equal to the total basic salary earned during the reference period.
13th Month Pay = Total Basic Salary Earned

Tired? Just in case you missed everything above — here’s a quick formula:

FORMULA
13th Month Pay = (monthly salary / 12) x months worked

Deadline for Paying Employees

According to the law, employers must pay the 13th month pay in cash not later than December 24th of each year. However, employers and employees can agree on a different payment schedule as long as it is before the December 24th deadline.

Penalties for Employers not Paying 13th Month Pay

Non-payment or partial payment of the 13th month’s pay may result in penalties for employers. The Department of Labor and Employment (DOLE) may impose fines or penalties, which can range from P5,000 to P100,000 depending on the violation. Repeat offenders may face additional penalties, suspension, or cancellation of their business permits.

Conclusion

Understanding how to compute the 13th month pay and being aware of eligibility criteria, payment deadlines, and penalties for non-compliance is crucial for both employers and employees in the Philippines. By adhering to the law, employers can ensure they fulfill their obligations, and employees can receive their rightful benefits.

Author
Recent Posts

Neil Bharwani

Hi! I'm Neil, a dedicated SEO specialist and content writer. I'm also the proud father of a Siberian Husky named Cookie. I'm on a mission to share valuable insights and broaden people's understanding of various subjects. I cover a wide range of topics, breaking down complex concepts into easily digestible content.

I believe that knowledge is power. Through comprehensive and informative articles, I aim to empower readers to make informed decisions.