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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
Section 1 of Presidential Decree No. 851 provides that all employers covered by Presidential Decree No. 851, hereinafter referred to as the “Decree”, shall pay to all their employees a thirteenth-month pay not later than December 24 of every year.
On the other hand, bonus is a gratuity or act of liberality of the giver, and cannot be considered part of an employee’s wages if it is paid only when profits are realized or a certain amount of productivity is achieved.
It’s the most wonderful time of the year!
For sure, most of you are still enjoying your most-awaited and well-deserved 13th Month Pay and Christmas Bonus. But what are the differences between the 13th Month Pay and a bonus, such as the Christmas Bonus? Are employers required to grant both of them to their employees? Are they taxable or non-taxable? Let’s see their notable distinctions below:
|
13th Month Pay |
Bonus |
|
|---|---|---|
|
Definition |
Thirteenth-month pay shall mean one twelfth (1/12) of the basic salary of an employee within a calendar year. (RULES AND REGULATIONS IMPLEMENTING PRESIDENTIAL DECREE NO. 851) |
Bonus is a gratuity or act of liberality of the giver, and cannot be considered part of an employee’s wages if it is paid only when profits are realized or a certain amount of productivity is achieved. (MEGA MAGAZINE PUBLICATIONS, INC., JERRY TIU, AND SARITA V. YAP vs. MARGARET A. DEFENSOR, G.R. No. 162021, June 16, 2014) |
|
Mandatory or Discretionary |
Mandatory. Section 1 of Presidential Decree No. 851 provides that all employers covered by Presidential Decree No. 851, hereinafter referred to as the “Decree”, shall pay to all their employees a thirteenth-month pay not later than December 24 of every year. |
Discretionary. The grant of a bonus or special incentive, being a management prerogative, is not a demandable and enforceable obligation, except when the bonus or special incentive is made part of the wage, salary or compensation of the employee, or is promised by the employer and expressly agreed upon by the parties. (MEGA MAGAZINE PUBLICATIONS, INC., JERRY TIU, AND SARITA V. YAP vs. MARGARET A. DEFENSOR, G.R. No. 162021, June 16, 2014) |
|
Coverage |
The 13th month pay shall be paid to rank-and-file employees in the private sector regardless of their position, designation, or employment status, and irrespective of the method by which their wages are paid, provided that they have worked for at least one (1) month during the calendar year. It shall also be given to rank-and-file employees who are paid on a piece-rate basis, fixed or guaranteed wage plus commission, those with multiple employers, those who resigned, were terminated from employment, or were on maternity leave and received salary differential. (DOLE Labor Advisory No 13-2024) |
Are the 13th Month Pay and Christmas Bonus Taxable?
They shall be non-taxable, provided that, when added together with other benefits, the total amount shall not exceed ninety thousand pesos (₱90,000.00). The ₱90,000.00 threshold may be increased through rules and regulations issued by the Secretary of Finance, upon recommendation of the Commissioner, after considering among others, the effect on the same of the inflation rate at the end of the taxable year. [Revenue Regulations (RR) No. 11-2018]
Any amount in excess of the ₱90,000 threshold shall be taxable.
Related Articles:
- Is my 13th Month pay subject to income tax? – ALBURO ALBURO AND ASSOCIATES LAW OFFICES
- Applicability of 13th month pay to commissions – ALBURO ALBURO AND ASSOCIATES LAW OFFICES
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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 0917-5772207/ 09778050020.
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