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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
- Thirteenth month pay is a form of monetary benefit equivalent to the monthly basic compensation received by an employee, computed pro-rata according to the number of months within a year that an employee has rendered service to the employer.
- The minimum amount of the thirteenth-month pay shall not be less than one-twelfth (1/12) of the total basic salary earned by an employee in a calendar year.
- For the purpose of computing thirteenth-month pay, the “basic salary” of an employee shall include all remunerations or earnings paid by his or her employer for services rendered. (Thirteenth-Month Pay, 2022 Handbook on Workers’ Statutory Monetary Benefits)
Thirteenth month pay defined
The Bureau of Working Conditions under the Department of Labor and Employment defined thirteenth-month pay as “a form of monetary benefit equivalent to the monthly basic compensation received by an employee, computed pro-rata according to the number of months within a year that an employee has rendered service to the employer.” (Q&A on 13th Month Pay, DOLE BWC)
The minimum amount of the thirteenth-month pay shall not be less than one-twelfth (1/12) of the total basic salary earned by an employee in a calendar year.
For the purpose of computing thirteenth-month pay, the “basic salary” of an employee shall include all remunerations or earnings paid by his or her employer for services rendered. (Thirteenth-Month Pay, 2022 Handbook on Workers’ Statutory Monetary Benefits)
It does not include allowances and other monetary benefits which are not considered or integrated as part of the regular or basic salary, such as cash equivalent of unused vacation or sick leave credits, overtime, premium, night shift differential and holiday pay, and the cost-of-living allowance, unless these salary-related benefits are treated as part of the basic salary of the employees, through individual or collective agreement, company practice or policy.
The law says:
“Section 2. Definition of certain terms as used in this issuance.
(a) “Thirteenth-month pay” shall mean one twelfth (1/12) of the basic salary of an employee within a calendar year;
(b) “Basic salary” shall include all remunerations or earnings paid by an employer to an employee for services rendered but may not include cost-of-living allowances granted pursuant to Presidential Decree No. 525 or Letter of Instructions No. 174, profit-sharing payments, and all allowances and monetary benefits which are not considered or integrated as part of the regular or basic salary of the employee at the time of the promulgation of the Decree on December 16, 1975. (Section 2, Rules and Regulations Implementing P.D. No. 851)
“The “basic salary” of an employee for the purpose of computing the 13th month pay shall include all remunerations or earning paid by this employer 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 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.” (Item No. 4, Revised Guidelines on the Implementation of the 13th Month Pay Law)
Formula for computation
The thirteenth-month pay is computed based on 1/12 of the total basic salary of an employee within a calendar year, or basic monthly salary for the whole year divided by 12 months.
The law says:
“An employee who has resigned or whose services were terminated at any time before the time for payment of the 13th month pay is entitled to this monetary benefit in proportion to the length of time he worked during the year, reckoned from the time he started working during the calendar year up to the time of his resignation or termination from the service. Thus, if he worked only from January up to September his proportionate 13th month pay should be equivalent of 1/12 his total basic salary he earned during that period.
The payment of the 13th month pay may be demanded by the employee upon the cessation of employer-employee relationship. This is consistent with the principle of equity that as the employer can require the employee to clear himself of all liabilities and property accountability, so can the employee demand the payment of all benefits due him upon the termination of the relationship.” (Item No. 6, Revised Guidelines on the Implementation of the 13th Month Pay Law)
The formula for the computation of thirteenth month pay is as follows:
Simply put:
Illustrations:
- For instance, Juan, a rank-and-file employee of XYZ Corporation, earns a monthly basic salary of PhP15,500.00. He was employed from January 2022 to September 2022. Following the formula above, how much is Juan’s proportionate thirteenth-month pay?
- Bogart, another rank-and file employee of XYZ Corporation, earns PhP25,000.00 as his monthly basic salary. However, due to unforeseen circumstances, he was only able to work from September 25, 2022 to October 25, 2022. How much is Bogart’s 13th month pay?
- Pedro, another rank-and-file employee of XYZ Corporation, who earns a monthly basic salary of PhP22,000.00, has been with the company for five years. Assuming he will be with the company until the end of the year, how much will Pedro’s thirteenth-month pay be?
- Maria was hired on January 04, 2022 to work for XYZ Corporation and earns the daily minimum wage, PhP570.00/day in a six-day workweek, or an equivalent monthly basic salary of PhP13,680.00. In 2022, she has not been absent nor on leave without pay except for the months of September to November 2022 when she was on maternity leave with pay. How much is Maria’s thirteenth-month pay?
Jurisprudence says:
As held in the case of Honda Philippines, Inc. v. Samahang Manggagawa sa Honda (G.R. No. 145561, June 16, 2005), “pro-ration of the benefit of 13th month pay applies only in cases of resignation or separation from work; computation should be based on the length of service and not on actual wage earned by the worker.”
However, employees who are paid a guaranteed minimum wage or commission earned are entitled to 13th month pay based on total earnings. (Philippine Agricultural Commercial and Industrial Workers Union v. National Labor Relations Commission, G.R. No. 107994, August 14, 1995)
Related article: What is the rationale for the implementation of the 13th month pay law?
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