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June 1, 2022

WHAT IS THE RATIONALE FOR THE IMPLEMENTATION OF THE 13TH MONTH PAY LAW?

After reading “What is the Rationale for the Implementation of the 13th Month Pay Law?”, read also “Applicability of 13th month pay to commissions”

  • The 13th Month Pay Law was created primarily to address the need to increase the minimum wage rates prevailing at that time.

  • It aims to protect the level of wages from the offshoots and effects of the global inflation that was persisting during that period.

  • It tackles the clamor of the people for an improved living condition, and uses the basic salary of the working men as a tool towards the change.

Presidential Decree No. 851 or the Decree Requiring All Employers to Pay Their Employees a 13th Month Pay was signed into law on December 16, 1976.

 

The law says:

“WHEREAS, it is necessary to further protect the level of real wages from the ravage of worldwide inflation;

WHEREAS, there has been no increase in the legal minimum wage rates since 1970;

WHEREAS, the Christmas season is an opportune time for society.” (P.D. No. 851.)

 

The 13th Month Pay Law was created primarily to address the need to increase the minimum wage rates prevailing at that time. The inflation during such era stimulated the enactment of the 13th Month Pay Law, as it aims to protect the level of wages from the offshoots and effects of the global inflation that was persisting during that period. It tackles the clamor of the people for an improved living condition, and uses the basic salary of the working men as a tool towards the change.

 

What does the term Basic Salary mean in connection with the 13th Month Pay Law?

 

The law says:

“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 (b), P.D. No. 851]

 

What does the term “Thirteenth-Month Pay” mean?

 

The law says:

“Thirteenth-month pay” shall mean one twelfth (1/12) of the basic salary of an employee within a calendar year. [Section 2 (a), P.D. No. 851]

 

Are all employees entitled to receive a 13th month pay under the law?

 

The law says:

Section 1 of P.D. No. 851 is categorical in its statement that all employers are required to pay all their employees receiving basic salary of not more than One Thousand Pesos per month, regardless of the nature of their employment. To wit:

Section 1. All employers are hereby required to pay all their employees receiving a basic salary of not more than P1,000 a month, regardless of the nature of their employment, a 13th-month pay not later than December 24 of every year.”

 

Likewise, Section 4 of the Rules and Regulations Implementing Presidential Decree No. 851 states that:

Section 4. Employees covered Except as provided in Section 3 of this issuance, all employees of covered employers shall be entitled to benefit provided under the Decree who are receiving not more than P1,000 a month, 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 month during the calendar year.”


Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.

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