Rules and Legal Basis for 13th Month Pay in the Philippines
Under Presidential Decree No. 851 and DOLE Labor Advisory issuances, all employers in the private sector are mandated to pay their rank-and-file employees 13th-month pay, regardless of the nature of their employment, provided they have worked for at least one (1) month during the calendar year.
Computation Formula
13th Month Pay = Total Basic Salary Earned within Calendar Year ÷ 12 MonthsWhat is Included in "Basic Salary"?
- Included: Regular basic wages, paid leaves (sick, vacation), and maternity/paternity differentials if subsidized as basic pay.
- Excluded: Overtime pay, night shift differential, holiday premium pay, unused leave conversions, and cost-of-living allowances (COLA).
Worked Example
An employee earns a basic salary of ₱25,000.00 per month and worked the entire 12 months without unpaid absences:
- Total basic salary earned: ₱25,000.00 × 12 = ₱300,000.00.
- Estimated 13th month pay: ₱300,000.00 ÷ 12 = ₱25,000.00.
- Since ₱25,000.00 is below the ₱90,000.00 statutory threshold, the entire amount is 100% tax-exempt.
Release Deadline
Under Philippine law, the 13th-month pay must be paid to employees not later than December 24 of each year. Employers may pay half of the required 13th-month pay before the opening of the regular school year and the remainder on or before December 24.