13th Month Pay Computation in the Philippines: How much Should You be Paid?

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The 13th month pay in the Philippines,  is one of the most anticipated pays of the year. Contrary to popular belief, it is not a bonus. It is rather the right of an employee.

The 13th month pay is a mandated compensation for private employees in the Philippines. It is a monetary benefit where the employer gives one additional month’s worth of salary to an employee every December of the year.

The thing is that the payment for 13-th month is not always equal to a month of salary. It is calculated according to the number of months you have worked for your current employer.

Take note that the the 13th month’s salary is only based on your basic income. It is not calculated based on your bonuses and employment allowances. The additional compensation is only computed from the time that you were employed, so it can get confusing.

How to Compute 13th Month Pay in the Philippines

The 13th month pay is equivalent to 1/12 of your total basic salary earned during the year. Essentially, it is your basic monthly salary multiplied by the number of months you have worked for the company, all divided by 12. This formula ensures that the 13th month pay reflects the proportion of the year that an employee has worked.

This yearly bonus payment is given no later than December 24th, which means that the employer will assume that you have worked the entire month of December to be able to compute it.

The 13th month formula in the Philippines is the following:

(Basic salary x months worked) ÷ 12 months

Example Calculation:

Suppose an employee has a basic monthly salary of PHP 20,000 and worked for the entire year:

Total basic salary for the year = PHP 20,000 x 12 = PHP 240,000.
13th month pay = PHP 240,000 ÷ 12 = PHP 20,000.

For employees who have not worked the full year, adjust the total basic salary accordingly before dividing by 12. Let us say that your basic salary per month is Php 20,000 and you worked from September to December, then you have worked for 4 months. How to compute 13th month pay for 4 months?

The calculation will be the following:

PHP 20,000 x 4 months = PHP 80,000;
PHP 80,000 ÷ 12 = PHP 6,666.67

Remember that if your salary includes the allowance, bonuses and commissions, they are not part of the calculation. Employees terminated before the payout period are still entitled to a prorated 13th month’s salary.

In the next section, we will be calculating payment for 13th month based on different scenarios. Below we give an example of how to compute 13th month pay for 8 months with 3-days unpaid leave:

Basic monthly salary	Php 20,000
Daily rate	Php 1,000
Date started	May 2, 2024
Length of employment for the calendar year (by December 31)	8 months
Unpaid leave	3 days
Total annual income (minus unpaid absences)	Php 157,000
13th-month pay	Php 13,083

After adjusting for the unpaid leave (Php 160,000 – 3000), the employee’s total income for the year is Php 157,000. Based on the above figures, the payment for the 13 month is Php 157,000÷ 12 = 13,083.

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How to Compute 13th Month pay for 6 Months

You also have to consider your employment length, or the number of months that you have worked in a company for a calendar year. For example, if you were employed or have worked for a company from April to October, then your employment length is six months.

You don’t necessarily need a 13th month pay calculator, as the formula is quite simple: just multiply your monthly salary by the number of months you’ve worked, then divide by 12. Here is the basic 13th month formula for calculating your payment for 6 month:

Your monthly basic salary refers to the amount that your employer pays you for your services. This does not include overtime pay, cost of living allowances, unused leaves, night shift differential, et cetera.

If you’ve been an employee for 6 months, here’s how you would compute your paycheck for month 13. We’re going to use the example above (employee from April to October). If your monthly salary is Php 30,000, your 13th pay is:

(PHP 30,000 x 6 months) ÷ 12 months = PHP 15,000

Because you did not work for the company for the whole calendar year, you will only receive a prorated amount based on the number of months you worked. So based on the sample computation above, your monthly salary of Php 30,000 will be multiplied by 6 since you only worked from April to October. But it will still be divided by 12 months so you get Php 15,000.

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How to Compute 13th-Month Pay Prorated

How to compute 13th month pay with absences and late? What we will compute in this section is an example for an employee who has earned different amounts in several months.

To compute the prorated  payment for the 13th month, particularly for employees who have not worked the entire calendar year or have varying monthly earnings, you can follow these steps:

• Determine the Basic Monthly Salary. Identify the employee’s basic monthly salary, excluding overtime, bonuses, allowances, and other additional compensations.
• Calculate Total Basic Salary Earned. Add up the total basic salary the employee earned during the months they worked within the calendar year.
• Account for Partial Months. If the employee started or left partway through any month, you need to calculate the salary for the portion of the month they worked. This could involve prorating the monthly salary based on actual days worked if necessary.
• Prorate the payment for 13 month. Divide the total basic salary earned by 12 to get the prorated paycheck for month 13.

Formula:

Prorated 13th-Month Pay = Total Basic Salary Earned During Employment Period ÷ 12

Thus, for an employee who worked only part of the year, their 13th pay is prorated based on the actual months (or days, if applicable) worked, ensuring they receive the equivalent of one twelfth of their annual basic salary earned.

Let us take the scenario below, how to compute prorated 13th month pay when you have time off. The basic pay of this employee is Php 15,000 per month:

Month	Absence	Salary
January	No absence	₱15,000
February	No absence	₱15,000
March	No absence	₱15,000
April	No absence	₱15,000
May	3 days leave with pay	₱15,000
June	No absence	₱15,000
July	2 days leave without pay	₱14,500
August	No absence	₱15,000
September	No absence	₱15,000
October	7 days leave without pay	₱13,500
November	No absence	₱15,000
December	No absence	₱15,000

On some occasions, the employee did not earn the full amount because he had unpaid absences. In some months, he earned more than Php 15,000 because he rendered overtime (take note that the salary presented is just the basic pay, and does not include other pays like bonuses, sales commissions, and others). Our prorated 13th month pay calculator will show this result:

PHP 178,000 ÷ 12 = PHP 14,833

 

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How to Compute 13th Month pay for Resigned Employees

What if you have resigned from the company? How much would you receive as 13th month’s salary??

Resigned and terminated employees are still entitled to their payment for 13th month, so no need to worry if you decided to leave before the end of the calendar year. This will be given to you as part of your back pay or final pay.

If you have resigned, your 13th month pay formula will be based on your monthly salary multiplied by the number of months you worked, divided by 12 months. For example, your previous salary was Php 40,000/month and you worked for the company for 10 months. The formula will be:

(PHP 40,000 x 10 months) ÷ 12 months

Going by this, your 13th month’s salary will be Php 33,333. If you have resigned, you will receive this as part of your final pay.

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What Is the 13th-Month Pay Law in the Philippines?

By virtue of Presidential Decree No. 851 (1)  private employers in the Philippines are required to give out 13-th month pay to all rank and file employees who have worked at least a month in the company. This was introduced in 1975 by President Ferdinand Marcos, who is considered the 13th month pay law author.

The meaning of 13 month pay is additional monetary compensation given to employees at the end of the year. This is given out regardless of their employment status or how they receive their wages, and must be awarded by December 24-th each year.

Under PD 851, employers must submit a 13th Month Pay Compliance Report by January 15 each year via reports.dole.gov.ph.

Actually 13-th month pay is not similar to a Christmas bonus: The 13-th month pay is mandated by law, requiring all employers to provide this benefit to their employees, whereas the Christmas bonus is entirely discretionary. It is up to your bosses if they will give out a Christmas bonus in the Philippines for 2024.

What is not Included in the 13th Month pay Computation

Note that only your monthly salary will be considered for the 13th month you are paid. In general, benefits and allowances that are not integrated into your basic monthly salary will not be included in the 13th month pay computation. These include:

• Cost of living allowance (COLA)
• Profit-sharing payments
• Cash equivalent of unused sick and vacation leaves
• Overtime pay
• Premium pay
• Night shift differential
• Holiday pay
• Maternity benefits

The benefits mentioned above will only be included in your 13-th month pay IF they have been integrated into your basic monthly salary in the first place.

The 3th-Month pay Eligibility

Per the guidelines set by the Department of Labor and Employment (DOLE), rank-and-file employees from the private sector are entitled to a 13th month pay provided that they worked for the company for at least a month during the entire year. It is part of employment law that obliges employers to pay either in one lump sum or two installments payable before December 24 of that year.

Those in managerial positions who have the authority to hire, discipline, and discharge rank-and-file employees are unfortunately not eligible for this pay.

The same applies to employees with distressed employers, household workers, and those earning on a commission or task basis. Government employees are also not entitled to receive 13th month’s salary.

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Is the 13th-Month pay Taxable?

Under the Train (Tax Reform for Acceleration and Inclusion) Law of 2018 (2), the 13th month is not subject to taxation if the pay is below the threshold. The threshold amount is set at Php 90,000 which means employees receiving salary below that maximum limit will receive their pay in full, tax-free, while those receiving above the threshold will be obliged to pay the corresponding tax.

What to Do if You Don’t Get 13th-Month Pay

If you did not get a 13th month pay, you need to file a report to the Department of Labor and Employment or DOLE (3). You will know how to compute your payment for 13th month with DOLE help and will get all the benefits you are entitled to under the law. The 13th  pay is a mandatory benefit. All employees are entitled to get a 13th month pay, provided that they have worked at least one month in the company.

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