What is the 13th Month Pay?

[Habagat12]

The 13th Month Pay Law of 1987 defines 13th month pay as “1/12 of the basic salary of an employee within a calendar year.”

How is basic salary on which the 13th month pay is based defined?

The basic salary of an employee for the purpose of computing the 13th month pay shall include all remunerations or earnings 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 113th 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.

Who are entitled to receive 13th month pay?

All rank and file employees are now entitled to a 13th month pay regardless of the amount of basic salary that they receive in a month if their employers are not otherwise exempted from the application of P.D. 851, otherwise known as the 13th Month Pay Law. Such employees are entitled to the benefit regardless of their 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 a calendar year.

Who are considered rank-and-file employees?

According to the Labor code, all employees not falling within the definition of a managerial employee are considered rank-and-file employees. A managerial employee is one who is vested with powers of prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall discharge, assign or discipline employees, or to effectively recommend such managerial actions.

How do we compute the 13th month pay?

The revised guideline says that “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.”

Based on the foregoing information, we can arrive with the following formula in computing 13th month pay:
13monthpay = total basic salary within the calendar year / 12

What is the minimum amount of the 13th month pay?

The minimum 13th month pay required by law shall not be less than one-twelfth of the total basic salary earned by an employee within a calendar year. For the year 1987, the computation of the 13th month pay shall include the cost of living allowances (COLA) integrated into the basic salary of a covered employee pursuant to Executive Order 178.

When must it be paid?

The required 13th month pay shall be paid not later than December 24 of each year. An employer, however, may give to his employees one half (½) of the required 13th month pay before the opening of the regular school year and the other half on before the 24th of December of every year. The frequency of payment of this monetary benefit may be the subject of agreement between the employer and the recognized/collective bargaining agent of the employees.

Is 13th month pay taxable?

Thirteenth month pay and other benefits amounting to P 30,000 and below are not subject to income tax. This means, if you receive P 40,000, the P10,000 excess is already taxable.

Are employees who have recently resigned entitled to the 13th month pay?

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.

Who are exempted from payment of 13th month pay?

Although P.D. 851, as amended by Memorandum Order No. 28, requires all employers to pay all their rank and file employees a thirteenth month pay, the rule is subject to certain exceptions. Excluded from the coverage, under Section 2 of the law, are “employers already paying their employees a thirteenth month pay or more in a calendar year or its equivalent at the time of the issuance of the law.” What the law wants to prevent is the imposition of a “double burden” upon the employer who is already paying the equivalent of a 13th month pay. The law exempts from the payment of the 13th month pay employers who are already giving its equivalent. Otherwise, the goal of uniformly providing employees with additional income will not be met. Another inequity will result; while most employees will be paid thirteen (13) months salary, some by virtue of P.D. No. 851, will be receiving salary for fourteen (14) months.

(Credit to the Dr. Jovito R. Salonga Center for Law and Development, College of Law, Siliman University, Dumaguete City for this Q&A)

[fayt]

may I ask what is the definition of basic salary? is it monthly basic? or monthly basic less tardiness/absences?

[Habagat12]

PRESIDENTIAL DECREE NO. 851
 
RULES AND REGULATIONS IMPLEMENTING
PRESIDENTIAL DECREE NO. 851

Sec. 2. Definition of certain terms. - As used in this issuance:

(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.

Sa simpleng salita,  it is the gross wages of income that you signed or agreed upon with your employer. Di po kasama dun yung bawas sa absences or mga kita sa commission etc.

[fayt]

okay so dapat si tardiness o absences hindi kasama.. kaso ang sabi po all renumeration paid by employer pero kapag mag absent po tayo hindi binabayaran ni employer nun araw na absent tayo so given po ba nito ibig sabihin kapag nag absent ka bawas si 13th month? sorry po sir kung makulit na yun tanong o ano man. gusto ko lang po malinawan dyan sa paragraph na yan about basic salary

[Habagat12]

Maganda po yung tanong nyo Sir Fayt.

Sir fayt kapag nag absent ka o tardy/late ka ibabawas po yun sa leave credits mo kung meron ka pang natitirang leave credits. Ibig sabihin,buo pa din ang basic salary mo sa buwan na yun.

Babawasan lamang ang sahod mo pag nag absent or tardy ka, pag wala ka nang leave credits na natitira gaya ng sick leave at vacation leave.Yan po ang general rule.

The 13th Month Pay Law of 1987 defines 13th month pay as “1/12 of the basic salary of an employee within a calendar year.” Ibig sabihin po nito, kung basic salary mo ay Php 120,000.00 annually ay tatanggap ka ng equivalent to 1 month of 12 months na basic salary mo or sa example natin ay Php 10,000.00.

If the employee served for less than one year...say June to December lang,  he or she will get only a proportion of the 13th month pay.

Kung lahat ng absences o tardiness mo ay covered ng leave credits mo,hindi maaapektuhan ang 13th month pay mo.

Pero kung wala ka nang leave credits at nag absent at tardy ka pa,based sa computation na:
13monthpay = total basic salary within the calendar year / 12, then your 13th month pay computation may have been reduced because of this formula.

Additional jurisprudence lang.

The term “basic salary” of an employee for the purpose of computing the thirteenth-month pay was interpreted to include all remuneration or earnings paid by the employer for services rendered, but does not include allowances and monetary benefits which are not 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 thirteenth-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. Central Azucarera De Tarlac vs. Central Azucarera De Tarlac Labor Union-NLU, G.R. No. 188949, July 26, 2010

Nawa'y maliwanag na po ang lahat.Pero kung sakaling may alinlangan pa din kayo,maari po kayong komunsulta sa DOLE pag kayo ay nasa pribadong kumpanya or sa CSC pag kayo ay nagtatrabaho sa gobyerno.

Salamat sa pagtanong Sir.

[fayt]

salamat sir sa answer saka nice topic po. marami kasi employee na basta basta lang tanggap kung ano yun binibigay sa kanila na 13th month without knowing the law governing this type of bonus.

muka sir sa government agency kayo nagtratrabaho kasi po yun policy about sa tardiness na icrecredit to VL policy po ni CSC hehe.

[Habagat12]

salamat sir sa answer saka nice topic po. marami kasi employee na basta basta lang tanggap kung ano yun binibigay sa kanila na 13th month without knowing the law governing this type of bonus.

muka sir sa government agency kayo nagtratrabaho kasi po yun policy about sa tardiness na icrecredit to VL policy po ni CSC hehe.

SIL po pag sa Private...Service Incentive Leave.

Pwede din naman ibawas sa VL or SIL ang mga tardy kahit sa Private Sir, depende po sa Practice ng kumpanya na yun.

[mico]

okay so dapat si tardiness o absences hindi kasama.. kaso ang sabi po all renumeration paid by employer pero kapag mag absent po tayo hindi binabayaran ni employer nun araw na absent tayo so given po ba nito ibig sabihin kapag nag absent ka bawas si 13th month? sorry po sir kung makulit na yun tanong o ano man. gusto ko lang po malinawan dyan sa paragraph na yan about basic salary

Just to add more info po being a former HR and Payroll officer, my iba po kasing company na nauutakan sa 13th month, i.e before my kilala ako na ang agreement nila is 12k a month, peroas per contract pala, 10k lang basic and 2k is parang Coct of living allowance, kaya nangyayari if 1 year cia sakto, instead na 12k free of tax 10k lang marereceive nya. yung mga bagong hired pala na employee, i.e June kayo na hire, most probable half lang ng 13th month ang marereceive nyo due sa above formulla na: Basic * (number of months worked after previous 13th month) /12

[fayt]

Just to add more info po being a former HR and Payroll officer, my iba po kasing company na nauutakan sa 13th month, i.e before my kilala ako na ang agreement nila is 12k a month, peroas per contract pala, 10k lang basic and 2k is parang Coct of living allowance, kaya nangyayari if 1 year cia sakto, instead na 12k free of tax 10k lang marereceive nya. yung mga bagong hired pala na employee, i.e June kayo na hire, most probable half lang ng 13th month ang marereceive nyo due sa above formulla na: Basic * (number of months worked after previous 13th month) /12

Madalas yan cost of living allowance na part ng basic. Tama ka, pagdating ng 13 month konti lang makukuha mo dahil ang nakadeclare yun basic less cola. Pero may isang benefits din yan lalo na ang cola declared as non taxable. Imbis kasi magbase ng tax mo sa 12000, pagbabasehan lang nila yun 10000. So konti lang binabayaran sa tax mo.

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