How to Compute your 13th Month Pay

13th month

CHRISTMAS season is here! The time of joy, gifts, vacation, Jose Mari Chan, and money. The season of 13th month pay and bonuses. For Filipinos, this is the month to look forward to.

If you’re like me who is looking forward to his 13th month pay, then you better educate yourself on what to expect and how it is calculated.

How to Compute the 13th Month Pay

The 13th month pay is calculated by the basic formula below:

Total Basic Salary x (Employment Length ÷ Total Employment Duration)

Examples:

₱ 12,0000.00 x (11 months ÷ 12 months) = ₱ 11,000.00

₱ 12,0000.00 x (300 days ÷ 305 days) = ₱ 11,803.28

What is the Total Basic Salary

The Total Basic Salary includes:

  • Your basic pay including deductions
  • Cost-of-living allowances

The Total Basic Salary does not include:

  • Cash equivalent of unused leaves
  • Overtime
  • Premiums and Night Differential
  • Holiday Pay
  • Other forms of allowances which are not integral to the basic salary rate

13th Month vs Christmas Bonus

13th Month
  • Mandated by law
  • Every rank-and-file employee should receive this provided they work at least one month in a year
  • Managerial employees are not entitled with 13th month pay
  • Should be paid not later than December 24th
  • The employer may pay one-half of the 13th month pay before the opening of the regular school year (in our case, May) and the other half on or before December 24th of the same year
  • Not subject to tax below ₱ 82,000.00
  • The employer can be reported to DOLE if the 13th month pay has not been paid on time
  • An employee who resigned within the year shall be entitled to 13th month pay, provided he or she rendered work of at least a month
  • Payment can be demanded upon separation
Christmas Bonus
  • Voluntarily given by the employer as a way of thanking the employee
  • May or may not be given by the employer
  • Taxable if given in cash

Rank and File Employee

The Labor Code clearly distinguish the rank-and-file employee from a managerial employee.

“A managerial employee is one who is vested with powers 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. All employees not falling within this definition are considered rank-and file employees,” the Dole said.

For more information, see Philippine Labor Laws.

Sources:
http://www.laborlaw.usc-law.org/2010/02/21/13th-month-pay-law/
https://www.dole.gov.ph/news/view/2652

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