The 13th month pay is a crucial component of employee benefits. This article will cover the 13th month pay law, when it is awarded in the Philippines, how to calculate 13th month pay, and other crucial topics that employers should be aware of.
What is 13th Month Pay?
According to Presidential Decree No. 851, the Philippine government requires employees to receive a monetary incentive known as the 13th month pay. This reward must be given to rank-and-file employees by all private businesses by December 24 at the latest, at the end of each year.
The employee’s 13th month pay must equal at least one-twelfth (1/12) of their entire base wage for the calendar year. The Department of Labor and Employment’s (DOLE) Labor Advisory No. 25, Series of 2023, states as much.
Who is entitled to 13th Month Pay?
As long as they have worked for the company for at least one (1) month during the calendar year, every rank-and-file employee in the private sector is entitled to earn their 13th month’s salary.
This benefit is applicable independent of a worker’s title, position, or employment status, as well as the way their pay is received.
Thus, in addition to individuals with numerous employers, rank-and-file employees paid piece-rate, fixed or guaranteed wage plus commission, resigned employees, terminated employees, and employees on maternity leave, they will also earn a 13th month’s pay.
Who is not eligible for 13th Month Pay?
Not every worker is eligible for the 13th month’s salary. This benefit is normally not available to employees of the government, its private companies, or government-owned and controlled businesses (GOCCs). This is because the public sector is subject to separate bonus and compensation plans.
Other exemptions for 13th month pay include:
1. employees paid on commission
2. employees who are paid a set sum for specified work, such as freelancers, contract workers, household helpers, and individuals in personal service, as well as boundary-based or task-based personnel.
3. Even though managers are not eligible for 13th month compensation, some firms nevertheless provide this perk.
How to Compute 13th Month Pay
According to DOLE guidelines, an employee’s 13th month pay cannot be less than one-twelfth (1/12) of their total base income for the calendar year.
Therefore, all you have to do to calculate the 13th month’s compensation is use this simple formula: Total Base Pay Received in the Year ÷ Twelve Months This method can be used to determine an employee’s total basic salary for the year if they receive the same amount each month (without allowances, overtime, or other benefits). Basic monthly pay x number of months worked
