How 13th Month Pay Is Computed
Presidential Decree No. 851 (PD 851) requires employers to give rank-and-file employees (workers who are not managers) a 13th month pay. Under the Revised Guidelines on the Implementation of the 13th Month Pay Law (1987), it must be at least one-twelfth of the total basic salary the employee earned within the calendar year.
- Add up the basic salary you actually earned from January to December. If you were absent without pay, that pay was never earned, so it is left out.
- Divide by 12.
- Subtract any part your employer already gave you this year.
If your salary was the same all year, that is the same as your monthly basic salary times the months you worked, divided by 12. A full year at ₱18,000 a month gives ₱18,000.
What Counts as Basic Salary
Basic salary is the pay for your work. Under the Revised Guidelines, it does not include allowances and benefits that are not part of your regular or basic salary, such as:
- overtime pay and premium pay
- night shift differential
- holiday pay
- the cash value of unused leave credits
- cost-of-living allowance (COLA)
These count only if your Employment Contract, a Collective Bargaining Agreement or company practice treats them as part of basic salary. Paid leaves you actually took are part of the salary you earned. If you are paid by commission, by piece or by results, the rules depend on how your pay is set up; ask your employer or the DOLE.
Who Gets It, and When
- All rank-and-file employees in the private sector, whatever their position or employment status, who worked at least one month in the calendar year.
- Your employer must pay it no later than 24 December. They may pay half before the school year opens and the rest by 24 December.
- If you resign or are dismissed before December, you are owed a 13th month pay for the part of the year you worked. It is usually released with your final pay.
Kasambahay (domestic workers) also have a right to a 13th month pay under Republic Act No. 10361 (the Batas Kasambahay). Government employees get their year-end bonus under separate rules.
Tax, and What to Do If It Is Not Paid
Section 32(B)(7)(e) of the National Internal Revenue Code, as amended by Republic Act No. 10963 (RA 10963), the TRAIN law, excludes up to ₱90,000 of 13th month pay and other benefits (such as a Christmas bonus or productivity incentive) from taxable income. Only the part above ₱90,000 is taxed.
If your employer does not pay by 24 December, you can raise it with them first, then ask for help through the DOLE's Single Entry Approach (SEnA), a free process where DOLE helps you and your employer settle, at the nearest DOLE office. See the guide on labor complaints.
Common Questions
How Do I Compute My 13th Month Pay?
Add up the basic salary you earned this year and divide by 12. At ₱18,000 a month for a full year, your 13th month pay is ₱18,000. If you worked 9 months at ₱24,000, it is ₱216,000 ÷ 12 = ₱18,000.
Is Overtime Included in the 13th Month Pay?
No. Overtime, holiday pay, night differential and allowances that are not part of your basic salary are left out, unless your contract or company practice includes them.
Do I Get 13th Month Pay If I Resigned?
Yes. If you worked at least one month in the year, you are owed an amount for the part of the year you worked, usually paid with your final pay.
Is 13th Month Pay Taxable?
Not up to ₱90,000, counting your 13th month pay and other benefits together. Only the amount above ₱90,000 is taxed.
Do Probationary and Contractual Workers Get It?
Yes. The Revised Guidelines cover all rank-and-file employees whatever their job title or employment status, as long as they worked at least one month in the year.
Not legal advice. This is general information. For advice on your own situation, consult a lawyer. If you cannot afford one, the Public Attorney's Office (PAO) or an IBP legal aid office may help for free.
This is an estimate to help you plan. The BIR, the city or municipal treasurer or the Registry of Deeds works out what you actually pay.