Now that the holiday season is fast approaching, most, if not all, employees are once again eagerly awaiting the release of abundant financial blessings from their respective companies and employers. One of the most awaited windfall is the government-mandated 13th month pay to be released to all employees, regardless of their designation or employment status and have worked at least one month during the calendar year.
To help us better understand how the 13th month pay is computed, we lifted the following Q&A article from the Official Gazette of the Philippines along with some other bits and pieces of related materials.
Here is everything we need to know about our 13th month pay!
Q: What is 13th month pay?
A: The 13th month pay is a form of monetary benefit equivalent to the monthly basic compensation received by an employee, computed pro-rata according to the number of months within a year that the employee has rendered service to the employer.
Q: Who are required to pay the 13th month pay?
A: All establishments regardless of the number of employees are required to pay their rank-and-file employees the 13th month pay.
Q: Who are entitled to receive the 13th month pay?
A: All rank-and-file employees regardless of the nature of their employment, and irrespective of the methods by which they are paid, provided they worked for at least one month during the calendar year.
Q: How is the 13th month pay computed?
A: The 13th month pay is computed based on 1/12 of the total basic salary of an employee within a calendar year, or basic monthly salary for the whole year divided by 12 months.
Q: What are the components of “basic salary”?
A: Basic salary shall include all remunerations or earnings paid by an employer to an employee 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. Basic salary includes 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 or company practice or policy, the same are treated as part of the basic salary of the employees.
Q: Are maternity leave benefits included in the computation of the 13th month pay?
A: No, maternity leave benefits are not included in the computation of the 13th month pay.
Q: When shall 13th month pay be paid?
A: 13th month pay should be paid not later than December 24 of each year.
Q: Are there employers who are exempted from paying the 13th month?
A: Yes. The following employers are exempted from paying the 13th month under PD 851:
- Government and any of its political subdivision, including government-owned and controlled corporations, except those corporations operating essentially as private subsidiaries of the Government;
- Employers already paying their employees 13th month pay or more in a calendar year or its equivalent at the time of this issuance;
- Persons in the personal service of another in relation to such workers; and
- Employers who are paid on purely commission, boundary, or task basis, and those who are paid a fixed amount for performing a specific work, irrespective of the time consumed in the performance thereof, except where the workers are paid on piece-rate basis in which case the employer shall grant the required 13th month pay to such workers.
Most employees are curious as to how their 13th month pay is computed. This is most common among employees who took extended leaves of absence during the year. This is because the 13th month pay is also affected by the actual number of days you were present at work or are on paid leave.
To clarify this matter, here is how the 13th month pay is computed based on the employee’s attendance for the year:
The employee’s basic monthly salary is Php25,000 and she has perfect attendance for the entire year, this is how his 13th month pay is computed:
25,000 x 12 (months attendance) / 12 = Php25,000
However, if the said employee was on maternity leave for two months, the computation varies:
- January 25,000
- February 25,000
- March 25,000
- April 25,000
- May 25,000
- June – on maternity leave
- July – on maternity leave
- August 25,000
- September 25,000
- October 25,000
- November 25,000
- December 25,000
25,000 x 10 (months attendance) / 12 = Php20,833.33
Keep in mind too that as implemented under RA No. 10653, the 13th month pay for salaries amounting up to Php82,000 are exempted from tax. However, this is the subject of an on-going tax reform discussion in the government, so stay tuned for further updates.
Have you received your 13th month pay yet? Remember to keep your spending within the limits of your budget, reward yourself, and share some to those in need. This is also the best time to jump start your savings account so you can begin planning for bigger investments like a home or a brand new vehicle.
Enjoy the holidays!