Are you excited to receive this year’s 13th-month pay? I know a lot of employees are eagerly awaiting the release of this yearly windfall. It is always good to have extra funds for the holidays.
Today we will be sharing with you the top 10 things you need to know about your 13th-month pay. If this is your first time to receive such, it is best that you are aware of its basic details such as the covered months of the pay, how it is computed, who are entitled to it, and when it should be released to the employees.
These pointers were lifted from the Handbook on Workers’ Statutory Monetary Benefits published by the DOLE.
All employers are required to pay their rank-and-file employees’ 13th-month pay, regardless of the nature of their employment and irrespective of the methods by which their wages are paid, provided they worked for at least one month during a calendar year.
The 13th-month pay should be given to the employees not later than December 24 or every year.
- DEFINITION OF RANK-AND-FILE EMPLOYEES
The Labor Code, as amended, distinguishes a rank-and-file employee from a managerial employee. A managerial employee is one who is vested with powers or prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, layoff, 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 above distinction shall be used as a guide for the purpose of determining who are rank-and-file employees entitled to the thirteenth-month pay.
- MINIMUM AMOUNT
The thirteenth-month pay shall not be less than 1/12th of the total basic salary earned by an employee in a calendar year.
What are included as basic salary?
- Remunerations or earnings paid by his employer for services rendered.
What are NOT included as basic salary?
- Monetary benefits which are not considered or integrated as part of the regular or basic salary.
- Cash equivalent of unused vacation leaves and sick leave credits, overtime pay, night shift differential, and holiday pay.
- Cost of Living Allowance (COLA).
However, these salary-related benefits should be included as part of the basic salary in the computation of the 13th-month pay if these are treated as part of the basic salary of the employees, through individual or collective agreement, company practice, or policy.
- FORMULA AND COMPUTATION OF 13TH MONTH PAY
TOTAL BASIC SALARY EARNED DURING THE YEAR
—————————————————————— = PROPORTIONATE 13TH MONTH PAY
The following types of employers are not covered by PD 851 (Presidential Decree 851 Requiring All Employers to Pay their Employees the 13th-month Pay):
- The government and any of its political subdivisions, including government-owned and controlled corporations, except those corporations operating essentially as private subsidiaries of the government;
- Employers who are already paying their employees 13th-month pay or more in a calendar year or its equivalent at the time of the issuance of the PD 851;
- Persons in the personal service of another in relation to such workers; and
- Employers of those who are paid on purely commission, boundary, or task basis, and those who are paid a fixed amount for performing specific work, irrespective of the time consumed in the performance thereof (except those workers who are paid on piece-rate basis, in which case their employer shall grant them 13th month pay).
- TIME OF PAYMENT
The 13th-month pay shall be paid not later than December 24 of every year. An employer, however, may give to his or her employees one-half (1/2) of the 13th-month pay before the opening of the regular year and the remaining half on or before December 24 of every year.
The frequency of payment of this monetary benefit may be the subject of an agreement between the employer and the recognized/collective bargaining agent of the employees.
- 13th MONTH PAY FOR CERTAIN TYPES OF EMPLOYEES
- Employees who are paid on piecework basis are entitled to the 13th-month pay.
- Employees who are paid a fixed or guaranteed wage plus commission are also entitled to the 13th-month pay, based on their earnings during the calendar year (ex: on both their fixed or guaranteed wage and commission).
- Employees with multiple employers.
Government employees working part-time in a private enterprise, including private educational institutions, as well as employees working in two or more private firms, whether on a full-time or part-time basis, are entitled to the 13th-month pay from all their private employers, regardless of their total earnings from each of their employers.
- 13TH MONTH PAY OF RESIGNED OR SEPARATED EMPLOYEE
An employee who has resigned or whose services are terminated at any time before the time of payment of the 13th-month pay is entitled to this monetary benefit in proportion to the length of time he or she has worked during the year, reckoned from the time he or she has started working during the calendar year up to the time of his or her resignation or termination from the service.
Thus, if he or she worked only from January to September, his or her proportionate 13th-month pay should be equal to 1/12th of his or her total basic salary earned during that period.
- NON-INCLUSION IN REGULAR WAGE
The 13th-month pay is not part of the regular wage of employees for purposes of determining overtime and premium payments, fringe benefits, contributions to the State Insurance Fund, Social Security System, National Health Insurance Program, and private retirement plans.
- COVERAGE FROM INCOME TAX OF THE 13TH MONTH PAY
The 13th-month pay and other benefits, such as productivity incentives and Christmas bonus, not exceeding Php 90,000.00 are exempted from taxation.
National Wages and Productivity Commission (www.nwpc.dole.gov.ph)
Department of Labor and Employment (www.dole.gov.ph)