The 13th-month pay is an extra payment given to employees at the end of the year. However, the value of the 13th-month pay depends on various factors and it usually mimics the value of an employee’s monthly salary.
But the question that boggles the mind of every employee is how a certain company computed their 13th-month pay. In this article, I will try to answer the question of how to compute the 13th-month pay here in the Philippines.
13TH-MONTH PAY: DEFINITION
Thirteenth-month pay means a benefit given to an employee amounting to one-twelfth (1/12) of the employee’s basic salary within a calendar year.
It is recommended by the Philippine labor laws as a mandatory benefit and should not be confused with the “Christmas bonus” commonly exercised in the local business setting. The Christmas bonus is not an obligation, and can only be released upon an employer’s voluntary judgment. It is usually given by employers to show appreciation and gratitude for the service rendered by their employees within a year. The 13th-month pay, on the other hand, is a requirement according to the law. However, employers who fail to provide them by the end of the year are subject to legal inquiry by the Department of Labor and Employment (DOLE).
WHAT COMPRISES A “BASIC SALARY”?
Basic salary includes all earnings of an employee paid by the employer for services rendered to the company (for purposes of computing the 13th-month pay). However, the following should not be included in the computation of the basic salary:
- Cost-of-living allowances;
- Profit-sharing payments;
- Cash equivalent of unaccustomed vacation and sick leave credits;
- Overtime pay;
- Premium pay;
- Night shift differential;
- Holiday pay;
- All allowances and monetary benefits are not considered or integrated as part of an employee’s regular or basic salary.
WHO IS ELIGIBLE TO RECEIVE THE 13TH-MONTH PAY?
Employees in the private sector (all rank-and-file), regardless of their position, designation, or employment status, and any method by which their wages are paid. (For the rank-and-file employee to be covered, he or she must have worked for at least one month during the calendar year.)
Managerial employees are NOT included in the 13th-month pay although some companies still choose to provide the benefit.
(Managerial employees are employees whose contract of employment requires or permits him or them to hire, transfer, promote, suspend, lay off, dismiss, reward, discipline or adjudge the grievances of other employees, or to make direct recommendations on these matters to the employer.)
All employers are required to pay their rank-and-file employees 13th-month pay regardless of the number of employees they employ.
(An employer is a person or business that employs one or more people, especially for wages or salary. This could be an organization, institution, government entity, agency, company, professional services firm, non-profit association, small business, and store.)
WHEN IS THE 13TH-MONTH PAY GIVEN?
Under Presidential Decree No. 851, employers from the private sector in the Philippines are duty-bound to pay their rank-and-file employees a 13th Month Pay not later than December 24 every year. The 13th-month pay is equivalent to one-twelfth (1/12) of an employee’s basic yearly salary.
An employer, however, may provide the employee one-half (½) of the 13th-month pay before the opening of the regular year and the remaining half on or before December 24 of every year.
HOW IS THE 13TH-MONTH PAY COMPUTED?
The amount of the 13th-month pay shall not be less than 1/12 of the total basic salary acquired by the employee within a calendar year.
Again, certain types of earnings are not included as a “basic pay” for purposes of computing the 13th-month pay (mentioned above in the definition of “basic salary”).
For example, if you receive holiday pay, sick benefits, vacation benefits, premium for works performed on rest days and holidays, pay for regular holidays, night differential, maternity leave benefits, overtime pay, or all allowances and monetary benefits which are NOT considered or integrated as part of the regular or basic salary, these earnings will be excluded in the computation of your basic salary.
FORMULA AND COMPUTATION
The formula is just simple. You will have to compute all your salary or earnings (excluding earnings not considered part of your basic salary) within a calendar year and divide it by 12. The total is the equivalent 13th-month pay that must be paid to you by your employer.
- How to sum up or compute your 13th-month pay if you have absences without pay/maternity leave/unpaid leaves/paid leaves/late record.
Take note that your 13th-month pay is not a fixed amount corresponding to 1/12 of your monthly basic pay. It is calculated based on the actual number of days that you worked including leaves with pay.
- Measuring or computing the 13th-month pay if there’s a salary increase or salary differential.
The salary increase will be taken into account when computing the 13th-month pay, provided that the additional amount is only applied in the first month the pay increase took effect and thereafter.
So for example in November you got a salary increase of Php 1,000, and your basic salary for November and December will be Php 17,000, respectively. This amount will then be added to your total basic salary earned during the year.
- Computing 13th-month pay for resigned employees or separated/terminated employees.
Resigned or separated employees are still eligible to receive the 13th-month pay.
Sec. 6 of the Revised Guidelines on the Implementation of the 13th-Month Pay Law provides that even if you have resigned from your job or were terminated, you are still entitled or eligible to receive the 13th-month pay in proportion to the amount of time you worked during the year, approximately from the time you started working during the calendar year up to the time you resigned or terminated from the service.
For example, you worked only from January to September. Your basic income during the said period will be added and thereafter divided into 12. The amount after dividing is your proportionate 13th-month pay.
- You are computing the 13th-month pay for Absence Without Leave or AWOL employees or employees with indefinite leave.
AWOL employees as well as those under indefinite leave are entitled to or eligible for the 13th-month pay provided these employees have worked for at least one month during a calendar year.
For instance, if you worked for three months and went into indefinite leave after, you will be entitled to a prorated 13th-month pay.
As some may say, the 13th-month pay is an anticipated pay waited by lots of employees because they can have an extra payment which is timely and relevant during the end of the year for Christmas celebration or on the mid-year for the enrollment of their children.
I hope I have answered the question that boggles your mind on how to compute your 13th-month pay.