Learn to Compute for Your 13th Month Pay

It is beginning to look like Christmas. As the holidays approach, Filipinos are rushing to put up their Christmas decorations, planning the gift-giving, and preparing for their noche buenas. But other than the possession of the Christmas spirit, Filipino employees are also busy summing up their long-awaited thirteenth month pay. Private employees are entitled to receive it, while business owners are required by law to give it.


Undoubtedly, an employee should expect cash inflow that will make their bank account sing for the holidays. Again, it is not just a philanthropic bonus coming from one’s employer, it is also a compensation required by the law. This article will discuss the thirteenth month pay, the law governing it, and other related concerns.

The 13th Month Pay Under Presidential Decree No. 851

As mentioned earlier, employees are required by law to receive the thirteenth month pay at the end of the year. Although it may appear to be a Christmas bonus, 13th month pay is not a discretionary benefit. It’s different from monetary extras, gift cards, or other gifts in kind. 


Employers are required to pay it because it is mandated in the employment law. Employees don’t have to feel extra thankful to their employers because this is not given out of the goodness of their heart. Business owners must pay the 13th month pay or suffer the consequences like an administrative case or a lawsuit. 


According to new memorandum, by December 24 of each year, eligible employees must receive their 13th month’s pay. Employers have the option of paying it in two installments, typically in June and December (to make it easier on the pockets), or in one lump sum. Hard working employees have the right to file a lawsuit against employers if the business owners fail to pay the 13th salary on time or at all.

Eligibility for the 13th Month Pay

No matter what kind of employment they hold or how they get paid, all rank-and-file employees who have been with a company for at least one month are entitled to a 13th month’s pay. The most recent guidelines from the Department of Labor and Employment (DOLE) serve as the foundation for this.


This indicates that you can anticipate receiving this financial benefit even if you have only been working for your current employer for at least one month as a probationary employee. Business owners should take note of this in their bookkeeping and accounting records because it is a necessary expense.

Correct Computation of This Much-Awaited Pay

Under the Presidential Decree, the 13th month’s pay is equal to one month’s salary or one-twelfth of an employee’s annual salary. This is true for regular employees who have been with the company for more than a year.  The DOLE provides a simple formula for the computation of the 13th month pay below:


*Total Basic Salary Earned for the Year ÷ 12 months = 13th Month Pay


As for those who have been in the company for only a month, fear not. A prorated amount of not less than one thousand pesos will be given to the employees who have only been with the company for less than a year, based on how long they have been there. Thus, entrepreneurs have to take note of this for their payroll services to avoid issues. Businessmen who hate accounting can outsource this service.

Minimum Wage Earners and Contractual Employees

Regardless of their employment status, those who earn the minimum wage are still eligible for the 13th month’s pay. However, the amount they receive may be affected by unpaid absences and company shutdowns.


The law fully safeguards contract employees. In accordance with Section 8 of Department Order No. The Labor Code grants contractual employees, such as seasonal, temporary and reliever workers, rights and privileges under section 18-A.

As stated in their employment contract or the Labor Code, they are eligible for the 13th month pay and other monetary benefits because of this.

Is The 13th Month Pay Taxable?

The 13th month pay is taxable depending on the amount you receive. On the positive side, the TRAIN law, the limit for the 13th month’s non-taxable pay and other benefits has been raised to Php 92,000.00.


Employees accounts’ are full or at least a few thousand pesos heavier as Christmas closes in. As you plan and celebrate your festivities, it is also a grand time to invest and begin your savings instead of squandering away that “bonus” you’re entitled too.


As for business owners who need to compute for this mandated pay, it’s best to consult an accounting professional with payroll services. If you need help, you can call our team for assistance. We can audit your books and make sure each and every employee receives the accurate 13th month pay they are eager to receive to enjoy a good holiday season.