How to compute 13th Month Pay: DOLE Philippines

October 4, 2009 by  
Filed under Employer - employees

calculator-handWe are already on the month of October and after a few months, Christmas season is here again. For employees, that season sounds delightful. Aside from the enjoyable Christmas party and the series of vacations, the long awaiting 13th Month pay will finally land in our hands. For employers, this extra month pay is an additional mandated expense given to employees once or twice (installment) a year. However, some good business owners and employers see the giving of this added remuneration to employees as an appreciation and gratitude for their valuable contribution to their companies.

An employer must know how to compute the lawful amount of 13th month pays to be distributed to his employees. On the other hand, it is clever for an employee to know the computation of his thirteenth month paycheck to ensure that he is receiving it in the right amount of money. So to know what must be known, the following guidelines are presented below.

How to compute?

Section 2(a) of PD No. 851, which was issued by former president Ferdinand E. Marcos on December 16, 1975, stated that:

“thirteenth-month pay” shall mean one twelfth (1/12) of the basic salary of an employee within a calendar year.

According to the Revised Guidelines on the Implementation of the 13th Month Law issued on November 16, 1987 by then Labor Secretary Franklin Drilon:

the “basic salary” of an employee for the purpose of computing the 13th month pay shall include all remunerations or earning paid by this employer 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, nigh differential and holiday pay, and 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 r collective agreement, company practice or policy, the same are treated as part of the basic salary of the employees.

Based on the foregoing information, we can arrive with the following formula in computing 13th month pay:

13monthpay = total basic salary within the calendar year / 12

Is it taxable?

Thirteenth month pay and other benefits amounting to P 30,000 and below are not subject to income tax. This means, if you receive P 40,000, the P10,000 excess is already taxable.

Who are entitled?

Memorandum Order No. 28, issued by former President Corazon C. Aquino on August 13, 1986, modified Section of PD No. 851 and provided that all employers are hereby required to pay all their rank-and-file employees a 13th month pay not later than December 24 of every year.

Before its modification by the aforecited Memorandum Order, P.D. No. 851 excludes from entitlement to the 13th month pay those employees who were receiving a basic salary of more than P1,000.00 a month. With the removal of the salary ceiling of P1,000.00, all rank and file employees are now entitled to a 13th month pay regardless of the amount of basic salary that they receive in a month if their employers are not otherwise exempted from the application of P.D. No. 851. Such employees are entitled to the benefit regardless of their designation or employment status, and irrespective of the method by which their wages are paid, provided that they have worked for at least one (1) month during a calendar year.

Who are considered rank-and-file employees?

According to the Labor code, all employees not falling within the definition of a managerial employee are considered rank-and-file employees. A managerial employee is one who is vested with powers of prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall discharge, assign or discipline employees, or to effectively recommend such managerial actions.

How about resigned and separated employees?

An employee who has resigned or whose services were terminated at any time before the time for payment of the 13th month pay is entitled to this monetary benefit in proportion to the length of time he worked during the year, reckoned from the time he started working during the calendar year up to the time of his resignation or termination from the service. Thus, if he worked only from January up to September his proportionate 13th month pay should be equivalent of 1/12 his total basic salary he earned during that period.

The payment of the 13th month pay may be demanded by the employee upon the cessation of employer-employee relationship. This is consistent with the principle of equity that as the employer can require the employee to clear himself of all liabilities and property accountability, so can the employee demand the payment of all benefits due him upon the termination of the relationship.

When to pay?

The required 13th month pay shall be paid not later than December 24 of each year. An employer, however, may give to his employees one half (½) of the required 13th month pay before the opening of the regular school year and the other half on before the 24th of December of every year. The frequency of payment of this monetary benefit may be the subject of agreement between the employer and the recognized/collective bargaining agent of the employees.

Who are considered exempted employers?

The following employers are still not covered by P.D. No. 851:

a.  The Government and any of its political subdivisions, including government-owned and controlled corporations, excepts those corporations operating essentially as private subsidiaries of the Government;

b.  Employers already paying their employees a 13th month pay or more in a calendar year or its equivalent at the time of this issuance;

c.  Employers of household helpers and persons in the personal service of another in relation to such workers; and

d.  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 where the workers are paid on piece-rate basis in which case the employer shall grant the required 13th month pay to such workers.

As used herein, workers paid on piece-rate basis shall refer to those who are paid a standard amount for every piece or unit of work produced that is more or less regularly replicated, without regard to the time spent in producing the same. 

The term “its equivalent” as used on paragraph (b) hereof shall include Christmas bonus, mid-year bonus, cash bonuses and other payments amounting to not less than 1/12 of the basic salary but shall not include cash and stock dividends, cost of living allowances and all other allowances regularly enjoyed by the employee, as well as non-monetary benefits. Where an employer pays less than required 1/12th of the employees basic salary, the employer shall pay the difference.

References:

DOLE: Frequently Asked Questions

BIR: Tax Info

Lawphil: PD 851

ChanRobles: Revised Guidelines on the implementation of the 13th month pay law

Comments

85 Responses to “How to compute 13th Month Pay: DOLE Philippines”
  1. viclogic says:

    “Please read first carefully the whole article and the previous comments and replies before making questions.” You're questions may have already been answered by the article itself or by our previous replies and answers on previous comments.

    Repeated questions will not help us all!

  2. thebigjuggler says:

    Good Day!

    This is with regards to 13th month. If you exceed 30,000 how is the tax computed for the excess? How my company does it is that let say your month salary is 40,000 which they pay semi-monthly. For the pay period they declare 20,000 as your basic pay and add the 10,000 so your gross for that semi monthly pay is 30,000 from there they deduct the tax.

    Employee Status ME1
    Base Tax 22,500.00
    Excess of Base Tax 32%

    Basic Pay 20,000.00
    13th Month Taxable 10,000.00

    Total Taxable 30,000.00
    Withholding 7,608.33
    Net 22,391.67

    13th Month Non-Tax 30,000.00
    Take Home 52,391.67

    Is this correct?
    Or should the 13th month be computed separately and not included for that specific pay period?

  3. mark0917 says:

    Thank you so much for the response viclogic… very much appreciated…

    But, i still have further inquiries about this matter.

    I am still working and my employment didn't end last november or will end this december or at any time soon.

    Just to clarify: Given the circumstances, did my boss' lawyer commit a mistake with the computation when he didn't include december?

    And, in case i'll be resigning by March, will the month of december be included in the computation (December – March), if, in case, they didn't really include december in the 13th month pay that we'll be receiving this 23rd?

  4. viclogic says:

    The law states that 13th Month pay is computed based on the total basic salary within the calendar year. Calendar year means year ending December 31 and not November 30. Hence, your December basic salary should be included.

  5. caitlin1232002 says:

    Sir, does tardiness affect the computation of 13th month pay? Is it deducted from your monthly wage for the computation of the 13th month?

  6. jenyap says:

    is it allowed to deduct the number of absences in 13th month pay?

  7. viclogic says:

    Hi thebigjuggler,

    Your income (taxable and non-taxable) should be reported in the year / period they are earned / received.

    Any overage or shortage in computing withholding income tax for the calendar year is anyway adjusted and corrected on the year-end month, which is December.

  8. mynezacayanong says:

    I gave birth last June..I'm on leave for 2 months because of my cesarean delivery and i wasn't paid on it by my employer..i only receive my SSS benefit in it…Last week our 13th month pay has been released and I kept on wandering why I didn't receive the full amount of it..2 MONTHS has been deducted in it…How can you help me about this matter sir?

  9. viclogic says:

    Hi mynezacayanong,

    Please find and read our replies on the comment made by Jrod23.

    Thank you.

  10. lucky71 says:

    Hi! Good day! Does Sick Leave and Vacation Leave paid by the company can be deducted in computation of 13th month?

    Thank you so much.

  11. mayke_5 says:

    Hi,

    just for clarification, I was promoted last october 2009 and my basic salary was adjusted november 2009. Wouldn't be the computation of the 13th month pay be based on the latest or adjusted basic salary instead of the old basic, right?

    Please help…

  12. zero_nightmare says:

    Here's the scenario:

    Company send you outside the country for work assignment, provided you $200.00 as allowance. Unfortunately, liquidation was been delayed due to not payment of salaries (3months), employee used the money until he resigned, but indicated that this the amount will be deducted from his unpaid salaries upon clearance. 13th month is mandated by law, the company released the pro-rated 13th month but deducted the $200 = peso equivalent without informing the employee, and worst this was discussed and agreed by their lawyer that $200.00 will be deducted in the salary once the company pays the employee.

    I just want to ask, does the company authorized to deducted it without the agreement from the employee? Is the company voilating the law?

  13. viclogic says:

    It should be based on the total earned / paid basic salary for the calendar year, which are composed of your old and new salary earned for that calendar year. All you basic salary (old and new) for the calendar year are summed up to be used as the basis for the computation of your 13th Month Pay, Please read the formula in computing 13th Month Pay in the article.

  14. viclogic says:

    Please read our article by following the link below.
    http://businessaccent.com/2009/10/18/philippine

    Please scroll down to the “no wage deduction” paragraph and read the exceptions.

    Thank you.

  15. viclogic says:

    Or except if it is already the practice of the Company to include the benefits.

  16. viclogic says:

    To all our visitors,

    With regard to the question whether absences and tardiness affect the computation of the 13th Month Pay. Please read the following supreme court ruling by following the link below:
    http://sc.judiciary.gov.ph/jurisprudence/2005/j

    Please take note that the SC ruled that:

    1. The “basic salary” of an employee for the purpose of computing the 13th month pay shall include all remunerations or earnings paid by his employer 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, and cost-of-living allowances.

    2.Considering the foregoing, the computation of the 13th month pay should be based on the length of service and not on the actual wage earned by the worker. In the present case, there being no gap in the service of the workers during the calendar year in question, the computation of the 13th month pay should not be pro-rated but should be given in full.

    3.More importantly, it has not been refuted that “the employer” has not implemented any pro-rating of the 13th month pay before the instant case. The employer did not adduce evidence to show that the 13th month, 14th month and financial assistance benefits were previously subject to deductions or pro-rating or that these were dependent upon the company’s financial standing. As held by the Voluntary Arbitrator:

    The Company explicitly accepted that it was the strike held that prompt[ed] them to adopt a pro-rata computation, aside [from] being in [a] state of rehabilitation due to substantial losses in 1997,1998, 999 due to strike. This is an implicit acceptance that prior to the strike, a full month basic pay computation was the “present practice” intended to be maintained in the CBA.

    The Supreme Court ruled that the Company compute 13th Month Pay in full and not in prorated basis, becuase more importantly, this is already the common practice of the Company, which was just halted becuase of substantial losses.

    The SC also stated that 13th Month Pay should be based on the length of service and not on the actual wage earned by the worker in that particular case. The SC, conisidering there is no “gap” in the service of the workers during the calendar year in question, ruled that the computation of the 13th month pay should not be pro-rated but should be given in full. Please take note, that anything that will affect the length of service may affect the computation of the 13th Month Pay.

    Finally, I encourage everyone to consult labor lawyers and the DOLE /NLRC regarding on this matter for more enlightenment.

    Thank you.

  17. cecillevibar says:

    i want to ask if it is valid for an employer to withhold the 13th month pay for december? Since we are paid on a daily rate, we were paid only until november. The payment for december was given up to this time and how is the 13th month computed for daily paid employees. Please reply to my other email which is maria.c.j.vibar@accenture.com. We need an immediate response to this quesry because we are in a quandary with out employer right now

  18. xinren says:

    hi po ,
    hmmm nagwwork po ako ngaun sa isang garments factory as taga compute ng salary ng mga nka daily rate . JUst want to know kung ano po b tlga ng proper computation ng late? and over time pay? I mean ung count tlga nya , kasi i know kung ilang percent ang per ot but ung exact counting ng time ang gusto ko po malman . Pati na ung sa late.
    Example po kapag ng out ng 6:55 pm considered na po ba un as 2hrs or 1hr and 30 mins na ot?.
    Then kpag po s late nman kpag ang in nya is 10:45am , as in po ba ic-count as 165 mins ang late?based po ang pasok sa 8am to 5pm..
    Pasensya na po tlgang confused lang po tlga ko.
    Salamat po..

  19. viclogic says:

    Hi xinren,

    Under time cannot be offset by overtime. Generally ,you need to compute late/undertime and overtime separately.

    Please read our article… http://businessaccent.com/2009/10/10/overtime-p

  20. viclogic says:

    Hi Cecille,

    Irrespective of the method by which your wages are paid your'e 13th Month Pay shall still be computed as:
    13monthpay = total basic salary within the calendar year / 12
    Calendar year means ending December 31.
    13h month pay must be paid not later than December 24.
    The purpose of the 13th Month Pay Law is to provide the Filipino employees benefit that they can use during the holiday season (that's why it should be paid on or before Dec. 24.

  21. Doy says:

    Hi Viclogic,

    Ask ko lang if yung 13th month pay and bonuses are thesame. So kasama sa P30,000 ceiling ang 13th month pay.

    Or hiwalay ba dapat ang 13th month pay at yung other bonuses.

  22. mamsir says:

    should a teacher working in his/her first year in a company receive only half of his/ her one month salary since it's his/ her first year in that company?

  23. viclogic says:

    Hi Doy,

    There is no provision that says… the Php 30,000 exemption is only applicable solely for 13th Month Pay. Hence, 13th month pay and the other benefits are included / combine in that ceiling.

    You may inquire with the BIR officers in regard to this matter.

  24. viclogic says:

    Hi,

    If you are in a private school, then the 13th Month Pay applies to you. Meaning, you are entitled to 13th Month Pay, as long as you have been employed for at least one month in that Company. Your pay, should equal to the basic formula. —please read the article.
    Thank you.

  25. jebelle says:

    how does the DOLE respond to LABOR VIOLATIONS by big private companies? are they really prosecuted?

  26. viclogic says:

    Hi Jebelle,

    Based on my experience in our region, the NLRC is active in defending laborers. IMO, big private companies are prosecuted in a way that they are required to pay the workers the rewards that are due to them.

  27. francistudlong says:

    Hello:
    Ask ko nga po kung ano ang basis ng Job Order pag nasa government ka nagwowork in terms of Benefits and Taxes.

    Sa akin Kasi Job Order as Instructor sa isang government College school and Renewable Per semester pero wala kaming pemermahan na kontrata. Pag sahod mayron kaming tax and monthly yan. 2 years na po akong Job Order and yet wala man lang ako natatanggap na benefits. Kindly explain to me the Labor Law . Thanks

  28. zephyr11 says:

    hello, i just want to ask dapat po ba mgdeduct ang employer kung ang employee po ay per day ang salary?

  29. magnifico822002 says:

    Where to ask or help assistance because my employer did not give my 13 month pay for more than one year?

  30. marvelyn says:

    hello po, nagwowork po ako minimum naman po ang salary ko kaya lang po madalas hindi binabayaran ang aking overtime saka wala rin po akong benefits d rin ako nakakatanggap ng x-mas bonus saka 13th month pay.gusto ko po sanang humingi ng payo at tulong sa inyo na sana maibigay naman sakin ang aking mga benefit

  31. Hi very nice counting by a computer all is very true for rube country thanks for nice sharing.

  32. i have to deduct thier absenses and lates? cause someone told that i have to… or its depend on me? thanks a lot

  33. 13th month pay is truly for the benefits of both employer and the employees. It’s a monetary and recognition benefits for employees, while it’s an opportunity to show appreciation and thankfulness to employees for employers.

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