13th-month pay is a form of monetary assistance equivalent to the monthly basic compensation received by an employee, computed pro-rata according to the number of months within a year that an employee has rendered service to an employer (basic monthly pay/12 x number of months actually worked).

Who are entitled to 13th month pay?

All rank and file employees, regardless of status, who have worked for at least one (1) month are entitled to receive 13th month pay.

What if I already worked for one month and I resigned thereafter?

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 13th month pay, in proportion to the length of time he worked during the year. The formula is: (basic monthly pay/12) x (number of months actually worked). The 13th month may be demanded at the time of effectivity of the resignation/termination. That doesn’t have to be December 24.

Who are rank-and file employees?

All employees not considered as managerial employees are considered rank-and-file employees. A managerial employee, as distinguished from a rank-and-file 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.

Is there a cap, i.e., only those receiving a salary below P1,000 may receive 13th month pay?

Prior to 1986, only those who receive a monthly salary of not more than PhP1,000 are entitled to receive 13th month pay. This cap was removed under Memorandum Order No. 28 issued by former President Corazon Aquino.

When must it be paid?

The 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.

Can the employer withhold payment of the 13th month pay?

No, the payment of 13th month pay is mandatory, specifically provided under Presidential Decree (P.D.) No. 851. In case of non-payment of 13th month pay, covered employees could complain at the Department of Labor and Employment (DOLE)  or the National Labor Relations Commission (NLRC).

Are there employers who are exempted from paying 13th month pay?

Yes. The following employers are not required to pay 13th month pay under P.D. 851, unless the grant thereof have become a policy or practice:

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.

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.

Who are those paid on a piece-rate basis?

They are workers 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.

What if I work in more than one company?

Workers who work in two or more companies or private employers, whether on full or part time basis, are entitled to the required 13th month pay from all their private employers regardless of their total earnings from each or all their employers.

Is it part of the Company bonus?

No. The payment of 13th month pay is mandated by law. It is separate from any other bonus given by the company. Read the previous discussion.

Is 13th month pay taxable?

No, as long as the amount does not exceed P90,000. Only the excess amount is taxable. In 2015, the allowable exclusion from gross income, in terms of 13th month pay and other benefits, was increased from P30,000 to P82,000 under Republic Act No. 10653 (see also BIR Revenue Regulation No. 3-2015). This amount was again increased to P90,000 under Republic Act No. 10963, also known as the Tax Reform Acceleration and Inclusion (TRAIN) Law.

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Atty.Fred

Atty. Fred Pamaos is a member of P&L Law (click on photo/name for profile). No legal advice is given in this forum. For other questions, use the "Contact Us" link.

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