13th Month Pay in the Philippines: Who Gets It and How It’s Computed
The rules under PD 851, how to compute a prorated 13th month pay, what counts as basic salary, and when it becomes taxable.
Updated
The 13th month pay is required by law, not a bonus your employer can choose to skip. Presidential Decree No. 851 requires employers to pay it to all rank-and-file employees who worked at least one month during the calendar year.
Who is entitled
- All rank-and-file employees, whatever their salary or how they are paid: monthly, daily, piece-rate, or commission-based with a fixed basic wage.
- Employees who resigned or were terminated during the year, prorated to the time they worked. It’s usually released with the final pay.
- New hires, prorated from their start date.
Managerial employees are not covered by the law, though many companies give it to them anyway.
How it’s computed
13th month pay = total basic salary earned during the calendar year ÷ 12
“Basic salary” means what you are paid for regular work. It excludes overtime pay, holiday and premium pay, night shift differential, and allowances, unless your company integrates them into basic pay.
Unpaid absences, lates, and undertime lower your total basic salary earned, so they also lower your 13th month pay. Paid leaves do not.
Examples
- Worked all year at ₱20,000 a month: ₱240,000 ÷ 12 = ₱20,000.
- Started June 1 at ₱18,000 a month (7 months): ₱126,000 ÷ 12 = ₱10,500.
- Earned ₱20,000 a month but had ₱2,400 in unpaid absences: ₱237,600 ÷ 12 = ₱19,800.
When it must be paid
On or before December 24. Employers may pay half before the school year opens and the other half by December 24.
Is it taxable?
The 13th month pay and other benefits, such as a mid-year bonus, Christmas bonus, productivity incentives, and cash gifts, are tax-free up to ₱90,000 a year combined. Only the excess is added to your taxable compensation.
For most employees earning up to ₱90,000 a month with no other large bonuses, the whole 13th month pay is tax-free. Bills to raise the ceiling to ₱150,000 have been filed in Congress, but as of this update none has become law.
Compute yours with the 13th Month Pay Calculator.