Handbook on Workers' Statutory Monetary Benefits (2024)

Thirteenth-Month Pay: Definition

Thirteenth-month pay refers to one-twelfth of the total basic salary earned by an employee within a calendar year.

Thirteenth-Month Pay: Coverage

All employers are required to pay their rank-and-file employees thirteenth- month pay, regardless of the nature of their employment and irrespective of the methods by which their wages are paid, provided they worked for at least one (1) month during a calendar year. The Labor Code, as amended, distinguishes a rank-and-file employee from a managerial employee. A managerial employee is one who is vested with powers or prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, layoff, recall, discharge, assign, or discipline employees, or to effectively recommend such managerial actions. All employees not falling within this definition are considered rank-and-file employees. The above distinction shall be used as guide for the purpose of determining who are rank-and-file employees entitled to the thirteenth-month pay. The following employers are not covered by Presidential Decree No. 851: 1. The government and any of its political subdivisions, including government-owned and controlled corporations, except those corporations operating essentially as private subsidiaries of the government; 2. Employers who are already paying their employees a thirteenth-month pay or more in a calendar year or its equivalent at the time of the issuance of Presidential Decree No. 851; 3. Employers of household helpers and persons in the personal service of another in relation to such workers; and 4. 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, See Revised Guidelines on the Implementation of the 13 Month Pay Law. See also DOLE Labor Advisory No. 18, Series of 2021 entitled Guidelines on the Payment of Thirteenth Month Pay. Issued on 25 October 2021. The term "its equivalent" shall include Christmas bonus, midyear bonus, cash bonuses, and other payments amounting to not less than one-twelfth (1/12) of the basic salary but shall not include cash and stock dividends, cost of living allowance, and all other allowances regularly enjoyed by the employee, as well as non-monetary benefits. Under Section 25 of Republic Act No. 10361 or the “Batas Kasambahay”, a domestic worker is entitled to thirteenth-month pay as provided for by law. irrespective of the time consumed in the performance thereof, except where the workers who are paid on piece-rate basis in which case the employer shall grant them thirteenth-month pay to such workers.

Thirteenth-Month Pay: Amount

The thirteenth-month pay shall not be less than one-twelfth (1/12) of the total basic salary earned by an employee in a calendar year. The "basic salary" of an employee for the purpose of computing the thirteenth-month pay shall include all remunerations or earnings paid by his or her employer for services rendered. It 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 shift differential and holiday pay, and cost of living allowance (COLA). However, these salary- related benefits should be included as part of the basic salary in the computation of the thirteenth-month pay if these are treated as part of the basic salary of the employees, through individual or collective agreement, company practice or policy.

Thirteenth-Month Pay: Computation

Total basic salary earned during the year = proportionate 13th-month pay 12 months To illustrate, assume Employee A earned ₱184,219.96 as his basic salary in a calendar year. In this case, his proportionate 13th-month pay shall be computed as follows: January no absence ₱15,910.83 February no absence 15,910.83 March no absence 15,910.83 April no absence 15,910.83 May no absence 15,910.83 June 5 days leave with pay 15,910.83 July no absence 15,910.83 August no absence 15,910.83 September 10 days leave w/o pay 9,810.83 October no absence 15,910.83 November 1 day leave w/o pay 15,300.83 December no absence 15,910.83 Total basic salary earned for the year ₱184,219.96 Proportionate 13 -month pay (₱184,219.96/12) ₱15,351.66 “Workers paid on piece-rate basis” 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. E.

Thirteenth-Month Pay: Time of Payment

The thirteenth-month pay shall be paid not later than December 24 of every year. An employer, however, may give to his or her employees one-half (1/2) of the thirteenth-month pay before the opening of the regular school year and the remaining half on or before December 24 of every year. The frequency of payment of this monetary benefit may be the subject of an agreement between the employer and the recognized/collective bargaining agent of the employees.

Thirteenth-Month Pay: Thirteenth-Month Pay for Certain Types of Employees

1. Employees who are paid on piecework basis are entitled to the thirteenth- month pay. 2. Employees who are paid a fixed or guaranteed wage plus commission are also entitled to the thirteenth-month pay, based on their earnings during the calendar year (e.g., on both their fixed or guaranteed wage and commission). In Boie-Takeda Chemicals, Inc. vs. De la Serna , the Supreme Court ruled that commissions, while included in the generic term wage, are not part of "basic salary/wage" and therefore should not be included in computing the thirteenth- month pay. Thus: In remunerative schemes consisting of a fixed or guaranteed wage plus commission, the fixed or guaranteed wage is patently the "basic salary" for this is what the employee receives for a standard work period. Commissions are given for extra efforts exerted in consummating sales or other related transactions. They are, as such, additional pay, which this Court has made clear do not form part of the "basic salary". 3. Employees with multiple employers. Government employees working part-time in a private enterprise, including private educational institutions, as well as employees working in two or more private firms, whether on full-time or part-time basis, are entitled to the thirteenth-month pay from all their private employers, regardless of their total earnings from each of their employers.

Thirteenth-Month Pay: Thirteenth-Month Pay of Resigned or Separated Employee

An employee who has resigned or whose services are terminated at any time before the time of payment of the thirteenth-month pay is entitled to this monetary benefit in proportion to the length of time he or she has worked during the year, reckoned from the time he or she has started working during the calendar year up to the time of his or her resignation or termination from the service. Thus, if he or she worked only from January to September, his or her proportionate thirteenth- G.R. No. 92174 & G.R. No. 102552, 10 December 1993. month pay should be equal to one-twelfth (1/12) of his or her total basic salary earned during that period.

Thirteenth-Month Pay: Thirteenth-Month Pay of Female Employee who is on Maternity Leave

The salary differential shall be included as part of the basic salary for purposes of computation of the 13th-month pay of the rank-and-file employee.

Thirteenth-Month Pay: Non-inclusion in Regular Wage

The thirteenth-month pay is not part of the regular wage of employees for purposes of determining overtime and premium payments, fringe benefits, contributions to the State Insurance Fund, Social Security System, National Health Insurance Program, and private retirement plans.

Thirteenth-Month Pay: Coverage from Income Tax of Thirteenth-Month Pay and Other Benefits

Pursuant to Section 2.78.1(B)(11) of BIR Revenue Regulation No. 2-98, as amended, among other income payments, the following are exempted from the requirement of withholding tax on compensation but may be subject to income tax depending on the nature/sources of income earned by the individual recipient: (a) Thirteenth-month pay equivalent to the mandatory one month basic salary of official and employees of the government (whether national or local), including government-owned or controlled corporations, and/or private offices received after the twelfth month pay; and (b) Other benefits such as Christmas bonus, productivity incentives, loyalty award, gift in cash or in kind, and other benefits of similar nature actually received by officials and employees of both government and private offices, including the Additional Compensation Allowance (ACA) granted and paid to all officials and employees of the National Government Agencies (NGAs) including State Universities and Colleges (SUCs), Government-Owned and/or Controlled Corporations (GOCCs), Government Financial Institutions (GFIs) and Local Government Units (LGUs). The above stated exclusions under (a) and (b) shall cover benefits paid or accrued during the year, provided that the total amount shall not exceed ₱90,000.00, which may be increased through rules and regulations issued by the Secretary of Finance, upon recommendation of the Commissioner, after considering among others, the effect on the same of the inflation rate at the end of the taxable year. See Department Advisory No. 01, Series of 2019 or the Guidelines on the Computation of Salary Differential of Female Workers during her Maternity Leave and its Criteria for Exemption Pursuant to Republic Act No. 11210 and its Implementing Rules and Regulations. Issued on 09 July 2019. As amended by BIR Revenue Regulations No. 11-2018 [Amending Certain Provisions of Revenue Regulations No. 2-98, as Amended, to Implement Further Amendments Introduced by Republic Act No. 10963, Otherwise Known as the “Tax Reform for Acceleration and Inclusion (TRAIN)” Law, Relative to Withholding of Income Tax]. Issued on 31 January 2018.

Thirteenth-Month Pay: No Exemption or Deferment

No request or application for exemption from payment of 13th-month pay, or for deferment of the payment thereof shall be accepted and allowed.

Thirteenth-Month Pay: Report of Compliance

Employers shall make a report of their compliance via online through the DOLE Establishment Report System at https://reports.dole.gov.ph/ not later than January 15 of the following year. The report shall conform substantially with the following: 1. Name of establishment 2. Address 3. Principal product of business 4. Total employment 5. Total number of workers benefitted 6. Amount granted per employee 7. Total amount of benefits granted 8. Name, position and telephone number of person giving information