Every year, millions of Filipino workers receive their 13th month pay — a mandatory government-mandated benefit that provides a significant financial boost before the holiday season. But many employees don't know exactly how it's calculated, what's included, what's excluded, and when their employer is required to pay it. This guide covers everything.
What Is 13th Month Pay?
The 13th month pay is a mandatory cash benefit required by Presidential Decree No. 851, signed on December 16, 1975 by President Ferdinand Marcos Sr. It entitles rank-and-file employees to receive an additional one-twelfth (1/12) of their total basic salary earned during the calendar year.
It is called the "13th month" because it effectively provides employees with a 13th monthly paycheck on top of their regular 12 monthly salaries — hence the name. The benefit is separate from and in addition to any Christmas bonuses, profit sharing, or other bonuses that employers may give voluntarily.
Presidential Decree No. 851 — Requiring All Employers to Pay Their Employees a 13th Month Pay (1975)
Revised Guidelines (1987) — Updated rules on coverage, computation, and exemptions issued by the Department of Labor and Employment (DOLE).
Who Is Entitled to 13th Month Pay?
All rank-and-file employees in the private sector who have worked for at least one month during the calendar year are entitled to 13th month pay — regardless of:
- The nature of their employment (regular, probationary, project-based, or seasonal)
- The method of payment (daily, weekly, monthly, or piece-rate)
- The amount of basic salary received
- Whether they are paid on commission, task, or piece-rate basis
— Government employees (covered by separate rules)
— Managerial employees (those vested with powers to lay off, hire, transfer, suspend employees)
— Domestic helpers / household workers (they have their own benefit rules under RA 10361)
— Employees already receiving a 13th month pay or its equivalent (e.g., those under a 14th month arrangement)
— Commission-based employees where the commission is the only compensation (no basic salary)
The Formula
Divide by 12 regardless of how many months you actually worked.
If you worked less than 12 months, your proportional pay is automatically reflected in the lower total.
What Is Included in "Basic Salary"?
This is where most of the confusion comes from. Basic salary is not the same as gross pay. Many components of your take-home pay are excluded from the 13th month pay computation.
| Pay Component | Included in Computation? |
|---|---|
| Basic monthly salary | ✅ Yes |
| Basic daily rate × days worked | ✅ Yes |
| Salary differential (minimum wage increase) | ✅ Yes |
| Cost of Living Allowance (COLA) | ❌ No |
| Overtime pay | ❌ No |
| Night differential pay | ❌ No |
| Holiday pay | ❌ No |
| Premium pay for rest day/holiday work | ❌ No |
| Cash equivalent of unused leave | ❌ No |
| Performance bonuses | ❌ No |
| Profit sharing | ❌ No |
| SSS/PhilHealth/Pag-IBIG contributions | ❌ No |
| Maternity/paternity/sick leave pay (if paid) | ❌ No |
Only the basic salary counts — the fixed amount you receive for your regular working hours, before any allowances, premiums, or bonuses are added. When in doubt, check your payslip for the line labeled "Basic Salary" or "Basic Pay."
Step-by-Step Computation
Add up all basic salary earned from January to December
Add your basic salary for every month you worked during the calendar year. If you were absent without pay, only count the salary you actually received. If your salary increased mid-year, use the new rate for months after the increase.
Divide the total by 12
Divide the total basic salary earned by 12. This applies to all employees — even if you worked fewer than 12 months. If you only worked 3 months, your total basic salary will naturally be lower, and dividing by 12 gives the correct proportional amount.
The result is your 13th month pay
The figure from Step 2 is your gross 13th month pay before tax. Check whether the amount exceeds the tax-exempt threshold (₱90,000) to determine if income tax applies.
Worked Examples
Example 1: Full Year Employee (Monthly Rate)
Example 2: Employee Who Started Mid-Year
Example 3: Daily Rate Employee
Example 4: Employee with Salary Increase Mid-Year
🧮 Quick 13th Month Pay Estimator
Enter your basic salary details for a quick estimate.
When Should It Be Paid?
Under DOLE rules, the 13th month pay must be paid on or before December 24 of each year. Employers may choose to release it earlier, and many companies split the payment into two tranches:
- First tranche: Released mid-year (often May or June, around school opening season)
- Second tranche: Released on or before December 24
This is allowed as long as the total amount paid equals at least 1/12 of the employee's total basic salary for the year. The December payment would then be the remainder after deducting the mid-year tranche.
If your employer fails to pay the 13th month pay on or before December 24, it is a violation of PD 851. Employees can file a complaint with the DOLE Regional Office. Non-compliant employers face penalties and are required to pay the amount owed plus potential damages.
Is 13th Month Pay Taxable?
Under the Tax Reform for Acceleration and Inclusion (TRAIN) Law (Republic Act 10963), the 13th month pay and other bonuses are exempt from income tax up to ₱90,000 per year.
| 13th Month Pay Amount | Tax Treatment |
|---|---|
| ₱90,000 and below | ✅ Fully tax-exempt |
| Above ₱90,000 | Only the excess above ₱90,000 is subject to income tax |
Note that the ₱90,000 ceiling applies to the combined total of 13th month pay AND other bonuses (Christmas bonus, performance bonus, etc.) received in the year. If your total bonuses from all sources exceed ₱90,000, only the amount above the threshold is taxed.
Common Questions
What if I resigned before December?
You are still entitled to your proportional 13th month pay for the months you worked. Your employer must pay this upon separation or at the time your final pay is released — whichever comes first.
What if I was on unpaid leave for part of the year?
Months (or portions of months) during which you received no basic salary due to unpaid leave are not counted in your total basic salary earned. Your 13th month pay will reflect only the salary you actually received.
What if my company gives a "Christmas bonus" — is that the same?
Not necessarily. A Christmas bonus is voluntary and at the employer's discretion. The 13th month pay is mandatory by law. If your employer's Christmas bonus is at least equal to 1/12 of your annual basic salary, it may qualify as the 13th month pay equivalent — but the employer must clearly indicate this. When in doubt, ask your HR department for a payslip breakdown.
Can the employer reduce or withhold the 13th month pay?
No. The 13th month pay is a statutory right — it cannot be reduced, offset against debts owed by the employee, or withheld for any reason except where the DOLE has specifically authorized an exemption (which is rare and subject to strict conditions).
1. Formula: Total Basic Salary Earned ÷ 12
2. All rank-and-file private sector employees who worked at least 1 month are covered
3. Only basic salary is included — not allowances, OT, or bonuses
4. Must be paid on or before December 24 each year
5. Tax-exempt up to ₱90,000 combined with other bonuses (TRAIN Law)
6. Proportional pay applies for employees who worked less than a full year
7. Non-payment is a DOLE violation — file a complaint if your employer withholds it
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