how to compute 13th month pay

November to December is always the busiest time of the year, and everyone is pretty much in a festive mood. The Christmas season is filled with reunions and get-togethers with family and friends accompanied by non-stop eating, celebrating and gift-giving. All these things are fun but will definitely take their toll on your budget big-time.

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To be able to fully fete, one of the things employees look forward to is receiving 13th month pay. But what exactly is it?

What is 13th month pay?

To put it simply, 13th monty pay is basically an additional month's-worth pay for employees. Former President Ferdinand Marcos required employers to pay their employees for a "13th month" or 1/12 of the annual salary, under the Presidential Decree No. 851. It was mandated in order for the working masses to be able to fully celebrate Christmas and New Year without worrying about finances.

Who are entitled to receive your 13th month pay?

Every rank-and-file employee is entitled to receive their 13th month pay. Whether you’re a contractual, project-based, seasonal or regular employee, you can fully look forward to an additional month’s pay. This means that you have the right to demand for it from your employer in case it is not disbursed to employees for one reason or another.

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When do you receive your 13th month pay?

Your 13th month pay should be given not later than the 24th of December each year. That’s why a lot of people mistakenly call it heir “Christmas bonus.” A Chistmas bonus is not mandated by law, and is given by an employer out of kindness. Some companies give both 13th month pay as well as a Christmas bonus as an additional compensation at the end of the year.

You may receive part of your 13th month pay earlier in cases of end-of-contract or resignation. For example, you resigned from your company in August and you have been with them since January of the same year. Upon receipt of your final pay, after all your clearances, you will receive a pro-rated amount for the services you’ve rendered for seven months. It is a portion of one-month's worth of your salary. Some companies opt to pay the 13th month in parts—half on the middle of the year and the remaining half before December 24. Depending on the time when it’s given, it may help in paying for other things such as major purchases or your child’s enrollment.

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How do you compute for your 13th month pay?

If you’re a regular employee and you have been with the same company from January to December of the same year, computing for your 13th month pay is easy. It’s worth your one month of basic salary (allowances and other monetary benefits are not included), net. Based on the TRAIN law, your 13th month pay should not be taxed for as long as it does not exceed P90,000. For the computation, this formula is used:

Total basic salary earned for the year ÷ 12 months = proportionate 13th month pay

If you took a maternity leave for the year, the months when you were not at work will not be part of the computation. Hence, the amount you will receive for the 13th month will be computed as pro-rated.

Employer non-compliance regarding 13th month pay

According to Section 9 of Presidential Decree No. 851, "Non-payment of the thirteenth-month pay provided by the Decree and these rules shall be treated as money claims cases and shall be processed in accordance with the Rules Implementing the Labor Code of the Philippines and the Rules of the National Labor Relations Commission." A company who does not comply will be given notices to do so within 10 days, and should they still refuse, sanctions will be given based on the Labor Code.

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Every employer is also required to submit a report of their compliance at the beginning of the year. This is according to Section 8 of the Decree, as listed on ChanRobles.com:

Every covered employer shall make a report of his compliance with the Decree to the nearest regional labor office not later than January 15 of each year.

The report shall conform substantially with the following form:

REPORT ON COMPLIANCE WITH P.D. NO. 851

  1. Name of establishment
  2. Address
  3. Principal product or business
  4. Total employment
  5. Total number of workers benefited
  6. Amount granted per employee
  7. Total amount of benefits granted
  8. Name, position and tel. no. of person giving information

Your responsibility as an employee

What's important is to report non-compliance to the Department of Labor and Employment, as according to a Business Mirror feature, there are many companies who often get away with not paying its employees ample 13th month pay. And while the law needs more teeth, it also needs you to report instances of employee injustices.

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With additional reporting by Charlene J. Owen

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