The 13th month pay in the Philippines is a legally required payment equal to one-twelfth of an employee’s total basic salary earned during the calendar year, owed by every private employer to rank-and-file staff who have worked at least one month.1The Lawphil Project. Presidential Decree No. 851 It must be paid on or before December 24 each year. The rule comes from Presidential Decree No. 851, signed in 1975, and it applies whether you are regular, probationary, casual, or paid by the piece.
Who Is Entitled
Any rank-and-file employee who worked at least one month during the calendar year qualifies. Job title and employment status do not matter. Piece-rate workers and those on non-standard pay arrangements are covered too.1The Lawphil Project. Presidential Decree No. 851
The line the law draws is between rank-and-file and managerial employees. You are managerial if you can set or carry out management policies, or hire, fire, suspend, or discipline other workers, and if so, the decree does not require your employer to pay you a 13th month.2Bureau of Working Conditions (DOLE). FAQs on 13th Month Pay Many companies extend the benefit to managers anyway. The decree is a floor.
Domestic workers were originally excluded, but Republic Act No. 10361, the Batas Kasambahay, now guarantees them the same benefit on the same December 24 deadline once they have rendered at least one month of service.3Philippine Commission on Women. Republic Act No. 10361 Implementing Rules and Regulations
How It Is Calculated
Add up all the basic salary you earned during the calendar year, then divide by twelve.1The Lawphil Project. Presidential Decree No. 851 The denominator is always twelve, regardless of how many months you actually worked.
“Basic salary” is narrower than what you might see on your payslip. It does not include:
- Cost-of-living allowances
- Profit-sharing payments
- Overtime pay
- Night shift differentials
- Holiday premium pay
- Monetary value of unused vacation or sick leave
- Other allowances and benefits not integrated into your regular salary1The Lawphil Project. Presidential Decree No. 851
The exclusion of overtime and differentials catches many workers off guard. If overtime feels like part of your normal earnings, the 13th month payment can look smaller than expected. Only the base rate counts.
A Worked Example
Say your basic monthly salary is ₱20,000 and you worked the full year. Your total basic salary is ₱240,000. Divide by 12, and your 13th month pay is ₱20,000. Now say you only started in July. You earned ₱120,000 across six months. Divide by 12, and your 13th month pay is ₱10,000.
If You Resigned or Were Separated Mid-Year
You still get paid. Any employee who worked at least one month during the calendar year is entitled to the benefit, even after resigning or being terminated.2Bureau of Working Conditions (DOLE). FAQs on 13th Month Pay The formula is unchanged: total basic salary earned during the year, divided by twelve. The result will be smaller because you worked fewer months.
This is one of the most commonly overlooked rights. Some employers quietly leave it out of the final pay, hoping the worker will not follow up. If you separate mid-year, check that your last pay computation includes it.
Deadline and Split Payment
The full amount must reach the employee on or before December 24. Employers may split it into two installments: one half before the opening of the regular school year, and the balance on or before December 24.1The Lawphil Project. Presidential Decree No. 851 Companies that use the split often release the first half around May or June to help with school expenses, then the rest before Christmas.
Is 13th Month Pay Taxable
Thirteenth month pay is tax-exempt up to ₱90,000 per year under the TRAIN Law (Republic Act No. 10963), effective 2018. That ceiling is the combined total of your 13th month pay and all other bonuses and benefits received during the year, including Christmas bonuses, performance incentives, and productivity awards. Only the portion above ₱90,000 is added to your taxable income.
For most rank-and-file workers, the 13th month pay alone will not approach the cap. If your employer also gives sizable mid-year or year-end bonuses, the combined total can cross the threshold, and the excess should be subject to withholding.
Employers That Are Exempt
The mandate covers nearly all private employers, with a few carve-outs:
- The national government, local government units, and government-owned and controlled corporations are excluded. GOCCs that operate essentially as private subsidiaries are still covered.1The Lawphil Project. Presidential Decree No. 851
- Employers already paying a Christmas bonus, mid-year bonus, or profit-sharing benefit worth at least one-twelfth of the basic salary are considered compliant. If the existing bonus falls short, the employer pays the difference.1The Lawphil Project. Presidential Decree No. 851
- Employers in serious financial distress may apply to DOLE for a temporary exemption, generally on evidence of accumulated losses of at least 20% of paid-up or invested capital, or a negative net worth, supported by audited financial statements. These exemptions are reviewed periodically and end once the business recovers.4ChanRobles Virtual Law Library. Rules Implementing Presidential Decree No. 851 – Rules on Exemption from Compliance with the Prescribed Wage Increases
What To Do If Your Employer Does Not Pay
Raise it in writing with your employer first. If nothing happens, file a complaint with the nearest DOLE Regional Office. DOLE can inspect the establishment and require compliance, and unresolved claims can be escalated through the labor dispute resolution process.
The 13th month payment is not discretionary. Complaints tend to spike around the holidays, and DOLE enforces the rule against employers who ignore it.