13th Month Pay: How to Compute
Are you eagerly anticipating your 13th month pay? As the year comes to a close, this benefit is on the minds of many employees in the Philippines. This government-mandated benefit is a welcome addition to your yearly income, but how much can you expect to receive?
In this article, we will discuss the computation and formula for the 13th month pay, as well as the eligibility and guidelines for receiving it. Whether you’re a long-time employee or a new hire, it’s important to understand this benefit and how it can impact your finances.
With this information, you can feel confident in your knowledge of the 13th month pay and make informed decisions about your financial future.
Key Takeaways
- 13th Month Pay is a government-mandated benefit for all rank-and-file employees who worked for at least one month in a company.
- The basic computation formula for 13th Month Pay is not less than 1/12 of the employee’s total basic salary within a calendar year.
- Resigned and terminated employees are still entitled to their 13th month pay, as long as they worked for the employer or company for at least a month.
- Private sector employees must receive their 13th month pay on or before December 24 of each year, and violation of the 13th month pay law can be reported to DOLE.
What is 13th Month Pay?
So, you’re probably wondering what exactly the 13th month pay is and who is eligible for it in the Philippines.
Simply put, it’s a government-mandated benefit for all rank-and-file employees who have worked for at least one month in a company.
It’s computed as not less than 1/12 of the employee’s total basic salary within a calendar year, making it a significant addition to your income.
One of the benefits of the 13th month pay is that it’s not subject to taxation if it doesn’t exceed ₱90,000. This means that you’ll be receiving the full amount without any deductions. However, if it exceeds the said amount, the excess will be subject to tax.
It’s important to note that this benefit is only available to regular, full-time, and part-time employees in the private sector, and the payment should be made on or before December 24 of each year.
Computation and Formula
To compute your 13th month pay, simply divide your total basic salary earned during the year by 12 months. This basic computation formula is mandated by the government, ensuring that all rank-and-file employees receive a fair and equal amount of the benefit.
However, for employees who were hired in the middle or toward the end of the year, or those who had their work suspended for several months due to business closure during the pandemic, a prorated computation formula may apply.
It’s important to note that the 13th month pay is taxable if it exceeds ₱90,000. This means that if your annual basic salary is above this threshold, you’ll need to set aside a portion of your 13th month pay for taxes. However, if it falls below the taxation threshold, you’ll receive the full amount of your 13th month pay as additional income.
To give a clearer picture, take a look at the table below. This shows a sample computation for a hypothetical employee named Jason. Jason has an annual salary of Php 240,000. However, his employer gives him an additional Php 12,000 for his transportation allowance and Php 15,000 for his performance bonus. The table shows the computation for Jason’s 13th month pay, excluding the amounts for his transportation allowance and performance bonus.
| Basic Salary | Php 240,000 |
|---|---|
| 13th Month Pay | Php 20,000 |
As shown in the table, Jason’s 13th month pay is Php 20,000, which is equivalent to 1/12 of his annual salary. Remember to exclude any other types of income that are not included in the computation of 13th month pay to ensure that your calculations are accurate and in compliance with the law.
Eligibility and Guidelines
If you are a rank-and-file employee who has worked for at least a month in a company, you are eligible for the 13th month pay, which is a government-mandated benefit in the Philippines. However, not all employees are entitled to this benefit. Freelancers, contractual workers, household helpers, and employees paid solely on commission are excluded from this benefit. Moreover, managers’ entitlement to the 13th month pay depends on the company’s policy.
To ensure that employers comply with the law, the Department of Labor and Employment (DOLE) has released guidelines on the payment of the 13th month pay for 2021. Violations of this law can be reported to DOLE using their query form. It is important to note that DOLE does not allow exemption or deferment of the 13th month payment. As a rank-and-file employee, it is your right to receive this benefit on or before December 24 of each year. Knowing your eligibility and the guidelines set by DOLE can help you assert your right and get what you are entitled to receive.
Important Considerations
Make sure to take note of these important considerations when calculating the 13th month pay for your employees.
First, be aware of the tax implications. The 13th month pay is subject to income tax and must be included in the employee’s taxable income for the year. As an employer, you must withhold the appropriate amount of taxes from the 13th month pay and remit it to the Bureau of Internal Revenue (BIR) on behalf of your employees.
Second, plan your budget accordingly. The 13th month pay is a mandatory benefit that you must provide to your employees. As such, you must include it in your budget planning and ensure that you have enough funds to cover it. Failure to provide the 13th month pay can result in legal action and administrative cases.
By taking these important considerations into account, you can ensure that you’re computing the 13th month pay correctly and fulfilling your obligations as an employer.
Frequently Asked Questions
Are bonuses and 13th month pay the same thing?
There is a common misconception that bonuses and 13th month pay are the same thing, but there are significant differences between the two. While bonuses are discretionary and may not be given annually, 13th month pay is a government-mandated benefit for employees that is calculated based on their basic salary. Understanding the differences between these benefits is important for employees to fully appreciate their significance.
Can the 13th month pay be given in kind or non-cash benefits?
Employers have the discretion to give 13th month pay in kind benefits, but it must be agreed upon in collective bargaining agreements and subject to tax implications and legal requirements. Salary deductions and government subsidies may also be affected. International comparisons suggest cash is preferred, and employee satisfaction and financial planning should be considered.
Can an employee receive a higher amount for their 13th month pay if they have outstanding performance or tenure?
Unfortunately, an employee cannot receive a higher amount for their 13th month pay based on outstanding performance or tenure alone. However, the company may choose to give a performance-based bonus or tenure-based bonus on top of the 13th month pay.
Is the 13th month pay pro-rated for part-time employees?
Part-time employees are entitled to a pro-rated calculation of their 13th month pay. Failure to do so may result in legal implications. It is important for employers to comply with the guidelines set by the Department of Labor and Employment.
Can an employee waive their right to receive the 13th month pay?
You cannot waive your right to receive the 13th month pay as it is a government-mandated benefit. Employers are obligated to provide it, and failure to do so may have legal implications. Alternative benefits may be negotiated, but proper financial planning is crucial.
