Presidential Decree No. 851 requires every employer to give rank-and-file employees a 13th month pay, regardless of position, designation or how wages are paid, as long as they worked at least one month during the calendar year. Here is how to compute it correctly.
The formula
13th month pay = total basic salary earned in the year ÷ 12
Basic salary means your regular pay for work done, including paid leaves that were converted into salary under company policy, but excluding overtime pay, holiday premium, night shift differential, cost-of-living allowance (unless integrated into basic pay) and profit-sharing. Unpaid absences and tardiness deductions reduce your basic salary earned.
Example 1: full year, fixed salary
Ana earns ₱22,000 a month and worked all twelve months with no unpaid absences. Total basic salary: ₱264,000. 13th month pay: ₱264,000 ÷ 12 = ₱22,000 — equal to one month's salary.
Example 2: salary increase mid-year
Ben earned ₱18,000 from January to June and ₱20,000 from July to December. Total: (₱18,000 × 6) + (₱20,000 × 6) = ₱228,000. 13th month pay: ₱19,000.
Example 3: new hire or resigned employee
Carla started on August 1 at ₱25,000 a month. By December she earned 5 × ₱25,000 = ₱125,000, so her 13th month pay is ₱125,000 ÷ 12 = ₱10,416.67. The same pro-rated method applies to an employee who resigns before December; the amount is usually included in the final pay.
Example 4: daily-paid worker
Dan earns ₱695 a day and worked 250 days in the year: ₱173,750 total basic pay, so his 13th month pay is ₱14,479.17. Unpaid days off are not counted.
Deadline and tax
The 13th month pay must be paid not later than December 24. It is tax-exempt up to ₱90,000 per year when combined with other benefits such as mid-year bonuses and Christmas bonuses; only the excess is taxable. It is also not subject to SSS, PhilHealth or Pag-IBIG contributions.
Who is not covered?
Government employees (who receive a separate year-end bonus), household helpers covered by the Kasambahay Law (which has its own 13th month provision), employees paid purely on commission, and employers already paying an equivalent benefit are the main exceptions. Managerial employees are not covered by PD 851, though many companies give it anyway.
Calculate yours instantly with the 13th month pay calculator. If your employer fails to pay, you may file a request for assistance with DOLE through the Single Entry Approach (SEnA).