The 13th month pay in the Philippines has become a yearly lifeline for many workers. Every December, people use it to buy gifts, catch up on bills, or save for the coming year. Yet many still ask: “How is it computed?” “Who is entitled?” “Why was it created in the first place?”
Understanding these basics helps you check if your employer is following the law and if your pay is correct.
What the 13th Month Pay Really Is
When Presidential Decree No. 851 was issued in 1975, the goal was simple: help Filipino families deal with holiday expenses. At the time, rising prices made December especially difficult for workers earning low wages.
PD 851 required all private-sector employers to give rank-and-file workers extra income. This made the 13th month pay a mandatory benefit, not a bonus. It also became one of the strongest labor protections in the country.
Why the 13th Month Pay Was Created
Here’s the motivation behind PD 851 and how it shaped today’s rules:
- Welfare during the holidays
Workers needed financial support, especially parents and low-income earners. - Part of labor reform
The decree was introduced during a period of economic pressure when families struggled with rising costs. - Employer responsibility
Unlike discretionary bonuses, the 13th month pay is a legal obligation. Companies that skip or delay it can face penalties or labor complaints. - Support for rank-and-file workers
The law ensures that those who keep businesses running receive a fair share of earnings.
How to Compute the 13th Month Pay
The law keeps computation simple. The formula is:
13th Month Pay = Total Basic Salary Earned (Jan–Dec) ÷ 12
To keep things clear, here are the points that matter:
What counts as “basic salary”?
Included:
• Daily/monthly basic pay
• Salary increases during the year
Not included:
• Overtime pay
• Holiday pay
• Night differential
• Allowances
• Commissions (unless your contract treats them as part of basic salary)
This is why two workers with the same position may receive different amounts at the end of the year depending on how their pay is structured.
Special Situations You Should Know
Many workers think you must be “regular” to receive it. That’s not true.
👉 If you were hired mid-year
You still get your 13th month pay. It will be pro-rated based on the months you worked.
👉 If you resigned
You are still entitled to your proportionate 13th month pay. Employers normally include it in the release of your final pay.
👉 If your salary increased
Your 13th month pay reflects all monthly salaries you earned, including months when your pay went up.
Deadline for release
Employers must pay it on or before December 24 each year. Some companies release it earlier to help employees plan finances.
Tax exemption
Under the TRAIN Law, the 13th month pay is tax-free up to ₱90,000 combined with other benefits.
Who Is Entitled to the 13th Month Pay?
The coverage of PD 851 is wide and clear:
✔ Eligible
- All rank-and-file workers in the private sector
• Employees paid monthly, daily, or hourly
• Workers who completed at least one month of service during the year
✖ Not covered
- Government employees (covered by different rules)
• Managerial employees (although many companies still provide it voluntarily)
• Employers already giving equivalent bonuses under special arrangements approved by law
This broad coverage makes the 13th month pay one of the strongest tools for worker protection in the Philippines.
Why It Matters for Every Employee
The 13th month pay is more than a December tradition. It represents:
- Financial relief during a high-spending month
Families prepare for food, gifts, school needs, and year-end payments. - Recognition of your work
It acknowledges your contribution to the company’s growth. - A labor safeguard
It protects rank-and-file workers from unfair pay practices. - Transparency in compensation
Employers must show how they computed your pay for the year.
Understanding this benefit empowers employees to verify if their compensation is correct and to take action when something is missing or delayed.
Frequently Asked Questions
1. Is the 13th month pay mandatory?
Yes. All private-sector employers must give 13th month pay to their rank-and-file workers.
2. When is the deadline?
It must be released on or before December 24.
3. Can contractual or part-time workers receive it?
Yes, as long as they worked at least one month within the year.
4. How is it computed if I didn’t work the full year?
Your employer will divide your total basic salary earned by 12. This results in a pro-rated amount.
5. What if the employer refuses to pay?
You may file a complaint with the Department of Labor and Employment (DOLE).
6. Is it taxable?
It is tax-exempt up to ₱90,000 combined with other benefits.
In Closing
The 13th month pay in the Philippines is more than a year-end requirement. It was designed to support workers, protect their rights, and give families a financial breather during the holidays. When you understand how it is computed and who is entitled, you can check if your pay is correct and take action if something is missing or delayed.
As December is already upon us, this benefit becomes a reminder that fair labor practices matter and that every worker deserves recognition for a full year of hard work.