What is 13th month pay?
13th month pay is a mandatory benefit in the Philippines under Presidential Decree No. 851. Every rank-and-file employee who has worked for at least one month during the calendar year is entitled to it, whatever their job title, employment status or how they are paid. Employers must pay it on or before 24 December each year. Many pay half in May or June and the other half in December.
13th month pay formula
13th month pay = Total basic salary earned during the calendar year ÷ 12
“Basic salary earned” means the basic pay you actually received for work done. Days of unpaid leave, absences, tardiness and undertime reduce the salary you earned, so they reduce the base. They are not deducted again from the final amount.
Included and excluded
| Included in basic salary | Usually excluded |
|---|---|
| Basic pay for days worked | Overtime, premium and holiday pay |
| Paid leave that counts as salary | Night shift differential |
| Allowances integrated into basic pay | Cost-of-living allowance (COLA) |
| Commissions that work like wages | Profit sharing and incentive bonuses |
| Cash conversion of unused leave |
A company policy or collective bargaining agreement can include more items. It cannot include fewer.
Worked examples
Full year, no absences
Maria earns ₱25,000 a month and worked all of January to December. Her total basic salary is ₱300,000, so her 13th month pay is ₱300,000 ÷ 12 = ₱25,000.
Joined in April
Jose started on 1 April at ₱20,000 a month. From April to December he earns 9 × ₱20,000 = ₱180,000. His 13th month pay is ₱180,000 ÷ 12 = ₱15,000.
Salary increase mid-year
Ana earned ₱18,000 from January to June and ₱21,000 from July to December. Her total is (6 × 18,000) + (6 × 21,000) = ₱234,000, so her 13th month pay is ₱19,500. Use the Month by month mode in the calculator for cases like this.
Is 13th month pay taxable?
Under the TRAIN Law (Republic Act No. 10963), your 13th month pay and other benefits, such as a Christmas bonus, productivity incentives and loyalty awards, are tax-free up to a combined ₱90,000 a year. Anything above that is added to your taxable compensation. The calculator adds your 13th month pay and the other bonuses you enter and shows the amount over the limit, if any. For the official rules, see the Bureau of Internal Revenue.
Resigned or terminated before December?
You are still entitled to a pro-rated 13th month pay for the basic salary you earned from January up to your last day. It should be included in your final pay, which employers are expected to release within 30 days of separation under DOLE guidelines. Our final pay calculator adds it together with unpaid salary, leave conversion and separation pay.
Who is not covered?
- Managerial employees, although many companies give it voluntarily.
- Government employees, who are covered by separate year-end bonus rules.
- Employers already paying an equivalent 13th month benefit or more.
- Some other categories exempted under the decree's implementing rules.
If you are not paid by 24 December, you can raise it with your HR team first and then with the Department of Labor and Employment (DOLE).
Frequently asked questions
How do I compute my 13th month pay?
Add up the basic salary you actually earned from January to December and divide by 12.
When is the deadline for 13th month pay?
On or before 24 December of each year. Employers may pay part of it earlier, for example in mid-year.
Is 13th month pay tax-free?
Yes, up to ₱90,000 a year combined with other bonuses and similar benefits. Any excess is taxable.
Do absences reduce my 13th month pay?
Unpaid absences reduce the basic salary you earned, which lowers the total that is divided by 12. Paid leave does not reduce it.
Am I entitled if I worked for only two months?
Yes. Rank-and-file employees who worked at least one month in the calendar year receive a pro-rated amount.
Does overtime count toward 13th month pay?
Not unless your contract or company policy includes it. The law uses basic salary.