Philippines 13th Month Pay: Rules Explained

What 13th month pay is

The benefit is a thirteenth month of basic pay for a full year of work, scaled down in proportion for a shorter period. Because it is a legal entitlement, an employer cannot refuse it, defer it past the deadline or replace it with a smaller amount, although a company is free to pay more under its own policy, a contract or a collective bargaining agreement.

Regular staff, probationary and contractual employees, part-timers and piece-rate workers are all covered, and so are employees who resigned or were separated partway through the year. An employee with two private-sector employers is owed a prorated amount by each of them, based on the salary earned with that employer. DOLE repeats the rule every year in a labour advisory, most recently Labor Advisory No. 16, Series of 2025.

The formula: total basic pay divided by 12

13th month pay equals total basic salary earned in the calendar year divided by 12. If you worked the whole year at the same basic salary, the answer is exactly one month's basic pay. If your salary changed, add up what you actually earned month by month and divide by 12. If you started mid-year, resigned, took unpaid leave or got a raise, the same formula handles it: divide what you actually earned by 12.

What counts as basic salary is where most mistakes happen. Basic salary is your regular wage. Overtime pay, holiday pay, night shift differential, cost-of-living allowance and profit-sharing payments are excluded, unless your contract, collective bargaining agreement or company policy expressly treats them as part of basic pay. For variable earners, such as piece-rate workers or employees on a fixed wage plus commission, the average monthly basic salary is used. To check a figure, add the basic pay lines on your payslips for the year, leave the overtime and allowance lines out, and divide by 12.

Worked examples

Take a full year at 25,000 pesos a month. Total basic salary earned is 300,000 pesos. Divided by 12, the 13th month pay is 25,000 pesos. The half instalment, if the employer pays in two parts, is 12,500 pesos. Take six months at 15,000 pesos a month. Total earned is 90,000 pesos. Divided by 12, the amount is 7,500 pesos, pro-rated, not rounded up to a full month.

Take only three months at 20,000 pesos a month. Total earned is 60,000 pesos. Divided by 12, the amount is 5,000 pesos, one quarter of a month's pay. Take a worker who resigned after June at 20,000 pesos a month. Total earned is 120,000 pesos. Divided by 12, the amount is 10,000 pesos, paid as part of the final pay. Resigning does not remove the entitlement for months already worked.

Who qualifies, deadlines and tax

Rank-and-file employees qualify regardless of position, designation, employment status or how they are paid, as long as they worked at least one month in the year. Managerial employees are not covered by the law, although many companies include them by policy. Government employees and most government-owned corporations are outside Presidential Decree No. 851 because they receive equivalent benefits under separate rules. Household helpers and personal service workers are excluded, as are workers paid purely on commission, boundary or task basis, with limited exceptions for piece-rate workers. Employers can also be exempt in narrow cases: distressed employers that prove financial hardship to DOLE, employers already paying at least one month's salary as an equivalent benefit, and certain new businesses.

The full amount must be paid on or before December 24 of each year. Employers may pay it in two instalments: one half before the opening of the regular school year, often in May or June, and the balance on or before December 24. A collective bargaining agreement can set a different schedule, but the full amount must still be settled by the deadline, and employers must file a compliance report with the nearest DOLE regional office by January 15 of the following year.

13th month pay is not automatically tax-free. Under Republic Act No. 10963, the TRAIN Law, 13th month pay together with Christmas bonus, mid-year bonus, performance bonus and similar cash benefits are tax-exempt up to a combined 90,000 pesos per calendar year. Only the excess is added to taxable compensation income, at the employee's marginal rate. Take a full year at 100,000 pesos a month. The 13th month pay is 100,000 pesos, so 90,000 pesos is exempt and 10,000 pesos is excess. If the same employee also got a 50,000 peso performance bonus, combined benefits are 150,000 pesos, and the excess is 60,000 pesos: the ceiling is shared, not per benefit. No single tax amount can be stated, because tax on the excess depends on total annual income.

Check your payslips, then run your figures through the Philippines 13th month pay tool. See all guides for the country on the Philippines page, and browse more guides on the Calcotia blog.