Introduction
Every year, HR professionals and payroll officers across the Philippines face the same challenge: ensuring the accurate computation of the 13th month pay. This benefit is not only mandated by law under Presidential Decree No. 851, but it also directly impacts employee satisfaction and trust in the company.
For 2025, HR and payroll teams must keep up with updated DOLE guidelines, pro-rata rules, and the increasing complexity of compensation structures. In this article, we’ll break down:
- The legal basis of 13th month pay
- Who is entitled (and exempted)
- The step-by-step computation formula with examples
- Common pitfalls in manual calculation
- How HRIS like Everything at Work automates the process
Legal Basis of 13th Month Pay
The 13th month pay law (PD 851) requires all employers to provide rank-and-file employees with an additional benefit equivalent to one-twelfth (1/12) of their basic salary within a calendar year.
Key reminders for 2025:
- Deadline: Employers must release 13th month pay on or before December 24, 2025.
- Coverage: Applies to all rank-and-file employees, regardless of position, designation, or employment status, as long as they worked at least one (1) month during the calendar year.
❓ Frequently Asked Questions on 13th Month Pay in the Philippines (2025 Update)
1. Who is entitled to 13th month pay in the Philippines?
All rank-and-file employees who have worked for at least one month during the calendar year are entitled, regardless of employment status (probationary, regular, contractual).
2. Are managers entitled to 13th month pay?
Not required by law under PD 851, but many companies extend it to managers and supervisors as part of company policy or competitive practice.
3. Does 13th month pay include allowances and overtime?
No. The computation is based on basic salary only. Overtime pay, holiday pay, night differential, and allowances (e.g., transportation, meal, clothing) are excluded — unless specifically considered part of “basic salary” in the employment contract or CBA.
4. What if the employee resigned before December?
The employee is still entitled to a pro-rated 13th month pay, based on the number of months worked. Employers must pay this upon release of final pay.
5. What if the employee was hired mid-year?
They are entitled to a pro-rated amount corresponding to the months they worked. Example: An employee hired in July earns half of the annual 13th month pay.
6. What if the employee had a salary increase during the year?
The computation should be based on the actual salaries earned per month. For example:
- Jan–Jun: ₱20,000/month
- Jul–Dec: ₱25,000/month
Total = ₱270,000 ÷ 12 = ₱22,500 (13th month pay).
7. When is the deadline for releasing 13th month pay?
On or before December 24, 2025. Employers must ensure timely release to comply with DOLE requirements.
8. Do part-time or probationary employees get 13th month pay?
Yes. As long as they are rank-and-file employees and worked at least one month during the year, they are entitled.
9. Do freelancers or project-based workers get 13th month pay?
If they are classified as independent contractors and not employees, they are not covered. But if they are on employment contracts, they are entitled.
10. Is 13th month pay taxable?
- The first ₱90,000 of 13th month pay and other benefits is tax-exempt (per TRAIN Law).
- Any amount beyond ₱90,000 is subject to withholding tax.
11. What are the penalties for not paying 13th month pay?
Non-compliance is a violation of labor law. Employers may face DOLE fines, legal complaints, and reputational damage.
12. How can HRIS help with 13th month pay?
HRIS like Everything at Work automates:
- Prorated calculations for resigned/new hires
- Adjustments for salary increases
- DOLE compliance reports
- Payslip integration in the Employee Portal
Formula for 13th Month Pay (2025)
The standard formula is:
13th Month Pay = (Total Basic Salary Earned for the Year ÷ 12)
⚠️ Important notes:
- Exclusions: Overtime pay, holiday pay, night shift differential, and allowances are not part of “basic salary” unless stated in the employment contract.
- Pro-rata: Employees who did not work for a full year are entitled to a pro-rated 13th month pay.
Example 1: Full Year Employee
- Monthly basic salary: ₱25,000
- Worked Jan–Dec 2025
Computation:
(₱25,000 × 12) ÷ 12 = ₱25,000
Example 2: Employee Resigned in August
- Monthly basic salary: ₱20,000
- Worked Jan–Aug 2025 (8 months)
Computation:
(₱20,000 × 8) ÷ 12 = ₱13,333.33
Example 3: Newly Hired in July
- Monthly basic salary: ₱18,000
- Worked Jul–Dec 2025 (6 months)
Computation:
(₱18,000 × 6) ÷ 12 = ₱9,000
Common Mistakes in 13th Month Pay Computation
- ❌ Including non-basic pay (OT, allowances, holiday pay) in the computation.
- ❌ Missing prorated calculation for resigned or newly hired staff.
- ❌ Not considering salary adjustments during the year (e.g., mid-year increases).
- ❌ Late release, risking DOLE penalties and employee dissatisfaction.
DOLE Compliance Reminders (2025)
- Employers must submit compliance reports on 13th month pay distribution to DOLE Regional Offices.
- Failure to pay is a labor law violation subject to penalties and legal action.
- For transparency, companies should provide payslip breakdowns showing the computation.
How Everything at Work HRIS Helps
Manually computing 13th month pay for dozens or thousands of employees can be prone to errors and delays. Everything at Work (EAW) automates this process by:
- ✅ Auto-computing prorated 13th month pay for resigned/new employees
- ✅ Tracking salary adjustments to reflect accurate computation
- ✅ Auto-generating DOLE compliance reports
- ✅ Integrating with Payroll, Leave, and Attendance modules for accurate records
- ✅ Ensuring employees see their 13th month pay details in the Employee Portal
With EAW, HR teams spend less time on manual calculation and more time focusing on strategic HR initiatives.
Conclusion
The 13th month pay is more than just a legal requirement — it’s a reflection of how much a company values fairness and compliance. In 2025, with increasing complexity in employment contracts and hybrid work arrangements, HR teams can no longer afford manual errors.
By automating the process with Everything at Work HRIS, companies ensure accurate, compliant, and on-time payouts — boosting both employee trust and business reputation.
Want to simplify your 13th month pay computation and DOLE compliance?
Book a Demo with Everything at Work today.