All employers are required to pay their rank and file employees thirteenth-month pay, regardless of the nature of their employment and irrespective of the methods by which their wages are paid, provided they worked for at least one (1) month during a calendar year. The thirteenth-month pay should be given to the employees not later than December 24 of every year.
B. Definition of Rank-and-File Employees
The Labor Code, as amended, distinguishes a rank-and-file employee from a managerial employee. A managerial employee is one who is vested with powers or prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, layoff , recall, discharge, assign, or discipline employees, or to effectively recommend such managerial actions. All employees not falling within this definition are considered rank-and-file employees.
The above distinction shall be used as guide for the purpose of determining who are rank-and-file employees entitled to the thirteenth-month pay.
C. Minimum Amount
The thirteenth-month pay shall not be less than one-twelfth (1/12) of the total basic salary earned by an employee in a calendar year.
The “basic salary” of an employee for the purpose of computing the thirteenth-month pay shall include all remunerations or earnings paid by his or her employer for services rendered. It does not include allowances and monetary benefits which are not considered or integrated as part of the regular or basic salary, such as the cash equivalent of unused vacation and sick leave credits, overtime, premium, night shift differential and holiday pay, and cost of living allowance (COLA). However, these salary-related benefits should be included as part of the basic salary in the computation of the thirteenth-month pay if these are treated as part of the basic salary of the employees, through individual or collective agreement, company practice or policy.
D. Formula And Computation of 13th Month Pay
Total basic salary earned during the year / 12 months = proportionate 13th month pay
Using the basic wage in the National Capital Region at P451.00 (from January 1, 2015 to April 3, 2015) and P466.00 (from April 4, 2015 to December 31, 2015) per day and a six-day workweek or an equivalent Monthly Basic Salary of P11,199.83 and P11,572.33, respectively, to wit:
- January – no absence – P11,199.83
- February – no absence – P11,199.83
- March – 1 day leave w/pay – P11,199.83
- April – no absence – P11,572.33
- May – 2 days leave w/pay – P11,572.33
- June – 2 days leave w/pay – P11,572.33
- July – no absence – P11,572.33
- August – 2 days leave w/pay – P11,572.33
- September – on maternity leave – no salary
- October – on maternity leave – no salary
- November – no absence – P11,572.33
- December – 5 days leave w/o pay – P 9,242.33
Total basic salary earned for the year = P112,275.80
P112,275.80 / 12 months = P9,356.32 is the proportionate 13th month pay
E. Exempted Employers
The following employers are not covered by PD 851:
- The government and any of its political subdivisions, including government owned and controlled corporations, except those corporations operating essentially as private subsidiaries of the government ;
- Employers who are already paying their employees thirteenth-month pay or more in a calendar year or its equivalent at the time of the issuance of PD 851;
- Persons in the personal service of another in relation to such workers;
- Employers of those who are paid on purely commission, boundary or task basis, and those who are paid a fixed amount for performing specific work, irrespective of the time consumed in the performance thereof (except those workers who are paid on piece-rate basis, in which case their employer shall grant them thirteenth-month pay).
As used herein, “workers paid on piece-rate basis” shall refer to those who are paid a standard amount for every piece or unit of work produced that is more or less regularly replicated, without regard to the time spent in producing the same.
The term “its equivalent” as used in item D.2 above shall include Christmas bonus, midyear bonus, cash bonuses, and other payments amounting to not less than one twelfth (1/12) of the basic salary but shall not include cash and stock dividends, cost of living allowance, and all other allowances regularly enjoyed by the employee, as well as non-monetary benefits.
F. Time of Payment of Thirteenth-Month Pay
The thirteenth-month pay shall be paid not later than December 24 of every year. An employer, however, may give to his or her employees one-half (1/2) of the thirteenth month pay before the opening of the regular school year and the remaining half on or before December 24 of every year. The frequency of payment of this monetary benefit may be the subject of an agreement between the employer and the recognized/collective bargaining agent of the employees.
G. Thirteenth-Month Pay for Certain Types of Employees
- Employees who are paid on piecework basis are entitled to the thirteenth-month pay.
- Employees who are paid a fixed or guaranteed wage plus commission are also entitled to the thirteenth-month pay, based on their earnings during the calendar year (i.e., on both their fixed or guaranteed wage and commission).In the consolidated cases of Boie Takeda Chemicals, Inc. vs. Dionisio de la Serna, G.R. No. 92174 December 10, 1993, and Philippine Fuji Xerox Corporation vs. Cresenciano B. Trajano and Philippine Fuji Xerox Employees Union, G.R. No. 102552 December 10, 1993, the Supreme Court ruled that commissions, while included in the generic term wage, are not part of “basic salary/wage” and therefore should not be included in computing the thirteenth-month pay. Thus:
In remunerative schemes consisting of a fixed or guaranteed wage plus commission, the fixed or guaranteed wage is patently the “basic salary” for this is what the employee receives for a standard work period. Commissions are given for extra efforts exerted in consummating sales or other related transactions. They are, as such, additional pay, which this Court has made clear do not form part of the “basic salary” (228 SCRA 329 ).
- Employees with multiple employers
Government employees working part -time in a private enterprise, including private educational institutions, as well as employees working in two or more private firms, whether on full-time or part-time basis, are entitled to the thirteenth-month pay from all their private employers, regardless of their total earnings from each of their employers.
H. Thirteenth-Month Pay of Resigned or Separated Employee
An employee who has resigned or whose services are terminated at any time before the time of payment of the thirteenth-month pay is entitled to this monetary benefit in proportion to the length of time he or she has worked during the year, reckoned from the time he or she has started working during the calendar year up to the time of his or her resignation or termination from the service. Thus, if he or she worked only from January to September, his or her proportionate thirteenth-month pay should be equal to one-twelfth (1/12) of his or her total basic salary earned during that period.
I. Non-inclusion in Regular Wage
The thirteenth-month pay is not part of the regular wage of employees for purposes of determining overtime and premium payments, fringe benefits, contributions to the State Insurance Fund, Social Security System, National Health Insurance Program, and private retirement plans.
J. Coverage from Income Tax of the 13th Month Pay
13th month pay and other benefits, such as productivity incentives and Christmas bonus, not exceeding Eighty-Two Thousand Pesos (P82,000.00) are exempt from taxation.
Revenue Regulations No. 3-2015, which implements R.A. No. 10653, emphasized that the amount of P82,000.00 shall only apply to the 13th month pay and other benefits prescribed under the provisions of Section 2.78.1 (B) (11) of RR No. 2-98, as amended, and shall in no case apply to other compensation received by an employee under an employer -employee relationship, such as basic salary and other allowances.
Source: 2016 revised Handbook on Workers’ Statutory Monetary Benefits prepared by the Department of Labor and Employment, Bureau of Working Conditions