What law governs the 13th month pay?

13th month pay is governed by Presidential Decree No. 851 and its implementing guidelines .

What is 13th month pay?

Thirteenth-month pay shall mean one twelfth (1/12) of the basic salary of an employee within a calendar year

Who are required to pay 13th month pay?

All employers are hereby required to pay all their rank-and-file employees a 13th month pay not later than December 24 of every year.

Who are not required to pay 13thmonth pay?

a.  The Government and any of its political subdivisions, including government-owned and controlled corporations, excepts those corporations operating essentially as private subsidiaries of the Government;

b.  Employers already paying their employees a 13th month pay or more in a calendar year or its equivalent at the time of this issuance;

c.  Employers of household helpers and persons in the personal service of another in relation to such workers; and

d.  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 where the workers are paid on piece-rate basis in which case the employer shall grant the required 13th month pay to such workers.

Who are entitled to 13th month pay?

All rank and file employees are entitled to a 13th month pay regardless of the amount of basic salary that they receive in a month if their employers are not otherwise exempted from the application of P.D. No. 851. Such employees are entitled to the benefit regardless of their designation or employment status, and irrespective of the method by which their wages are paid, provided that they have worked for at least one (1) month during a calendar year.

Rank-and-file employees are those who are not vested with powers of prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall discharge, assign or discipline employees, or to effectively recommend such managerial actions. In short, they are not managerial employees.

13th Month Pay for Certain Types of Employees.

(a)  Employees Paid by Results. — Employees who are paid on piece work basis are by law entitled to the 13th month pay.

Employees who are paid a fixed or guaranteed wage plus commission are also entitled to the mandated 13th month pay, based on their total earnings during the calendar year, i.e., on both their fixed or guaranteed wage and commission.

(b)  Those 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 or part time basis, are entitled to the required 13th month pay from all their private employers regardless of their total earnings from each or all their employers.

(c)  Private School Teachers. — Private school teachers, including faculty members of universities and colleges, are entitled to the required 13th month pay, regardless of the number of months they teach or are paid within a year, if they have rendered service for at least one (1) month within a year.

13th Month Pay of Resigned or Separated Employee.

An employee who has resigned or whose services were terminated at any time before the time for payment of the 13th month pay is entitled to this monetary benefit in proportion to the length of time he worked during the year, reckoned from the time he started working during the calendar year up to the time of his resignation or termination from the service. Thus, if he worked only from January up to September his proportionate 13th month pay should be equivalent of 1/12 his total basic salary he earned during that period.

The payment of the 13th month pay may be demanded by the employee upon the cessation of employer-employee relationship. This is consistent with the principle of equity that as the employer can require the employee to clear himself of all liabilities and property accountability, so can the employee demand the payment of all benefits due him upon the termination of the relationship.

When is the time for payment of 13th month pay? 

The required 13th month pay shall be paid not later than December 24 of each year. An employer, however, may give to his employees one half (½) of the required 13th month pay before the opening of the regular school year and the other half on before the 24th of December of every year. The frequency of payment of this monetary benefit may be the subject of agreement between the employer and the recognized/collective bargaining agent of the employees.

What is the formula for the computation of the 13th month pay?

The Department of Labor and Employment in its Department Advisory No. 2, Series of 2012 provides for the formula for the computation of the 13th month pay as follows:

Total basic salary earned during the year/12 months = Proportionate 13th month pay

What are the special features of 13th month pay?

The benefits granted under this issuance shall not be credited as part of the regular wage of the employees for purposes of determining overtime and premium pay, fringe benefits, as well as premium contributions to the State Insurance Fund, social security, medicare and private welfare and retirement plans.

Remedy for non-payment of 13th month pay?

Non-payment of the thirteenth-month pay shall be treated as money claims cases and shall be processed in accordance with the Rules Implementing the Labor Code of the Philippines and the Rules of the National Labor Relations Commission.

Is 13th month pay taxable?

No, if the amount does not exceed P30,000.00.

Yes, if the amount exceeds P30,000.00



Source:

1. PD 851
2. Revised Guidelines on the Implementation of the 13th Month Pay Law
3. Payment of 13th month pay, DOLE Advisory No. 2, Series of 2012