A Comprehensive Primer on 13th Month Pay in the Philippines

Introduction

Financial stability is a goal realized when a person comes of age. This is why it is not surprising that working-age Filipinos gravitate toward jobs that offer proper compensation, security, and benefits.

Becoming a part of this population is a significant milestone introducing new responsibilities. One is researching labor laws in the Philippines, a topic many find overwhelming given its technical nature.

You don’t need to become a licensed lawyer overnight, but it would be helpful to grasp the labor law basics, especially those concerning wages and benefits. After all, your labor allows businesses to profit, so you should receive just compensation for your work.

In this article, you will learn more about one topic in particular: the 13th-month pay law in the Philippines.

What Is 13th Month Pay?

The labor code of the Philippines is a compilation of laws that sets the minimum standards for working conditions in the country. It was enacted in 1974 under then-President Ferdinand Marcos and has been amended several times since then.

The codes cover a wide range of topics, from labor standards and security of tenure to occupational safety and health. It also features provisions on the 13th-month pay, which will be discussed in more detail below.

13th Month Pay Explained

To understand the 13th-month pay, you must first know the difference between mandatory and discretionary pay.

Mandatory pay refers to the compensation you are legally entitled to receive after rendering your services. On the other hand, discretionary pay is given at the employer’s discretion and is not required by law. Since discretionary pay depends on the employer, the criteria for receiving it also vary.

With that said, the 13th-month pay falls under the mandatory pay category, making it an additional paycheck that employers in the Philippines must give their employees before they face legal penalties.

Organizations are also required to file with their Regional Offices a sworn statement of all their rank-and-file employees indicating the total amount of 13th-month pay or its cash equivalent that was paid to them.

13th Month Pay vs Christmas Bonus

It’s possible to confuse the 13th-month pay with a Christmas bonus since they are given around the same time, but there are critical differences between them.

First, a Christmas bonus is discretionary pay, so the government doesn’t mandate employers to give it to their employees. Second, a Christmas bonus can take the form of gifts, whereas 13th-month pay must always be in cash.

Third, the 13th-month pay is limited to specific employees in the private sector, while a Christmas bonus can be given to employees in both the public and private sectors. Lastly, the 13th-month pay is computed using an employee’s basic salary, but the Christmas bonus can factor in an employee’s allowances and commissions.

Who Is Entitled to 13th Month Pay?

Private Sector Employees

The 13th-month pay law in the Philippines dictates that all private sector rank-and-file employees who have worked for at least one month are entitled to the 13th-month pay, regardless of their position, status, or salary rate.

This includes regular, casual, and probationary employees and those who have resigned or been terminated from their jobs. The only exception to this rule is if an employee already receives the 13th-month pay or its equivalent, such as a quarterly bonus.

It’s worth noting that organizations are not obligated to provide 13th-month pay to employees in managerial positions. The same applies to contractors paid a set amount for a limited period.

Minimum Wage Earners

According to the labor code of the Philippines, minimum wage earners are also entitled to the 13th-month pay, provided that they meet the criteria of having worked with the private organization for at least one month.

13th Month Pay Computation in the Philippines

Unlike discretionary pay, the 13th-month pay doesn’t have a set amount, although the labor code of the Philippines does dictate that it cannot be less than 1/12th of the employee’s basic salary.

Aside from the minimum requirement, there is also the 13th-month pay computation, which goes as follows: the total basic salary earned throughout the year (minus the unpaid absences) / 12 months = 13th-month pay.

Let’s say your basic salary is 28,000 pesos a month, and you have been working with the company for six months. You didn’t have an unpaid absence, so the 13th-month pay computation for you will be (28,000 x 6) ÷ 12 = 14,000.

After working for the company for two years, your basic salary goes up to 35,000. Your 13th-month pay computation will then be (35,000 x 12) ÷ 12 = 35,000.

Given that your 13th-month pay depends on changing factors, you can expect it to change yearly. The one thing that remains constant is the deadline by which you must receive it, which is the 24th of December.

What To Do When You Don’t Receive Your 13th Month Pay

The labor laws in the Philippines are transparent when it comes to the 13th-month pay, from the entitled and exempted employees to the computation of pay to the deadline.

Unfortunately, a clear code doesn’t necessarily mean that all employers are in compliance. If you don’t receive your 13th-month pay on or before the 24th of December, you can take a few steps.

The first is to request a detailed explanation from your employer. It will not excuse their shortcomings, but you can get a better understanding of the situation.

If your employer is unreachable, consult with a labor lawyer immediately. The Yap, Kung, Ching & Associates Law Office lawyers have been handling labor cases for years and will be more than happy to assist you.

Book a meeting with us today to discuss your case in detail and take the first step towards getting the 13th-month pay you deserve.

Conclusion

Presidential Decree No. 851 is the 13th-month pay law in the Philippines that dictates all private sector rank-and-file employees who have worked for at least one month are entitled to the 13th-month pay, regardless of their salary rate. Regular and probationary employees are due this pay, as well as those who have already parted ways with the organization.

Learning about this decree is the first step in pursuing a healthy career. If you meet the criteria outlined in the labor code of the Philippines and don’t receive your 13th-month pay, you can take a few steps to remedy the situation.

Request an explanation from your employer, consult with a labor lawyer, and perhaps lodge a complaint with the Department of Labor and Employment (DOLE). Contact Yap, Kung, Ching & Associates Law Office today and get started on your labor case now.

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