FAQs on the mandatory 13th month pay

MANILA, Philippines — The Department of Labor and Employment (DOLE) last week answered frequently asked questions on the mandatory 13 month pay benefit of rank-and-file employees.

Labor Secretary Rosalinda Baldoz urged all private companies to "voluntarily comply with the law and pay their workers the 13th month pay" including other lawful employee benefits.

Employees across the country look forward to receiving an "extra" salary toward the end of the year usually spent on Christmas gifts and holiday-related purchases.

Below are some queries about the benefit and corresponding answers provided by DOLE:

What is 13th month pay?

The 13th month pay is a form of monetary benefit equivalent to the monthly basic compensation received by an employee, computed pro-rata according to the number of months within a year that the employee has rendered service to the employer.

Who are required to pay the 13th month pay?

All establishments regardless of the number of employees are required to pay their rank-and-file employees the 13th month pay.

Who are entitled to receive the 13th month pay?

All rank-and-file employees regardless of the nature of their employment, and irrespective of the methods by which they are paid, provided they worked for at least one month during the calendar year.

How is 13th month pay computed?

The 13th month pay is computed based on 1/12 of the total basic salary of an employee within a calendar year, or basic monthly salary for the whole year divided by 12 months.

What are the components of 'basic salary'?

"Basic salary" shall include all remunerations or earnings paid by an employer to an employee for services rendered, but 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 differential and holiday pay. Basic salary includes cost-of-living allowances.

However, these salary-related benefits should be included as part of the basic salary in the computation of the 13th month pay if, by individual or collective agreement or company practice or policy, the same are treated as part of the basic salary of the employees.

Are maternity leave benefits included in the computation of 13th month pay?

No. Maternity leave benefits are not included in the computation of 13th month pay.

When shall 13th month pay be paid?

The 13th month pay should be paid not later than December 24 of each year.

Is there an option when a covered employer should pay the 13th month?

Yes. A covered employer may pay one-half of the 13th month pay before opening of the regular school year and the other half on or before the 24th day of December of every year.

Are all employees entitled to 13th month pay?

Only rank-and-file employees are entitled to 13th month pay. 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, lay off, 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.

Are there employers who are exempted from paying the 13th month wage?

Yes. The following employers are exempted to pay 13th month under PD 851:

• Government and any of its political subdivision, including government-owned and controlled corporations, except those corporations operating essentially as private subsidiaries of the Government;
• Employers already paying their employees 13th month pay or more in a calendar year or its equivalent at the time of this issuance;
• Persons in the personal service of another in relation to such workers; and
• Employers who are paid on purely commission, boundary, or task basis, and those who are paid a fixed amount for performing a 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 shall grant the required 13th month pay to such workers.