13 laws you may not know about 13th month pay

There are still employers and employees who are clueless about Presidential Decree No 851, the law mandating 13th month pay to all wage-earners or salaried personnel, whether daily-paid, wage-earner, or monthly paid salaried personnel. Ignorance of the law isn’t an excuse for violating it. The law should be complied with whether you know it or not, whether you like it or not.

First and foremost, all should know that the 13th month pay is an obligation for employers and a legal right of all employees. Whether regular, casual, seasonal, project, “pakyaw”, permanent, or probationary, all hired workers should be paid this benefit or else the DOLE or the NLRC shall issue an order for payment. Employers have no excuse for refusing. Second, the 13th month pay is different from the Christmas bonus. A bonus is a gift arising from grace or benevolence. The 13th month pay is a legally-mandated obligation of the employer and a benefit for the employee. Third, 13th month pay is given to all, even those who worked only for 30 days in the last 12 months of the same year.

Fourth, the 13th month pay may be less than a month’s salary. For instance, if an employee started working on December 1, at a monthly salary of ?20,000, he should be paid 13th month pay of ?666.67 only, which is one-twelfth of his salary. If the same employee started working on January 1 but resigned on March 30, his 13th month pay is equal to his monthly salary, which is ?20,000 divided by 12 multiplied by three or ?5,000. This is roughly one-fourth of his monthly salary because he only worked one-fourth of the 12 months of the year. That is assuming that he was not absent without pay during his brief employment period.

Fifth, people should realize that the law entitles only rank-and-file employees. Supervisory and managerial employees and executives are not legally entitled to 13th month pay. Sixth, if the supervisors, managers, directors, vice presidents, and higher corporate officials are granted such benefit, it is not due to a legal mandate but a voluntary grant out of the benevolence of the employer. And if such a grant has ripened into a company practice, it cannot be withdrawn or stopped anymore, even during financially-difficult years. To stop paying it would constitute an undue and illegal diminution or withdrawal.

Seventh, in computing 13th month pay, only the basic pay should be considered. It does not include overtime pay, night differential, cost of living allowance, and holiday premium pay but it includes the 12 legal holidays for monthly-paid employees which should be paid even if unworked by monthly-salaried personnel. Eighth, commissions for sales are, as a matter of general rule, not to be included in computing the 13th month pay, except if there is a contract, an established company practice or a CBA stipulating that commissions are considered integral part of the salaries of monthly-paid or daily-paid employees.

Ninth, when an employee has multiple employers, then he gets multiple 13th month pay. For instance, when I was vice president of a global soft drinks company I was also a Law professor at night in four universities. Hence, I got five 13th month pays proportionate to the basic incomes I received from each of my five employers. Tenth, these are tax-exempt but only up to ?90,000 per year. If my total 13th month pay exceeded this threshold amount, BIR Revenue Regulation 10963 orders that the excess shall be taxable.

Eleventh, PD 851 was not approved by Congress. There was no Congress in 1975. It was martial law. Only the president mandated it through a decree. Twelfth, the reason why the president mandated payment of a 13th month pay was that there was no wage increase from 1970 to 1975 and he wanted the poor workers to have money during Christmas. The daily minimum wage then was only ?8. Thirteenth, when PD 851 was issued, the 13th month pay was only for those receiving a total monthly basic pay of ?1,000. It is really a form of social amelioration.

Remember all these and do not forget that tomorrow, December 24 is the deadline. You should have given it much earlier. Not because it is a legal mandate to advance it but rather because you are a true Christian and you know the meaning of compassion and grace. Have a truly blessed Christmas then.