How to compute 13th month pay and Pro-Rata 13th month pay

All employees ranked and file are entitled to receive their 13^th month pay regardless of their designation or employee status who have worked for at least one month during the calendar year.

If you are a new employee and you are not aware of it, it is time to rejoice now since you will be receiving this. In this article, we will be teaching you the steps on how to compute your 13^th month pay and of course, everything about it.

What is 13th Month Pay?

Before diving in straight to the topic, let us first discuss what the 13^th month pay is. The 13^th month pay is a benefit in a monetary form that is given to an employee before the 24^th of December of every year. Its computation solely depends on the number of months the employee has attended work in a year. All establishments regardless of the number of employees are required to pay their rank-and-file employees.

How to compute 13th month pay?

The basic formula to compute the 13th month pay is:

13th Month Pay = Total Basic Salary Earned During the Year ÷ 12

Step-by-Step Guide

Step 1. Determine the Total Basic Salary for the Year:

• Add up all the basic salary you earned during the year (from January to December).
• Basic salary does not include allowances, overtime pay, or other benefits.

Step 2. Exclude Non-Includable Earnings:

• Exclude earnings such as overtime pay, holiday pay, night differential, and cash bonuses as these are not part of the basic salary.

Step 3. Divide by 12

• Once you have the total basic salary for the year, divide it by 12 (the number of months in the year).
• This will give you your 13th month pay.

Read: How to Compute Night Differential

Example

Let’s say your monthly basic salary is PHP 10,000, and you worked for the entire year without any unpaid leaves.

1. Total Basic Salary for the Year: PHP 10,000 × 12 months = PHP 120,000
2. 13th Month Pay: PHP 120,000 ÷ 12 = PHP 10,000

In this example, your 13th month pay would be PHP 10,000.

Notes

• Pro-rata computation applies if you didn’t work the entire year. For example, if you worked only 6 months, only the basic salary for those months will be considered.
• The 13th month pay should be given no later than December 24 each year, as mandated by Philippine labor laws.

How to Compute Pro-Rata 13th Month Pay

The pro-rata computation of the 13th month pay applies when an employee has not worked the full 12 months of the calendar year. This may occur due to resignation, termination, or if the employee was hired partway through the year. In such cases, the 13th month pay is calculated based on the actual number of months or days the employee worked.

Pro-Rata 13th Month Pay Formula

13th Month Pay = (Monthly Basic Salary  × Number of Months Worked) ÷ 12

Example 1: Employee worked for 8 months

Let’s assume an employee earns PHP 20,000 per month basic salary and works for 8 months during the year.

Prorated 13th Month Pay = (PHP 20,000 × 8 months ) ÷ 12 = PHP 13,333.33

In this case, the employee’s prorated 13th month pay is PHP 13,333.33.

Example 2: Employee resigned after working for 6 months

Let’s assume an employee with a monthly basic salary of PHP 18,000 resigned after 6 months of work.

Prorated 13th Month Pay = (PHP 18,000 × 6 months ) ÷ 12 = PHP 9,000

In this case, the employee’s prorated 13th month pay is PHP 9,000.

Key Points to Remember

• The 13th month pay is calculated based on the total number of months worked in a calendar year.
• Employees who resign or start late are entitled to a prorated 13th month pay based on the actual time they worked during the year.

Now that you know how to compute for your 13^th month pay, you can now be carefree because you can compute it for yourselves without having the fear that your employer might get some of the pay that you deserve.

Read: How do I Compute for my Hourly Rate?

Frequently Ask Questions About 13th Month Pay

1. What is the 13th month pay?

The 13th month pay is a mandatory benefit provided by employers in the Philippines, equal to one-twelfth (1/12) of an employee’s total basic salary within a calendar year. It is typically given no later than December 24.

2. Who is entitled to receive the 13th month pay?

All rank-and-file employees who have worked for at least one month during the calendar year are entitled to receive the 13th month pay, regardless of their employment status (e.g., regular, contractual, or probationary).

3. Are all employees entitled to the 13th month pay?

Only rank-and-file employees are mandated by law to receive 13th month pay. Managerial employees are not covered under this provision, but many companies still provide it as a benefit.

4. How is the 13th month pay computed?

The 13th month pay is computed as:
13th Month Pay = Total Basic Salary Earned for the Year ÷ 12
Basic salary includes only the fixed monthly wage and excludes overtime, holiday pay, allowances, and other bonuses.

5. What if I didn’t work the entire year?

If you worked only part of the year, your 13th month pay will be pro-rated based on the number of months you worked. Even if you resign or were terminated, you’re still entitled to a prorated amount for the time you worked.

6. Is the 13th month pay taxable?

The 13th month pay is tax-exempt up to PHP 90,000. Any amount exceeding PHP 90,000 will be subject to income tax.

7. When should the 13th month pay be given?

Employers are required to give the 13th month pay on or before December 24. Some companies split the payment into two, with half given in June or July and the other half by December.

8. Does maternity leave affect my 13th month pay?

Yes, maternity leave is excluded from the computation of the 13th month pay because it is not considered as time worked. Only the actual months worked are counted.

9. What if I worked for multiple employers in a year?

If you worked for multiple employers, each employer must provide you with a prorated 13th month pay based on the time you worked for them during the year.

10. Can employers defer or withhold the 13th month pay?

No, employers are legally required to pay the 13th month benefit on or before December 24. Failure to do so may result in penalties, fines, or complaints filed against the employer.

11. Is the 13th month pay the same as a Christmas bonus?

No, the 13th month pay is mandated by law, while a Christmas bonus is voluntary and given at the discretion of the employer. Some companies may give both, but only the 13th month pay is required by law.

12. Does my 13th month pay increase if I receive a salary raise?

Yes, any salary increase during the year affects the 13th month pay, as the computation is based on the total basic salary earned throughout the year.

13. What if my employer fails to pay the 13th month pay?

If your employer does not pay the 13th month pay, you can file a complaint with the Department of Labor and Employment (DOLE) to ensure compliance with the law.

Read Also: How to compute for overtime pay

Disclaimer: The information provided in this article is for general informational purposes only and is not intended as legal or financial advice. While we strive to ensure accuracy, labor laws and payroll regulations may vary based on your location and specific circumstances. For precise calculations and compliance with local laws, consult with a qualified accountant, HR professional, or legal expert. The author assumes no liability for any errors or omissions in the content.

REFERENCES:

1. Presidential Decree No. 851 – Mandates the 13th-month pay for private sector employees.
2. Department of Labor and Employment (DOLE) – Provides guidelines on computation and eligibility.
3. Labor Code of the Philippines – Related provisions on wages and benefits.