Calculating 13th Month Pay in the Philippines: A Comprehensive Guide

Updated on April 2, 2024

Calculating 13th Month Pay in the Philippines: A Comprehensive Guide

Discover How to Calculate 13th Month Pay in the Philippines: Everything You Need to Know! Employees accumulate earnings throughout the year, receiving their 13th-month paychecks at the end to boost motivation. This article provides a comprehensive guide on computing the 13th-month pay.

How to Compute 13th Month Pay?

December brings joy with its festive atmosphere, marked by celebrations and holidays. Amidst the gift-giving and family gatherings, the 13th-month pay serves as a valuable aid. This bonus, a testament to employees’ year-long dedication, is based on their basic salary and contributions to the company. In the Philippines, it’s a mandatory practice, while in some countries, it’s becoming a customary extra paycheck, calculated based on the average salary received throughout the year.

What is 13th Month Pay in the Philippines?

The 13th-month pay, established in 1976 through Presidential Decrees 851, ensures employees receive an extra month’s salary. This practice is mandatory in the Philippines, and the Department of Labour and Employment has confirmed that employees in the private sector will get an additional month’s paycheck before Christmas. According to the department’s advisor, those who have worked for at least one month are eligible for the 13th-month paycheck.

Regardless of rank, status, designation, or employment method, all eligible candidates, including those who have resigned, are on material leave, or have been terminated, will receive the 13th-month pay. As per the Presidential Decree, employees receiving a minimum of 1000 PHP monthly are entitled to this benefit. It serves as a welfare initiative not only for the employees but also for the entire household.

How To Calculate 13th Month Pay?

In some countries, the 13th-month pay is viewed as a bonus for a successful year of contributions to the company. They often calculate it based on the 12-month payments, dividing the total annual salary by 12. Essentially, it represents the monthly paycheck. In the Philippines, the calculation formula for the paycheck is as follows: [Insert Calculation Formula].

In the Philippines, for a private sector employee with a basic salary of approximately PHP 172,140, the 13th-month paycheck is estimated to be around PHP 14,345.

In contrast, countries like Brazil and Italy calculate the amount as part of the annual salary, dividing the total by 13 months. This approach, including 13 months in the annual package, results in reduced monthly paychecks.

Argentina, on the other hand, issues the amount as 50 percent of the highest monthly deposit, calculated based on the duration worked rather than a fixed 12-month period. In South Asian countries, the amount is given as the average percentage of the total salary.

Is the 13th Month Pay Taxable?

The 13th-month paycheck is typically taxable, but some countries, like the Philippines, impose tax on amounts exceeding PHP 90,000. Candidates earning above this threshold are subject to tax credits. In contrast, countries like Austria apply lower tax rates, such as 6 percent.

It’s important to note that the payment excludes additional insurance amounts, such as health insurance and security deposits, encompassing only the basic payslips. Allowances like overtime, holiday bonuses, unpaid absences, night shift pay, and unused paid leave are not factored into the 13th-month paycheck.

All We Know About 13th Month Pay

Certain fortunate employees may also be entitled to a 14th-month paycheck, calculated using the same method as the 13th-month pay. The decision to issue this additional paycheck is still under consideration. Currently, the 14th paychecks are discretionary and depend on the employers.

If the bill passes, the 14th-month paycheck could become a legal obligation. Government workers are already eligible for both payments, and freelancers, household helpers, and contract-based employees are also anticipated to receive these incentives.



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