Every November, the group chats start: "Kailan ba lalabas ang 13th month?" And every December, someone in the office is quietly computing if the amount on their payslip makes sense.
Most workers know they're entitled to it. But many don't know the exact formula — which means they can't catch it when their employer computes it wrong. Let's fix that.
The Law: Presidential Decree 851
13th month pay is mandated by Presidential Decree No. 851, signed by Marcos Sr. in 1975. It's been in effect for over 50 years, so this isn't a benefit your employer is generously giving you — it's the law.
The DOLE has consistently enforced this, and employers who fail to pay can be reported and penalized. The deadline every year is December 24.
Who Is Entitled to 13th Month Pay?
You're entitled if you're a rank-and-file employee in the private sector who has worked at least one month in the calendar year. Here's what that covers:
- Regular employees (full-time)
- Probationary employees (yes, even on probation)
- Project-based and contractual workers (as long as they worked at least one month)
- Workers paid by result (piece-rate, commission, task-based) — if they have a fixed employer
- Resigned or separated employees — entitled to prorated 13th month as part of final pay
Who is NOT covered:
Managerial employees — employees whose primary duty is managing the enterprise or a department, and who can hire/fire employees. The law excludes them by definition.
Government employees — they have a separate year-end bonus system.
Household helpers and those paid purely on commission with no fixed salary basis.
True freelancers / independent contractors — no employer-employee relationship, no mandatory 13th month.
Note: Many companies give 13th month pay to managers anyway as company policy — which is great, just not legally required.
The Formula (Straight from DOLE)
13th Month Pay = Total Basic Salary Earned / 12
Simple enough — but the key phrase is "total basic salary earned". This is not your gross pay. It's your basic salary only:
| Included in Basic Salary | NOT Included |
|---|---|
| Regular monthly salary | Overtime pay |
| Salary during paid leaves | Night differential |
| Back pay covering regular work hours | Holiday pay (premium portion) |
| Allowances (COLA, transportation, meal, etc.) | |
| Commissions and incentives | |
| Profit-sharing |
This is where a lot of employers (and a lot of employees) get confused. Your 13th month is based on basic pay only — not all the allowances that inflate your gross salary on paper.
Example: Full Year Employment
You earned P30,000 basic salary every month, January to December.
When you've worked the full calendar year at a consistent salary, your 13th month is exactly one month's pay. Makes sense.
Example: Mid-Year Hire (Prorated)
You started working on July 1, 2026. Your basic salary is P25,000/month. By December, you've worked 6 months.
Notice you always divide by 12 — not by the number of months you actually worked. That's how proration works under PD 851. You divide by 12 regardless, which naturally gives you a fraction proportional to your tenure.
What If You Resigned Before December?
You're still entitled. Let's say you resigned on September 30, 2026. You worked 9 months. Your basic salary was P20,000/month.
This should be included in your final pay, which employers are required to release within 30 days from your last day of employment (per DOLE Labor Advisory No. 06, Series of 2020).
If your employer tells you that you "forfeited" your 13th month because you resigned — that's illegal. Insist on it.
Is 13th Month Pay Taxable?
This one trips people up. Here's the rule under the TRAIN Law:
The first P90,000 of 13th month pay and other bonuses combined is tax-exempt.
The P90,000 ceiling covers 13th month pay plus any other bonuses you receive in the year — Christmas bonus, performance bonus, mid-year bonus, whatever. If the total exceeds P90,000, only the excess is taxed as ordinary income.
| Monthly Basic Salary | 13th Month Pay | Taxable? |
|---|---|---|
| P10,000 | P10,000 | No — well below P90,000 |
| P20,000 | P20,000 | No |
| P30,000 | P30,000 | No (still room for P60,000 more in bonuses) |
| P50,000 | P50,000 | No (but watch your other bonuses) |
| P100,000 | P100,000 | Yes — P10,000 excess is taxable |
This assumes no other bonuses received. If you get mid-year or performance bonuses, those count toward the P90,000 combined threshold.
Common Employer "Mistakes" That Shortchange You
Some are genuine errors. Some are not. Either way, knowing these protects you.
1. Computing based on gross pay instead of basic
This one can actually go either way. If your gross is higher than your basic (due to allowances), computing on gross favors you — but it's not how the law is written. The issue is when employers exclude months with absences or unpaid leaves in a way that's not proportional — that's where errors creep in.
2. Excluding the months you were on leave
If you were on paid leave (vacation leave, sick leave, maternity leave), those months of salary are still counted in your total basic salary earned. They are paid work, after all. Unpaid leaves are legitimately excluded — but only the actual unpaid days, not entire months.
3. Telling resigned employees they "forfeited" their 13th month
No provision in PD 851 or the TRAIN Law allows for forfeiture of 13th month pay. If you resigned, you're entitled to a prorated amount. Some employment contracts include language that sounds like this — but those provisions are unenforceable against the minimum standard set by the law.
4. Using the wrong divisor
A few employers divide by months worked instead of 12. Example: You worked 6 months, basic is P20,000. Wrong formula: P120,000 / 6 = P20,000 (this overpays, ironically). Correct formula: P120,000 / 12 = P10,000. The law is clear — always divide by 12.
5. Claiming your Christmas bonus counts as your 13th month
If a company gives a Christmas bonus that is less than the legally required 13th month pay, the difference must still be paid. A company cannot substitute a smaller bonus for the mandatory 13th month. However, if their Christmas bonus equals or exceeds the required amount, they can treat it as compliance — as long as this is clear in company policy or contract.
What to Do If Your Employer Gets It Wrong
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Compute it yourself first. Use the formula. Get your payslips for the year, add up your basic salary months, divide by 12. Compare to what you received.
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Raise it with HR or Finance first. Many discrepancies are genuine errors. Show your computation, ask them to show theirs. Most companies will correct it without escalation.
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If unresolved, file a complaint with DOLE. You can file a Request for Assistance (RFA) at the DOLE Regional Office nearest you. It's free, and DOLE takes 13th month complaints seriously. Bring payslips, employment contract, and your computation.
Want to see how your 13th month fits into your total annual income?
Use our 13th Month Pay Calculator to compute your entitlement instantly — including prorated amounts for mid-year hires and resigned employees.