A Quick Guide To Computing Your 13th Month Pay
December is just around the corner! Aside from the upcoming series of festivities to celebrate Christmas and ring in New Year's Day, another much awaited occurrence of most Filipino employees during this month is the release of the 13th month pay.
Who are entitled to 13th month pay?
All rank-and-file employees, regardless of rank or designation are entitled to a 13th month pay, as long as they have been employed by the company for at least one month by December 31. The Philippine Labor Code issued by the Department of Labor and Employment (DOLE), identifies employees as rank-and-file or managerial which are defined as follows:
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, layoff, 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.
The above distinction shall be used as guide for the purpose of determining who are rank-and-file employees entitled to the thirteenth month pay.
How much is the 13th month pay?
As the label implies, an employee's 13th month pay is roughly the equivalent of his monthly salary. However, there are several components that are needed to be factored in in order to determine the exact amount of the 13th month pay.
Computation of the 13th month pay does not involve allowances and additional financial compensation that are part of an employee's remuneration package such as unused leaves, night differential, cost of living allowance, and holiday pay. For 13th month pay, only the basic salary is put into consideration.
How do employers compute the 13th month pay?
An employee should not receive an amount that is less than 1/12 of his annual income. The basic formula for 13th pay computation is: (Monthly Salary x No. of Months with the Company)/12.
For example, an employee has been working for the company since June 1 of the calendar year. By December 31st, the employee has already completed a 6 month tenure and computation would be as follows:
|Basic Monthly Salary||P20,000|
|Tenure (Number of Months w/ the Company)||6 months|
|Basic Monthly Salary x Tenure||P20,000 x 6 = P120,000|
|(Basic Monthly Salary x Tenure) / 12||P120,000 / 12 = P10,000|
|Total Amount of 13th Month Pay||P10,000|
An employee's 13th month pay is non-taxable up to P82,000. Any amount exceeding P82,000 will be subject to income tax.
Are resigned employees entitled to 13th month pay?
All employers are mandated to release the 13th month pay even for employees who have already left the company. This would be prorated and will be computed in the same manner as employees who have rendered less than 12 months of service.
13th month pay of resigned employees will be credited as part of their separation pay, or back pay.
When is the 13th month pay credited?
By law, employers are required to release the 13th month pay to their employees before December 24 of each calendar year. This has been the schedule as the 13th month pay was primarily mandated by the Department of Labor and Employment to aid the working class in celebrating Christmas.
Most companies release the 13th month pay during the early weeks of December, with some even crediting this by November in order to avoid the Christmas rush.
Have you already planned what to do upon receiving your 13th month pay? Don't spend it all at once! Read these articles to guide you in planning your course of action:
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