EMPLOYERS, UNLESS LAWFULLY EXEMPTED, MUST GIVE 13TH MONTH PAY

Dear PAO,
We have a small vacant space beside our house and I intend to start a purified water refilling station by
early next year. Since our area is near a jeepney and bus terminal, I want the store to be open 24/7.
There might be a need for me to hire three to four employees so that they can have a shifting schedule.
As it is only a small business, I want to know whether I need to give, aside from the regular salary, 13th
month pay to the employees I will be hiring. If so, is there a possibility that I can get exempted? Your
advice will be appreciated.
Euly

Dear Euly,
The 13th month pay benefit is expressly mandated under Presidential Decree 851. Pursuant to the
Revised Guidelines on the Implementation of the 13th Month Pay Law, the minimum amount of 13th
month pay as required by law shall not be less than one-twelfth of the total basic salary earned by an
employee within a calendar year. Such benefit shall be given to all rank-and-file employees, regardless
of the amount of basic salary that they receive in a month and their designation or employment status,
and irrespective of the method by which their wages are paid, provided that they have worked for at
least one month during a calendar year and their employers are not otherwise exempted therefrom.
(Id.)

As specifically stated under said guidelines, only the following are considered as exempted employers:
(a) The government and any of its political subdivisions, including government-owned and controlled
corporations, except those corporations operating essentially as private subsidiaries of the government;
(b) Employers already paying their employees a 13th month pay or more in a calendar year or its
equivalent at the time of this issuance; (c) Employers of household helpers and persons in the personal
service of another in relation to such workers; and (d) Employers of those who are paid on purely
commission, boundary or task basis, and those who are paid a fixed amount for performing specific
work, irrespective of the time consumed in the performance thereof, except where the workers are paid
on piece-rate basis in which case the employer shall grant the required 13th month pay to such workers.

Applying the foregoing in the situation that you have presented, we submit that you will be required to
pay your employees the benefit of the13th month pay, should you pursue your water refilling station

business and hire employees, provided that the latter has rendered work for at least one month during
the applicable calendar year.

This holds true even if you claim that yours is only a small business given that the law does not
distinguish between the scales of business. The only means for you to be exempted from providing such
benefits to your employees is if you can establish that you fall under any of the categories mentioned for
exempted employers.

Please note that the13th month pay benefit must be paid not later than December 24 of each year.
Employers are nevertheless permitted to give to their employees one half thereof before the opening of
the regular school year and the other half on or before the 24th of December of every year, or subject to
the agreement between the employer and the recognized/collective bargaining agent of the employees.
(Id.)

We hope that we were able to answer your queries. Please be reminded that this advice is based solely
on the facts you have narrated and our appreciation of the same. Our opinion may vary when other
facts are changed or elaborated.