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13 THMONTH PAY AND

14 MONTH PAY
TH
13TH MONTH PAY IN THE PHILIPPINES:
MANDATORY
• Under Presidential Decree No. 851, employers from the private sector in the Philippines
are required to pay their rank-and-file employees a Thirteenth 13th Month Pay not later
than December 24 every year. The 13th month pay is equivalent to one twelfth (1/12) of
an employee’s basic annual salary.
• This should not be confused with “Christmas Bonus” which is not a demandable and
enforceable obligation of the employer. This is released upon the voluntary discretion of
the employer/
COVERAGE

• All rank-and-file employees in the private sector who have worked for at least one (1)
month during the calendar year are entitled to receive 13th month pay regardless of
their position, designation or employment status.
MONETARY COMPENSATIONS NOT REGARDED AS
PART OF THE COMPUTATION:
• cost-of-living allowances;
• profit-sharing payments;
• cash equivalent of unused vacation and sick leave credits;
• overtime pay;
• premium pay;
• night shift differential;
• holiday pay; and
• other allowances and monetary benefits not considered part of an employee’s basic salary.
COMPUTATION

• Computation of the 13th month pay primarily consists of the total basic monthly salary
of an employee for the whole year, divided by twelve (12) months. Those who have
worked for less than a year, however, are only entitled to receive the amount due to
them on the number of months they were employed.
• Employer is given the prerogative to release the 13th month pay in installments of two
(2) to whichever number that is convenient to satisfy the condition that the mandatory
benefit be given before December 24 every year.
NEW TAX OBLIGATION RATE UNDER TRAIN LAW
FOR 2018 ONWARDS
• 13th month pay is generally exempt from taxation.
• However, there is a prescribed limit to this exemption provided under Section 32
(B)(7)(e) of the National Internal Revenue Code (NIRC) – which was amended by
Republic Act No. 10963 or the TRAIN law on January 2018.
• As it stands, 13th month pay and other equivalent benefits equivalent to Php 90,000 pesos
or below, shall not be included in the computation of the employee’s gross income for
the applicable taxable year.
14TH MONTH PAY

• There is no law requiring the issuance of 14th month pay. ATM, the congress has merely
drafted House Bill (“H.B.”) 8095 concerning the payment of 14th month pay which is still
pending enactment.
• Fourteenth-month pay is a bonus, and therefore, not legally demandable. It is a gratuity
for which the recipient has not right to demand. [Kamaya Point Hotel v. NLRC, G.R. No.
75289, August 31, 1989].
• Barring any contractual relation between the ER and the EE on the payment of 14th
month pay its grant is purely upon the discretion of the employer.