13th Month Pay in the Philippines: Computation, Deadline, and Who Must Receive It

The 13th month pay is a mandatory monetary benefit in the Philippines. Under Presidential Decree No. 851, issued on December 16, 1975, all employers are required to pay their employees a 13th month pay not later than December 24 of every year. The decree covers employees receiving a basic salary of not more than P1,000 a month, regardless of the nature of their employment. Employers already paying a 13th month pay or its equivalent are not covered by the decree, because the benefit is already being given.

What the law says about 13th month pay

Presidential Decree No. 851 is the primary law requiring employers to grant 13th month pay. It was issued to protect the level of real wages from inflation and to give workers the means to celebrate the Christmas and New Year seasons.

The decree requires payment to all employees receiving a basic salary of not more than P1,000 a month, regardless of the nature of their employment. The payment must be made not later than December 24 of every year.

Two points follow from the text of the decree. First, the coverage threshold stated in the decree is based on basic salary. Second, employers already giving a 13th month pay or its equivalent are exempt from the decree's coverage.

Who must receive 13th month pay

Under Presidential Decree No. 851, the benefit is due to employees receiving a basic salary of not more than P1,000 a month, regardless of the nature of their employment. The phrase "regardless of the nature of their employment" means the benefit is not limited to regular or permanent employees; the decree's own terms do not distinguish based on the type of engagement.

Employers already paying their employees a 13th month pay or its equivalent are not covered by the decree. This means an employer that already grants the benefit — or something equivalent to it — is considered compliant and need not pay twice.

The decree does not, on its face, list exclusions. Any question of whether a particular worker falls within the coverage of the decree should be resolved by examining the worker's basic salary and the nature of the employment arrangement, consistent with the policy of the Labor Code to afford protection to labor and to resolve doubts in favor of labor under Article 4 of the Labor Code.

How 13th month pay is computed

The decree itself does not set out a formula. It simply requires payment of a 13th month pay. Because the text does not prescribe a computation method, the safest general statement is that the 13th month pay is equivalent to one month of the employee's basic salary, subject to the coverage and exemption rules in the decree.

Employers should be careful to distinguish between basic salary and other payments. The decree's coverage language refers to earlier payment is permitted; the deadline is a ceiling, not a fixed date.

The employer exemption for existing 13th month pay

Section 2 of Presidential Decree No. 851 provides that employers already paying their employees a 13th month pay or its equivalent are not covered by the decree. This is an exemption from coverage, not a reduction of the benefit. An employer that already pays the benefit or its equivalent is treated as complying with the decree.

The practical question for employers is whether what they already pay qualifies as a 13th month pay or its equivalent. If it does, the decree does not require an additional payment. If it does not, the employer must comply with the decree's requirements, including the December 24 deadline.

Frequently asked questions

Is 13th month pay required by law in the Philippines? Yes. Presidential Decree No. 851 requires all employers to pay their employees a 13th month pay not later than December 24 of every year, subject to the decree's coverage and exemption rules.

Who is covered by the 13th month pay requirement? The decree covers employees receiving a basic salary of not more than P1,000 a month, regardless of the nature of their employment. Employers already paying a 13th month pay or its equivalent are not covered.

When is the deadline for paying 13th month pay? The deadline is not later than December 24 of every year, as stated in Presidential Decree No. 851.

Practical takeaways

• Presidential Decree No. 851 requires employers to pay a 13th month pay not later than December 24 of every year.
• The decree covers employees receiving a basic salary of not more than P1,000 a month, regardless of the nature of their employment.
• Employers already paying a 13th month pay or its equivalent are not covered by the decree.
• The decree does not prescribe a detailed computation formula; employers should apply its terms consistently and follow more favorable company or CBA terms where applicable.
• Under Article 4 of the Labor Code, doubts in the implementation and interpretation of the Code are resolved in favor of labor.

Primary sources

The rules discussed above are drawn from the following primary sources, as published in the Official Gazette and the national statute book.

• Labor Code of the Philippines (Presidential Decree No. 442)

• OMNIBUS RULES IMPLEMENTING THE LABOR CODE - OMNIBUS RULES IMPLEMENTING THE LABOR CODE

• PRESIDENTIAL DECREE NO. 851, December 16, 1975

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.