13th Month Pay in the Philippines: Who Gets It, How It's Computed, and the Tax Rule

The 13th month pay is one of the most anticipated benefits for Filipino workers — and one of the most misunderstood. Some employees don’t know if they’re legally entitled to it. Others don’t know how to check if they’re getting the right amount. And freelancers often wonder where they stand.

Yung 13th month ay hindi regalo ng employer — ito ay karapatan mo sa ilalim ng batas. Kahit mag-resign ka o matanggal, may karapatang makuha ang pro-rated na 13th month mo.

This guide explains everything: the legal basis, who qualifies, the exact computation formula, the December 24 deadline, how it’s taxed, and what to do if you don’t receive it.

Legal Basis: Presidential Decree 851

The 13th month pay requirement was established by Presidential Decree (PD) 851, signed by President Ferdinand Marcos Sr. on December 16, 1975. It mandates that all rank-and-file employees in the private sector receive 13th month pay equivalent to at least 1/12 of their total basic salary earned during the calendar year.

“Rank-and-file” is defined broadly: any employee who is not in a managerial capacity. This covers the vast majority of Filipino workers in private companies.

Who Is Entitled to 13th Month Pay

A key point: length of service doesn’t matter for entitlement. Even if you’ve only worked for one month, you’re entitled to a pro-rated 13th month for that month.

The Formula

13th Month Pay = Total Basic Salary Earned in Calendar Year ÷ 12

Important definition: “Total Basic Salary” means your basic pay only. It excludes:

• Overtime pay
• Allowances (transportation, meal, housing, clothing)
• Commissions
• Profit sharing
• Cash gifts
• Any other supplement not considered part of basic pay

The calendar year runs from January 1 to December 31.

Full-Year Example

• Monthly basic salary: ₱25,000
• Worked the full year (January to December)
• Total basic salary earned: ₱25,000 × 12 = ₱300,000
• 13th month pay: ₱300,000 ÷ 12 = ₱25,000

In this case, the 13th month pay equals one full month’s basic salary — which is how most people think of it.

Pro-Rated Example (Resigned in September)

• Monthly basic salary: ₱25,000
• Worked January to September = 9 months
• Total basic salary earned: ₱25,000 × 9 = ₱225,000
• Pro-rated 13th month: ₱225,000 ÷ 12 = ₱18,750

This pro-rated amount becomes part of your final pay when you resign. You can use FinalPay.ph to compute this automatically — especially useful when you have unpaid absences or incomplete months that affect the exact total.

What About Absences?

Unpaid absences reduce your “total basic salary earned.” If you had 10 days of leave without pay (LWOP) during the year, those days are deducted from your total, which slightly lowers your 13th month computation.

However, paid leaves (vacation leave, sick leave used, paid rest days) count as earned salary — they do not reduce your 13th month.

The December 24 Deadline

Employers must release 13th month pay on or before December 24 of each year. This is absolute — no exceptions are allowed under PD 851.

Many companies pay earlier or split the payment:

• Half in June/July (mid-year release) + half in November/December
• Full payment in November before the holiday rush
• Full payment on December 24 (at the latest)

All of these are compliant as long as the total for the year reaches the required amount by December 24.

How 13th Month Pay Is Taxed

Under the TRAIN Law (Republic Act 10963), 13th month pay and other bonuses are exempt from income tax up to ₱90,000 combined per year.

The ₱90,000 tax-exempt cap covers:

• 13th month pay
• Christmas bonuses
• Performance bonuses
• Other cash gifts from your employer

For most rank-and-file employees: if your monthly basic salary is under ₱90,000/month, your 13th month pay alone will almost certainly fall under the ₱90,000 cap — meaning it’s fully tax-free.

If you receive additional performance bonuses or a Christmas bonus on top of 13th month, track your combined total against the ₱90,000 threshold. The excess above ₱90,000 is added to your taxable income and taxed at the applicable graduated rate.

What If Your Employer Doesn’t Pay Your 13th Month?

Di ba, isa sa pinakamalaking tanong ay — paano mo malalaman kung tama ang binigay ng employer mo?

First, check your payslips for the year. Some companies include the 13th month payment in a regular payroll cycle, and employees miss it. Also verify that what was released matches the correct formula.

If you genuinely didn’t receive it or received an incorrect amount:

Step 1: Raise it informally with HR first — sometimes it’s a payroll error.

Step 2: File a Request for Assistance (RFA) under DOLE’s Single Entry Approach (SEnA) — free 30-day mediation at any DOLE Regional Office.

Step 3: Escalate to a formal DOLE complaint if mediation doesn’t resolve it. Employers found in violation of PD 851 face penalties.

13th Month Pay for Resigned and Terminated Employees

Your entitlement does not disappear because you left:

• Resigned voluntarily: You’re entitled to pro-rated 13th month for all months worked in the calendar year. This is included in your final pay.
• Terminated for just cause (e.g., serious misconduct): You’re still entitled to pro-rated 13th month. Termination for cause does not forfeit this benefit.
• Terminated for authorized cause (e.g., redundancy, retrenchment): Also entitled to pro-rated 13th month, plus separation pay on top.

What About Filipino Freelancers?

Para sa mga freelancers — di tayo covered ng PD 851, pero kaya nating magbigay sa sarili natin ng ating sariling “13th month” through consistent savings.

As an independent contractor or freelancer, you are not legally entitled to 13th month pay. PD 851 applies to employees only. Some clients voluntarily give a year-end bonus equivalent — this is goodwill, not a legal obligation.

But here’s a practical workaround: pay yourself a freelancer’s 13th month.

Set aside 1/12 of each month’s income into a separate savings account. After 12 months, you’ll have one full month’s equivalent — the same buffer employees receive automatically. You can use this as your year-end bonus, a buffer during slow months, or a contribution to your emergency fund.

This discipline is especially important during the holiday season when client work often slows down and expenses spike.

Employers Who Give More

Some companies give 14th, 15th, or even higher month pay as part of their compensation package — especially in competitive industries like IT, banking, and BPO. Others give a “Christmas bonus” separate from the mandatory 13th month.

These additional amounts are not legally required — they are company policy or part of your employment contract. If your contract stipulates a 14th month, that becomes a contractual right.

Always read your employment offer letter and company handbook carefully to understand your full benefits package beyond the legal minimums.

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