How 13th month pay is computed (DOLE rules)
Under Presidential Decree No. 851 and the Department of Labor and Employment (DOLE) guidelines, every rank-and-file employee who has worked at least one month during the calendar year must receive a 13th month pay of not less than:
Total basic salary earned during the calendar year ÷ 12
"Basic salary" excludes COLA, overtime, premium and night differential pay, holiday pay, and profit-sharing — unless these are integrated into the basic salary by company practice or agreement.
Worked example — full year
Monthly basic salary PHP 25,000, employed all 12 months, no unpaid absences: total basic salary earned = 25,000 × 12 = PHP 300,000. 13th month pay = 300,000 ÷ 12 = PHP 25,000.
Worked example — mid-year hire (prorated)
Hired July 1 with monthly basic salary PHP 20,000: salary earned July–December = 20,000 × 6 = PHP 120,000. 13th month pay = 120,000 ÷ 12 = PHP 10,000. Proration happens automatically because the formula divides what you actually earned by 12 — there is no separate "prorated formula."
Worked example — with unpaid absences
Monthly basic salary PHP 26,100 (daily rate PHP 1,200 on a 261-divisor), full year but 5 days LWOP: salary earned = 26,100 × 12 − 1,200 × 5 = 313,200 − 6,000 = PHP 307,200. 13th month pay = 307,200 ÷ 12 = PHP 25,600.
Deadline and taxation
Employers must pay on or before December 24. The 13th month pay is tax-exempt up toPHP 90,000 (combined with other bonuses) under the TRAIN Law; any excess is taxable as compensation income.
Frequently Asked Questions
What is the formula for 13th month pay?
13th month pay = total basic salary earned during the calendar year ÷ 12. This comes from Presidential Decree No. 851 and the DOLE guidelines. 'Basic salary earned' means what you actually received for work performed — so unpaid absences reduce it, and mid-year hires are automatically prorated.
Is 13th month pay taxable in the Philippines?
13th month pay and other benefits (bonuses, incentives) are tax-exempt up to PHP 90,000 combined per year under the TRAIN Law (RA 10963, implemented by BIR RR 11-2018). Only the amount exceeding PHP 90,000 is added to your taxable income.
Are allowances and overtime included in the computation?
No. The computation uses basic salary only. Cost-of-living allowances (COLA), overtime pay, premium pay, night shift differential, holiday pay, and cash conversions of unused leave are excluded — unless your company, by policy or collective bargaining agreement, treats certain allowances as part of basic salary.
I started working in the middle of the year. Do I still get 13th month pay?
Yes. Any rank-and-file employee who has worked at least one month (30 calendar days) during the calendar year is entitled to 13th month pay, computed proportionally: the basic salary you actually earned from your start date, divided by 12.
Do unpaid absences (LWOP) reduce my 13th month pay?
Yes, indirectly. Days on leave without pay do not earn basic salary, so they reduce your 'total basic salary earned' — and therefore your 13th month pay. Paid leaves (SIL, paid sick leave, paid maternity benefit top-ups counted as basic salary per company policy) that form part of basic salary do count.
When is the deadline for employers to pay 13th month pay?
On or before December 24 of every year. Some employers pay half in May/June and the balance in December, which is allowed as long as the full amount is settled by December 24.
Who is NOT covered by the 13th month pay law?
Government employees, managerial employees, and workers paid purely on commission or task basis (with some exceptions) are outside P.D. 851's coverage. Kasambahay (domestic workers) are entitled under the Kasambahay Law. When in doubt, consult DOLE.