What You Need to Know About 13th Month Pay

When the last quarter or ‘-ber’ months of the year roll in, thoughts of 13th month pay enter the minds of both employers and employees.  This mandatory payment under a specific law (PD851) generally covers all rank and file employees who have worked for at least one (1) month during the calendar year.  (A calendar year is the period starting from January to December).

Who are not covered

Generally, all employers must pay their rank and file employees 13th month pay (under PD 851), except the following:

  1. 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.
  2. Employers already paying their employees a 13th month pay or more in a calendar year or its equivalent at the time of the issuance of PD 851.
  3. Employers of household helpers and persons in the personal service of another in relation to such workers
  4. 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, regardless of the time spent performing such work.  BUT workers paid on piece rate basis are entitled to 13th-month pay.


Workers paid on piece-rate are those who are paid a standard or fixed amount for every piece or unit of work performed or produced that is more or less regularly replicated, regardless of the amount of time spent by the worker in producing the same.  Some factory workers and those employed in cottage industries often fall under this type of work.  Under PD 851, these workers must be given 13th month pay.

 How much to pay:  The minimum amount of the 13th month pay is the equivalent of 1/12 of the total basic salary earned by an employee with a calendar year (i.e. from Jan to Dec).   

Basic salary includes all earnings paid by the employer for services rendered except:

  • allowances and monetary benefits not considered or integrated in the regular or basic salary (e.g. cash equivalent of unused vacation and sick leave credits, overtime, night differential and holiday pay, and cost of living allowances)
  • commissions for extra efforts exerted in completing sales or other related transactions.

Time of payment:  The deadline for the release of the 13th month pay is on December 24 each year.  Employers have the option of giving out one half (1/2) of the 13th month pay before the opening of the regular school year and the other half on or before December 24.

Related posts:

  1. Computation of Termination Pay
  2. Night Shift Pay
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