21-B Rufino Pacific Tower, 6784
Ayala Avenue cor. Rufino St.,
Makati, Metro-Manila, Philippines
13th Month Pay in the Philippines
13th Month Pay in the Philippines Overview
The 13th-month pay in the Philippines is equivalent to 1/12 of the basic salary received by an employee within the year. If a Filipino employee worked for less than a year (regardless of the cause for the termination of his employment), the amount due to him is determined by dividing the total salary he received by the number of months he was employed. The computation of the basic salary does not include allowances and monetary benefits that are not considered or integrated as part of the employee's regular compensation. The items that are taken off the list are: cash equivalent of unused vacation and sick leave credits; overtime, premium, night differential and holiday pay, and cost-of-living allowance. If, however, these benefits are, by agreement company practice or policy treated as part of the basic salary, then they shall be included in the computation of an employee's 13th-month pay. Although the law requires that the extra pay be given not later than Dec. 24, the employer may give 50 percent before the opening of the regular school year and the balance on the cut-off date mentioned.
13th Month Pay Coverage
The 13th month pay should not be confused with the bonus which is not part of the benefit mandated by Philippine law. It is already discretionary on the part of the employers to give a bonus to their employees on top of the 13th month pay which is mandatory. The early in December an employer can provide 13th month pay for its Filipino employees the more the employees will appreciate it. Not releasing 13th month pay by December 24 could result in sanctions of law and VERY disgruntled Filipino employees
When the 13th-month pay decree came out in the Philippines, those who were already receiving a Christmas bonus from their employer thought the extra pay decreed by the government would be in addition to their company benefit. However, the decree states that employers already paying their employees the equivalent of a 13th-month pay are exempted from its coverage. Some companies though chose to maintain their Christmas bonus on top of the obligatory 13th-month pay in the Philippines.
13th Month Pay Tax Obligation
The recipient of the 13th-month pay is not the only beneficiary of that Christmas-related gesture. The Philippine government shares in it by way of income tax. Under existing tax regulations, up to a maximum of P30,000 of that additional income is exempt from the income tax due from fixed wage earners. Anything beyond that cut-off amount must be included in the computation of the employee's gross income for the applicable taxable year. Ordinarily, the tax due for income received by an employee should be withheld by the employer and, later, remitted to the Bureau of Internal Revenue, before he gets his pay check.
Contact Kittelson & Carpo Consulting