Every December, many employees in the Philippines look forward to one thing — the 13th month pay. It’s that extra cash that makes Christmas shopping, family gatherings, and travel plans a bit more comfortable.
But have you ever wondered how it’s actually computed and whether you’re getting the correct amount? In this article, we’ll break down how to compute your 13th month pay the easy way — no accounting degree required.
What Is 13th Month Pay?
The 13th month pay is a mandatory benefit given to all rank-and-file employees in the Philippines, as required by Presidential Decree No. 851.
It’s equivalent to one-twelfth (1/12) of your basic salary earned within a calendar year. Employers are required to release it on or before December 24 of each year.
Who Is Entitled to 13th Month Pay?
You’re entitled to receive 13th month pay if:
- You are a rank-and-file employee, regardless of position, designation, or employment status (regular, contractual, or probationary).
- You have worked at least one month within the year.
Even if you resigned before December, you’re still entitled to a pro-rated 13th month pay based on the months you actually worked.
Who Are Not Entitled?
The following are not required by law to receive 13th month pay (unless voluntarily granted by the employer):
- Government employees
- Employees already receiving a 13th month or Christmas bonus equivalent to or more than the required amount
- Commission-based or purely profit-based earners (unless they have a fixed salary component)
Formula: How to Compute 13th Month Pay
Here’s the official formula:
13th Month Pay = (Total Basic Salary Earned During the Year ÷ 12)
Example 1: Full-Year Employee
Let’s say your monthly basic salary is ₱20,000 and you worked the entire year.
Computation:
₱20,000 × 12 months = ₱240,000 (total basic salary for the year)
₱240,000 ÷ 12 = ₱20,000
✅ You’ll receive ₱20,000 as your 13th month pay.
Example 2: Resigned Mid-Year
If you resigned in August after working 8 full months at ₱20,000 per month:
₱20,000 × 8 = ₱160,000
₱160,000 ÷ 12 = ₱13,333.33
✅ You’ll receive ₱13,333.33 as your 13th month pay.
Example 3: With Unpaid Leaves or Absences
Remember: only basic salary is included.
Deductions such as unpaid leaves or absences will lower your total earnings for the year.
So if you have ₱240,000 total salary but ₱10,000 in unpaid absences:
₱240,000 – ₱10,000 = ₱230,000
₱230,000 ÷ 12 = ₱19,166.67
✅ You’ll receive ₱19,166.67 as your 13th month pay.
What’s Not Included in 13th Month Pay?
To clear confusion, the following are excluded from the computation:
- Overtime pay
- Night shift differential
- Holiday pay
- Allowances (transportation, meal, clothing, etc.)
- Commissions or incentives (if not part of basic pay)
Only basic salary counts — nothing more, nothing less.
When Is the 13th Month Pay Given?
Employers are required to release the 13th month pay on or before December 24.
However, some companies give half in mid-year (June) and the remaining half in December. That’s also allowed, as long as the full amount is released by December 24.
Is 13th Month Pay Tax-Free?
Good news — yes, it can be tax-free, but only up to ₱90,000 (combined with other bonuses).
If your total 13th month pay and other benefits exceed ₱90,000, the excess will be subject to income tax.
Blogger’s Corner
Your 13th month pay isn’t just a bonus — it’s a reward for your hard work throughout the year.
But before spending it all, consider using a portion for savings or investments, like Pag-IBIG MP2 or digital banks that offer higher interest rates. Even setting aside just 20% of it can make a difference for your future self.
If you want to maximize your year-end income, check out my other guides on Pag-IBIG MP2, emergency funds, and investment strategies for beginners.