It’s the most wonderful time of the year, luv! Aside from the holidays, Filipino employees look forward to one thing — 13th Month Pay! But what exactly is it, and how can you make the most of it? Keep reading to learn everything you need to know about this much-anticipated bonus. Plus, we’re going to teach you how to compute 13th month pay!
Table of Contents
What is the 13th Month Pay?
In simple terms, 13th Month Pay is a mandatory benefit provided to employees in the Philippines. According to Presidential Decree No. 851, employers are required to give rank-and-file employees this extra compensation annually.
For many Filipinos, the 13th Month Pay isn’t just a year-end bonus; it’s a lifeline for holiday expenses, debt repayments, and savings. Understanding how it’s computed ensures you get the right amount, empowering you to plan your finances better!
Why it’s essential to understand how it’s computed
Getting 13th month pay computation right isn’t just your employer’s job — it’s your right! Here's why you need to know the numbers:
- To ensure accurate computation: Mistakes happen, even in payroll systems. Knowing how to compute your 13th Month Pay keeps you informed.
- To plan ahead: Whether it’s budgeting for Noche Buena or setting aside savings, understanding the amount of your bonus can help you maximize its value.
Understanding the basics of 13th Month Pay
Who is entitled to receive it?
All rank-and-file employees who have worked for at least one month during the calendar year are entitled to 13th Month Pay. Yes, even if you’re new or resigned earlier in the year, you’re still eligible for a prorated amount.
Deadline for payment
Employers must release this by December 24 of each year. So, if Santa doesn’t deliver it, labor laws might!
Components of 13th Month Pay
The computation is based on your basic salary — this excludes overtime pay, allowances, and other monetary benefits. So no, your holiday tips from your boss don’t count, luv!
How to compute 13th Month Pay
Here’s the magic formula:
13th Month Pay = Total basic salary earned for the year ÷ 12
13th month pay computation sample
- For employees with full service:
If your monthly salary is PHP 20,000 and you worked the entire year, your 13th Month Pay is:
PHP 20,000 x 12 ÷ 12 = PHP 20,000 - For employees with partial service:
Say you resigned after working six months, with the same monthly salary of PHP 20,000:
PHP 20,000 x 6 ÷ 12 = PHP 10,000
Common misconceptions
- Prorated Payments: Yes, you’ll only receive 13th Month Pay for the months you’ve worked.
- Deductions: Contributions to SSS, PhilHealth, and Pag-IBIG aren’t part of the 13th month pay computation!
How to maximize the use of 13th Month Pay
Tips for spending wisely
- Prioritize essentials: Pay off bills, debts, and household expenses first. That’s right, it’s best not to think about “treating yourself” if those Meralco or telecom bills aren’t even paid for yet!
- Pro-tip: Take this opportunity to free yourself from current debt and pay your loans. Trust us, you will reap the rewards for responsible loan payment habits, like building a good credit score and strengthening your financial security!
- Save and invest: Start an emergency fund or look into low-risk investments. You don’t have to put all your bonus in the emergency fund, but setting aside a portion of it will help in the long run.
- Plan ahead: You can take things a step further by setting aside funds for future needs like education, health insurance, or retirement. These may not be essential now, but they’ll be essential in the future. That’s why we’re emphasizing the importance of knowing how to compute 13th month pay!
- Do you know a good place to put your savings? Hop on the Tonik app and create a Stash or Time Deposit! Think of our Stash as a savings account where you can add money anytime, while it earns interest. Best thing is, you can withdraw the money whenever you need it! Meanwhile, you can commit a specific amount of money in our Time Deposit to be locked in over a period of time while it earns a high interest rate; plus, you can make as many as five TD accounts! Awesome, right?
Avoid overspending
- Create a spending plan to curb impulse buying. That means, you ought to make a list of the things you want to buy before going to the mall or market, just so you won’t be tempted to purchase anything you didn’t plan on buying before. We know sales and discounts are tempting, but if it’s not on your list, maybe you should put that item back on the shelf.
- Separate your needs from your wants. Once you’ve done that, buy your needs, and then rank your wants according to priority so you’ll have a clearer picture of which items to splurge on. Set a budget limit for everything and do not exceed it. We know it’s hard, luv, but you’ll thank yourself later!
Treat yourself responsibly
- Finally, go treat yourself! You’ve worked hard all year, so it’s okay to splurge. Just make sure it’s within your budget!
📌 The rule is the same: 13th Month Pay = Total Basic Salary Earned During the Year ÷ 12.
Yup, even if you didn’t work the full year, you’re still entitled to a pro-rated 13th month pay based on your actual earnings.
Here’s how to do it step-by-step:
- Add up your total basic salary for the 6 months you worked.
- Divide that amount by 12—and that’s your 13th Month Pay!
Example time!
Let’s say your monthly basic salary is PHP 15,000 and you worked for 6 months:
- Total salary = PHP 15,000 × 6 = PHP 90,000
- 13th Month Pay = PHP 90,000 ÷ 12 = PHP 7,500
✅ That means you’ll receive PHP 7,500 as your 13th Month Pay, luv! Remember, this applies even if you resigned or started mid-year—just count the total basic salary you earned, divide it by 12, and you’re good to go!
13th Month Pay FAQs
Is it taxable?
- Good news, luv! If your 13th Month Pay (plus other bonuses) doesn’t exceed PHP 90,000, it’s tax-free. Any amount beyond that will be subject to tax.
What happens if the employer fails to pay?
- If your employer doesn’t deliver, you can file a complaint with the Department of Labor and Employment (DOLE). Know your rights and fight for what you’re owed. Not to mention, know what you’re owed by doing your own 13th month pay computation!
How is it different from bonuses?
- Unlike bonuses, which are discretionary and given at the company’s will, 13th Month Pay is a legal requirement. Think of it as a guaranteed reward for all your hard work!
Luv, your 13th Month Pay is more than just a bonus—it’s a chance to set yourself up for success! So, know how to compute 13th month pay, use the extra money wisely, and don’t forget to give yourself a well-deserved treat. Now go enjoy the holidays and let your money work for you
