Holiday season is coming and for sure everyone is excited again for their 13th Month Pay which they can enjoy during the most celebrated occasions in the Philippines. Though some may already received portion of it in earlier month, most of the companies traditionally give it during the month of November to December. But do you completely understand what is 13th month pay and how your employer compute for your pay?
13th Month Pay is a form of monetary benefit equivalent to the monthly basic compensation that should be received by rank-and-file employees, computed pro-rata according to the number of months within a calendar year that the employee has rendered services (P.D. NO. 851 issued by President Ferdinand Marcos on December 16, 1975). This must be given on or before the 24th of December (Memorandum Order No. 28 issued by President Corazon Aquino on August 13, 1986 amending Section 1 of P.D. No. 851).
Regardless of your position, designation or employment status and irrespective of the method by which your wage is paid (whether daily, weekly, semi-monthly, and monthly), as long as you have rendered your service for at least 1 month during the calendar year and you are employed in the private sector, you are entitled to receive 13th month pay.
Government employees, and employees who are paid on purely commission, boundary or task basis, and those who are paid a fixed amount for performing a specific work are not entitled to 13th month pay.
HOW EMPLOYERS SHOULD COMPUTE FOR 13TH MONTH PAY?
In accordance with the law, this must be the formula:
Total basic salary earned during the year / 12 months = proportionate 13th month pay
“The “basic salary” of an employee for the purpose of computing the 13th month pay shall include all remunerations or earning paid by this employer for services rendered but does not include allowances and monetary benefits which are not considered or integrated as part of the regular or basic salary, such as the cash equivalent of unused vacation and sick leave credits, overtime, premium, nigh differential and holiday pay, and cost-of-living allowances. However these salary-related benefits should be included as part of the basic salary in the computation of the 13th month pay if by individual or collective agreement, company practice or policy, the same are treated as part of the basic salary of the employees.”
Illustration 1:
Mr. Glen worked in the company for 10 months with a monthly salary of 25,000. He did not incur any absences or leave without pay. How much is his 13th month pay?
Solution:
10 months x P 25,000 = P 250,000 salary earned
Applying the formula: P 250,000 / 12 = P 20,833.33
Illustration 2:
Mr. Manuel worked in the company for 10 months with a monthly salary of 25,000 for 6 months and an additional of P 2,000 monthly on the succeeding months. He did not incur any absences or leave without pay. How much is his 13th month pay?
Solution:
6 months x P 25,000 = P 150,000 salary earned
4 months x P 27,000 = P 108,000 salary earned
P 150,000 + P 108,000 = P 258,000
Applying the formula: 258,000 / 12 = P 21,500.00
Illustration 3:
Ms. Salvador has been in the company for 3 years. Her monthly compensation package is composed of 35,000 basic salary and 3,000 allowance.How much is her 13th month pay?
Solution:
12 months x P 35,000 = P 420,000 salary earned
Applying the formula: P 420,000 / 12 = P 35,000.00
Allowance is not included in the computation of 13th month pay.
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