Last Updated: February 2026
13th month pay is a mandatory monetary benefit for all rank-and-file employees in the Philippines, governed by Presidential Decree No. 851. This guide explains who qualifies, how it's computed, when it's paid, and how it's taxed.
Legal Basis
Presidential Decree No. 851 (December 16, 1975) requires all employers to pay their rank-and-file employees a 13th month pay not later than December 24 of every year. The Revised Guidelines on the Implementation of the 13th Month Pay Law further clarify the rules.
Who Qualifies?
All rank-and-file employees who have worked for at least one (1) month during the calendar year are entitled to 13th month pay, regardless of:
- Whether they are full-time, part-time, or piece-rate workers
- The nature of their employment (regular, contractual, probationary)
- The method of payment (daily, weekly, monthly)
- The reason for their separation (resignation, termination, end of contract)
Who is Excluded?
- Managerial employees — those whose primary duty is to manage the business or a department, and who have authority to hire, fire, or discipline employees
- Government employees (covered by different rules)
- Employees already receiving 13th month pay or more under company policy, individual agreement, or CBA
- Household helpers and persons in personal service of another (covered under RA 10361 / Batas Kasambahay)
How to Compute 13th Month Pay
The formula is simple:
13th Month Pay = Total Basic Salary Earned During the Year ÷ 12
"Basic salary" includes: basic pay, cost-of-living allowances integrated into the basic pay, and other payments treated as part of basic pay. It does NOT include: overtime pay, premium pay, night shift differentials, allowances (COLA, transportation, meal), and other monetary benefits.
Full-Year Employee Example
Employee worked all 12 months. Monthly basic salary: ₱25,000
13th Month Pay = (₱25,000 × 12) ÷ 12 = ₱25,000
Pro-Rated 13th Month Pay (For Resigned/Separated Employees)
If you leave before December, you are entitled to a pro-rated 13th month pay based on your total basic salary earned from January 1 to your last day of work.
Pro-Rated 13th Month Pay = Total Basic Salary Earned This Year ÷ 12
Employee worked from January 1 to September 30 (9 months), Monthly salary: ₱30,000
Total salary earned: ₱30,000 × 9 = ₱270,000 ÷ 12 = ₱22,500
This amount must be included in the final pay released within 30 days of separation.
Tax Treatment
Under the TRAIN Law (RA 10963), the 13th month pay (and other bonuses) is tax-exempt up to ₱90,000 per year. Any amount exceeding ₱90,000 is subject to income tax.
Example: If you receive ₱100,000 in 13th month pay, ₱90,000 is tax-exempt and ₱10,000 is subject to income tax.
When Must 13th Month Pay Be Released?
- For employees still working: On or before December 24
- Employers may pay half in June and half in December
- For separated employees: Must be included in final pay, released within 30 days of separation