Computing 13th month pay can feel like doing math on a moving jeepney. Most employees know it’s a mandatory benefit in the Philippines, but the actual formula often gets mixed up with bonuses, incentives, and all sorts of office lore. If you’re an HR officer, a small business owner, or a freelancer trying to make sense of your own compensation, understanding how to calculate it properly is essential.
This guide breaks down how to compute 13th month pay in a clear and simple way, so you can avoid confusion, stay compliant with DOLE rules, and make sure everyone gets what they’re entitled to by year’s end. Let’s untangle the numbers together.
We cover a lot of topics about 13th month pay in this article and you can use the table of contents below to jump to a specific topic you are interested in.
- How to Compute for 13th Month Pay?
- Is 13th Month Pay Taxable?
- When is the Deadline for Payment of 13th Month Pay?
- Can employers release 13th month pay in installments?
- Who are entitled to receive 13th month pay?
- Do resigned or terminated employees still get 13th month pay?
- Do freelancers or independent contractors get 13th month pay?
- How is 13th month pay computed for employees who joined mid-year?
- Are Maternity Leave Benefits Included in the 13th Month Pay?
- Is Used Service Incentive Leave Included in the 13th Month Pay?
- Is 13th month pay the same as a Christmas bonus?
- How to report 13th month pay compliance to DOLE?
- Automated 13th Month Pay Computation
How to Compute for 13th Month Pay?
It is calculated by getting an employees’ Total Annual Salary – the sum of all payments that they have received for the whole year. This amount will then be divided by 12, which is the number of months in a year.
13th Month Pay = Total Annual Salary / 12
What is included in the 13th month pay computation?
- Basic Salary (late, undertime and absences already deducted)
- Used Service Incentive Leave
Here are the following items that are excluded from 13th month pay
- Cost-of-living allowances (COLA)
- Profit-sharing income
- Cash conversion of unused vacation and sick leaves
- Overtime pay
- Premium pay
- Night differential
- Holiday pay
- Other items that are not part of the basic salary
Is 13th Month Pay Taxable?
The Tax Reform Acceleration and Inclusion Law or TRAIN Law was passed in 2018, effectively raising the tax exemption of 13th Month Pay to ₱90,000. This means 13th Month Pay and Other Benefits amounting to ₱90,000 and below is non-taxable. If the employees 13th month pay is over ₱90,000, only the excess of ₱90,000 is non-taxable.
When is the Deadline for Payment of 13th Month Pay?
Like a calendar that circles itself every year, the deadline never changes. Under Philippine labor rules, employers must release the 13th month pay on or before December 24. That’s the latest possible day, not a suggested target.
Many companies choose to release it earlier in December to help employees prepare for holiday expenses, school requirements, or long-planned family trips. But regardless of timing, the law draws a clear line: it must be fully paid on or before December 24.
Meeting this deadline does more than keep you compliant. It builds trust, boosts morale, and gives your team the holiday breather they’ve worked hard for all year.
Can employers release 13th month pay in installments?
Yes, but only if the full amount is completely paid on or before December 24. Many companies split the payout, releasing half in June or September and the rest in December.
As long as employees receive the entire amount by the legal deadline, installment releases are compliant.
Who are entitled to receive 13th month pay?
All rank and file employees who have worked for at least one month in the company are entitled to receive their 13th Month Pay, except for those who fall under the following categories:
- Managers
- Government employees
- Employees paid on a commission- or project-basis
- Housekeepers and those in the personal service of another
Do resigned or terminated employees still get 13th month pay?
Yes. Employees who resigned or were terminated are still entitled to a prorated 13th month pay. The computation only includes the months they actually worked in that year.
It doesn’t matter if the employee left in January or November. As long as they rendered at least one month of service, they must receive their corresponding amount, usually released together with their final pay.
Do freelancers or independent contractors get 13th month pay?
No. Freelancers, project-based workers, independent contractors, and professionals engaged under a contract for service are not entitled to 13th month pay.
The law only covers employees under an employer-employee relationship, usually confirmed through payroll records, attendance rules, and withholding tax obligations.
How is 13th month pay computed for employees who joined mid-year?
The formula stays the same, but the total basic salary will only include the months they actually worked.
Formula:
Total basic salary earned during the year ÷ 12
So if someone joined in July, only their July to December basic salary is counted. The result is their prorated 13th month pay.
Are Maternity Leave Benefits Included in the 13th Month Pay?
No. Maternity leave benefits are not included in the computation of 13th month pay.
During maternity leave, the employee receives a benefit from SSS, not from the employer. Since 13th month pay is based only on the basic salary actually earned, and maternity leave days are not considered “earned salary,” those amounts are excluded.
Once the employee returns to work, only the basic salary she earns from that point onward will be counted toward the 13th month pay computation.
Is Used Service Incentive Leave Included in the 13th Month Pay?
Yes. Used Service Incentive Leave (SIL) is included in the 13th month pay computation because it is paid as part of the employee’s basic salary.
When an employee uses SIL, those days are treated like regular paid workdays. Since the employee still receives their basic salary for those days, the amount is counted in the total basic salary earned for the year.
To keep it simple:
- ✅ Used SIL (paid leave) is included
- ❌ Unused or encashed SIL is not included
If the leave is paid and part of the basic salary, it forms part of the 13th month computation.
Is 13th month pay the same as a Christmas bonus?
No. Think of 13th month pay as a legal requirement, while a Christmas bonus is an optional gift. The 13th month pay is mandated by Presidential Decree 851, and every rank-and-file employee is entitled to it as long as they’ve worked at least one month in a calendar year.
A Christmas bonus, on the other hand, is purely voluntary. Companies may give it based on performance, profits, or tradition, but it is not required by law.
How to report 13th month pay compliance to DOLE?
Reporting your 13th month pay compliance to the Department of Labor and Employment (DOLE) is a yearly requirement for many businesses. The process is simple, but it must be done on or before January 15 of the following year to avoid issues during inspections or audits. Here’s a clear, no-fuss guide on how to do it:
- Login to https://reports.dole.gov.ph/ you need to create an account if you dont have it yet
- Look for 13th Month Pay Report and click it.
- Fill up the forms and submit
Automated 13th Month Pay Computation
Even the simple 13th month pay have many rules and many type of earnings included and excluded and if you have many employees this can be overwhelming especially since it is computed during one of the busiest months of the year. If you want to make things easier, you can automate the process by using MPM Payroll.
Reach out to us today to get started!
The company started January also the employees will i compute the december basic salary even we dont know if he/she has a absent or late?