In a land of low wages and high costs of living, bonuses are a godsend to the toiling masses. They help make ends meet and increase purchasing power, though they are given only at certain times of the year. Among all the types of special work compensation, perhaps the most anticipated is the 13th month pay. It is, after all, mandated by law and hence certain to be given to employees, unlike other bonuses. Furthermore, it is provided in time for the merriment during the Christmas holidays. If you’re wondering how the 13th month pay is computed for, read on to find out.
How to compute for the 13th month pay
According to Presidential Decree 851, an employee’s 13th month pay is equal to 1/12th of the basic salary they earned in an entire year. Say, your monthly basic salary is Php 25,000 and you’ve worked for your company the entire year. Your total basic salary then is Php 300,000. Divide this by 12 and you get Php 25,000. This is your 13th month pay.
Simply put, your 13th month pay is equivalent to a month’s paycheck – that is if you have been working for your company the entire year.
This means that if you haven’t been with your company for a whole year, your pay will not be equal to your basic monthly salary. Instead, it will be equivalent to your total basic pay for the number of months that you’ve been with the company divided by 12.
Say, by December you will have been working for your company for four months with a salary of Php 25,000. The total basic salary you will have drawn by then is Php 100,000. Divide Php 100,000 by 12 and you get roughly Php 8,300. This is your 13th month pay.
Who is entitled to a 13th month pay?
The law states that all non-managerial employees in the private sector are entitled to a 13th month pay. This is regardless of employment status (regular or under probation), designation or position. The only requirement for such employees to receive it is for them to have been with the company for at least one month by the time the pay is to be given.
For those in managerial positions, it is at the discretion of their companies whether or not to give them this pay. They are not covered by this enforceable obligation.
Government employees, meanwhile, are not entitled to the 13th month pay. However, they routinely receive other types of bonuses in lieu of it.
Is it taxable?
Currently, a 13th month pay that does not exceed Php 90,000 is not subject to taxes. If the bonus exceeds this amount, the initial Php 90,000 is tax-free but the excess amount is taxable. The percentage of the tax depends on the employee’s income bracket.
When is it given?
Employers should dispense the 13th month pay to their employees before December 24, according to the law. This bonus, after all, is meant to help with the expenses on holiday celebrations.
Can you still get your 13th month pay if you resign before December?
You are still entitled to your 13th month pay even if you resign or are terminated before December. Like in all other instances, the basis for the computation is the number of months you have worked for your company in the year.
We hope this answers whatever questions you might have about the 13th month pay. Let us know if you need further clarification!
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