13 things to know about 13th month pay

First of all, the Philippines is the only country in the whole world that grants 13th month pay to all its qualified employees. Not even the United States is giving it, despite the fact that the country is supposedly the richest country and strongest economically. According to the latest 2018 World Economic Forum Global Competitiveness Index, the USA ranks first in economic competitiveness in the whole world. Not even Singapore, the second richest globally and the top ASEAN nation, gives out 13th month. Only the Philippines is concerned with its workers during the Christmas spending season. Second, the law mandating this benefit, Presidential Decree 851, was signed by dictator President Ferdinand Marcos on December 16, 1975 during Martial Law upon the recommendation of a DOLE secretary who did not even have a college degree.

Third, only rank-and-file employees are entitled to this benefit. Executives, managerial, and supervisory personnel are not supposed to receive it. But if there had been a mistake or a deliberate act of grace in voluntarily granting 13th month pay to managers and supervisors, then this can no longer be withdrawn. A unilateral withdrawal would be a violation of law for it constitutes a diminution of benefit. Fourth, 13th month pay should be paid in cash, not in kind. A fishing company cannot give fish in lieu of money. A banana plantation cannot give bananas, instead of cash. Fifth, 13th month pay is distinct and different from a bonus; it is a benefit arising from law. A bonus is a reward for good performance or an expression of gratitude voluntarily granted.

Sixth, your 13th month pay may be lesser than your monthly salary. If you worked only for 10 months, for instance, or if there were days that you were on leave without pay, then necessarily, your 13th month pay shall decrease accordingly. Seventh, to compute for 13th month pay, you simply add all the basic pay earned from January to December and divide the total by 12. That is the formula under PD 851. Eighth, maids and personal drivers, drivers paid on boundary, and agents paid purely on commissions are not entitled to 13th month pay. But pakyaw workers, agents, and drivers with basic pay plus commissions are legally entitled to it.

Ninth, maternity benefits are not included in the computation of 13th month pay. Tenth, only basic pay is included in the computation. Tenth, resigned employees are entitled to proportionate 13th month pay. Thus, if an employee resigned in the month of September, his total income from January to September divided by 12 is his 13th month pay. In fact, even an employee who was legally dismissed is also entitled to the benefit. Eleventh, even if you have only one employee, you need to pay his 13th month pay. Twelfth, a claim for 13th month pay is a money claim. It should be filed within three years, otherwise, it shall be deemed abandoned or prescribed forever.

Thirteenth, your 13th month pay is exempt from income tax, except if it exceeds P82,000, in which case, only the excess is taxable. It is important that both employers and employees know about these basic things or they may be involved in long and expensive legal battles.