It’s Easy To Calculate Your 13th Month Pay!

It’s Easy To Calculate Your 13th Month Pay!

For Filipinos, Christmas season is when everyone looks forward to buying gifts, parties to attend, and food to prepare on Noche Buena. However, above all that, there is one thing that Filipinos (especially employees) are more excited about – their 13th month pay.

While it’s basically an extra month monetary compensation for working for the entire year, its computation will vary depending on your salary and length of service for the entire calendar year.

What is 13th month pay?

Thirteenth-month pay is a form of monetary benefit given to every rank-and-file employee. The Department of Labor and Employment (Dole) said that every rank-and-file employee in the private sector has the right to receive 13th month pay, provided they worked for at least one month in a year. Basically, the amount of the 13th month pay is 1/12 of the employee’s annual salary.

What are included in its computation?

Primarily, the 13th month pay covers only the basic salary of the employee. The computation of the basic salary does not include allowances and monetary benefits that are not considered or integrated as part of the employee’s regular compensation.

Items that are excluded from its computation are: cash equivalent of unused vacation and sick leave credits, overtime, premium, night differential and holiday pay, and cost-of-living allowance. However, if these benefits are treated as part of the basic salary in the employee’s contract or agreement, then they shall be included in the computation of the employee’s 13th month pay.

The 13th month pay, as stated in the Republic Act 10653, is not subject to tax, only when the gross benefits received by employees of public and private companies does not exceed ₱82,000. Every employer is required to make a report of compliance with the law to the nearestDOLE regional office not later than January 15 of each year.

How to compute it?

The 13th  month pay is computed based on 1/12 of the total basic salary of an employee within a calendar year, or basic monthly salary for the whole year divided by 12 months.

Annual Basic Salary (minus unpaid leaves) /12 months = 13th month pay

Example:

Basic monthly salary₱20,000
Daily rate₱1,000
Date startedMay 2, 2017
Length of employment for the calendar year (by December 31)8 months
Unpaid leave3 days
Total annual income (minus unpaid leave)₱157,000
13th month pay13,083

When do you get this 13th pay?

According to the law, the 13th month pay should be provided to the employees on or before December 24 of each year. In most cases, employees get their 13th month pay as early as the first week of December, while some within Christmas week or the day before Christmas day.

13th month pay vs Christmas bonus

Aside from the 13th month pay, many employees get another benefit called “Christmas bonus.” However, this is purely dependent of the employer’s initiative as it isn’t mandated by law.

In form, this can also vary because it doesn’t necessarily come in cash. Commonly, employers provide Christmas bonus in a form of gift certificates, canned goods or even cash, making it non-taxable.

If employers fail to provide 13th month pay

Employer who fail to pay the 13th month benefit can be subjected to administrative cases. Employees can file their charges at the nearest DOLE office. This monetary benefit is in pursuant to Presidential Decree (PD) 851 signed by former President Ferdinand Marcos on December 16, 1975 which was later amended by the succeeding President Corazon Aquino. This mandate’s sole purpose is to allow Filipinos more discretionary money for Christmas and New Year celebrations.  

It’s the only time of the year when our pockets are full or at least a few thousand pesos heavier . As we close in on Christmas season and plan for our celebration, it’s also the perfect time to kick start our savings or investment plans.

How to make the most out of your 13th month pay

While Christmas is all about giving (and spending), it wouldn’t hurt either to start saving or investing, while you still have the resources. Not to mention, it’s the perfect precedent to a financially focused New Year’s resolution. The best gift that you can give yourself this Christmas is the peace of mind knowing that your finances are all set for the future! Here are things you can spend on with your 13th month pay that will help you do that.

Investment

Instead of draining your pocket this Holiday season, why not make your money work for you through investments. There are various channels that could yield high returns for your money, such as mutual funds, stocks, real estate, and forex.

Savings/fixed time deposit

With time deposits, you essentially agree to keep your money in the bank for a predetermined period, say one year, without making any withdrawals until it reaches maturity. The bank offers you a fixed interest rate provided that is higher than savings account if you do not make withdrawals or terminate the contract before the maturity term.

Emergency fund

The ideal emergency fund should be at least your threemonths salary. Your 13th month pay is basically equivalent to a single month of your salary, but it’s  good enough to kick start your emergency fund.

Insurance

The best gift that you could ever give yourself is a secured future, and what better way to do that than to get an insurance. Accidents and disasters can and do happen, and if you aren’t adequately insured, it could leave you in financial ruin. You need insurance to protect your health, your ability to earn income, and to keep a roof over your head.

The main reason why 13th month pay was implemented is to serve as a monetary relief for Filipinos during Christmas season, for them to enjoy and celebrate the spirit of Christmas better. This however doesn’t mean that you can only limit your spending to gifts and other forms of luxuries to treat yourself this Christmas season.  

 

 

Source: https://www.dole.gov.ph/files/LA%20012-13.pdf

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