The 13th-month pay is a mandatory benefit for private sector employees in the Philippines. In 2025, this rule continues to ensure that rank-and-file workers receive extra compensation during the holiday season. Below is a detailed guide on eligibility, computation, payment deadlines, and taxation.
What is 13th-Month Pay?
13th-month pay is an additional financial benefit that private sector employees in the Philippines are entitled to receive. The amount is equivalent to at least one-twelfth of an employee’s total basic salary earned over a calendar year. The purpose of this benefit is to provide workers with extra funds during the holiday season.
Who is Eligible?
The law mandates that the following employees qualify for 13th-month pay:
- Rank-and-file employees in private companies.
- Workers who have been employed for at least one month during the calendar year, regardless of whether they are full-time, part-time, or have multiple employers.
- Employees who resign or are terminated before December 24th are still entitled to receive the benefit.
Exemptions include:
- Government employees and those working in government-owned or controlled corporations.
- Managerial staff who hold supervisory positions.
- Domestic workers such as household helpers.
- Employees who earn purely on commission without a fixed basic salary.
How is 13th-Month Pay Calculated?
To compute the 13th-month pay:
- Add up the total basic salary earned by the employee during the calendar year.
- Divide the total by 12.
For example, if an employee earns ₱240,000 in basic salary for the year, the 13th-month pay would be ₱240,000 ÷ 12 = ₱20,000.
Payment Deadline
Employers are required to pay the 13th-month salary on or before December 24th each year. This ensures that employees receive their bonus in time for the holidays.
Taxation Rules
The 13th-month pay in the Philippines has specific tax regulations:
- Up to ₱90,000 of 13th-month pay and other benefits are exempt from income tax.
- Any amount exceeding ₱90,000 is subject to withholding tax.
- Employers must include the 13th-month pay in the Annual Alphalist of Employees and report the exemption in BIR Form No. 2316.
Key Points to Remember
- The benefit is mandatory for private sector rank-and-file employees.
- Employees with at least one month of service in the year are eligible.
- Payment must be made before December 24th.
- Tax exemption applies up to ₱90,000.
Conclusion
The 13th-month pay rule is an important financial benefit for private sector employees in the Philippines. It provides additional support during the holiday season and is protected by law. Employers must comply with the deadlines and reporting requirements to ensure all eligible workers receive their rightful compensation.
