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13th-month pay
13th-month pay is a mandatory extra wage for private-sector rank-and-file employees in the Philippines. It is at least one-twelfth of the basic salary the employee earned in the calendar year, paid on or before.
Also called thirteenth month pay, 13th month
A bonus is money you choose to give above that floor. Calling the 13th month a bonus in a U.S. offer letter does not make it optional.
How it is measured
DOLE’s FAQ: every rank-and-file employee who worked at least one month in the calendar year is covered, whatever the title or the pay method. Managers who hire, fire, or effectively recommend those actions sit outside the rank-and-file rule. Almost every remote individual contributor you will hire is in.
Formula: total basic salary earned in the year ÷ 12. Basic is earnings for work performed. It does not automatically swallow COLA, profit-sharing, or allowances that were never integrated into basic. Commissions that are part of wage can go into the base. If you are unsure, the conservative move is to include the wage-like piece and document why.
You may split the payment: half before the school year, half on or before December 24. You may not skip it because cash is tight. DOLE’s current FAQ says requests to defer or exempt are not accepted.
Example: hired 1 April at ₱60,000 basic, no unpaid leave. Basic earned through 31 December is ₱540,000. 13th month is ₱45,000, due by 24 December. A U.S. founder who budgeted “₱60,000 × 12” is ₱45,000 short in December and has been under-accruing ₱5,000 a month since April. Loaded-cost models put that ₱5,000 in the monthly number so December is not a surprise.
How it differs
Statutory contributions go to SSS, PhilHealth, and Pag-IBIG. 13th month goes to the worker. Holiday pay is a premium on a named day. 13th month is a year-to-date wage. The BIR tax exemption cap on 13th month and other benefits is a tax line, not a labor-law ceiling. Paying ₱0 because “we already pay above market” fails PD 851.
Common errors
Prorating to zero for a March start. One month of work is enough to earn a prorated amount. Excluding piece-rate or commission-paid staff. DOLE says they are in. Treating a recruiter’s 90-day commercial guarantee as a reason to withhold the accrual. The worker’s right does not care who introduced them.