Quick answer
To compute 13th month pay in the Philippines, add up the basic salary the employee actually earned from January 1 to December 31 (or up to their last day), then divide by 12. Overtime, night differential, holiday pay, premium pay, cash conversions of unused leave and allowances not integrated into the basic salary are left out unless your contract, CBA or company practice treats them as basic pay. All rank-and-file employees who worked at least one month in the year are entitled, and payment is due on or before December 24. Up to ₱90,000 of 13th month pay and other bonuses combined is excluded from taxable income.
This guide is for owners, HR and payroll staff. It covers the PD 851 rules and DOLE guidelines, a formula table to keep beside your payroll sheet, and worked examples for full-year, new, resigned and daily-paid employees.
The law behind 13th month pay
The 13th month pay is required by Presidential Decree No. 851 (December 1975). The original decree only covered employees earning up to ₱1,000 a month. Memorandum Order No. 28 (13 August 1986) changed that by requiring employers to pay all their rank-and-file employees a 13th month pay not later than December 24 of every year, whatever their salary.
The detailed rules are in the DOLE’s Revised Guidelines on the Implementation of the 13th Month Pay Law, issued 16 November 1987. They define the benefit, what counts as basic salary, the payment schedule, pro-rating for separated employees and which employers are exempt.
Every year the DOLE also issues a labor advisory reminding employers of the rules. The most recent one we could verify is Labor Advisory No. 16, Series of 2025, “Guidelines on the Payment of the Thirteenth-Month Pay.” It repeated the 1/12 minimum, the December 24 deadline and the compliance report deadline of 15 January 2026. The 2024 version, Labor Advisory No. 13, Series of 2024, set out the same rules with a computation example.
Check for the 2026 advisory: As of 24 October 2026 we had not found a 2026 labor advisory on 13th month pay. DOLE usually releases it in the last weeks of the year. Before you run the December payroll, check the DOLE and DOLE Bureau of Working Conditions websites for the new advisory and its reporting deadline.
Who is entitled and who is exempt
Under the Revised Guidelines and recent DOLE advisories, the following are entitled to 13th month pay:
- All rank-and-file employees in the private sector, whatever their position, designation or employment status (regular, probationary, project, seasonal, part-time or fixed-term), and however they are paid, as long as they worked at least one month during the calendar year.
- Employees paid on a piece-rate basis.
- Employees with a fixed or guaranteed wage plus commission. Whether the commission goes into the computation is a separate question, covered below.
- Employees with more than one employer. Each private employer pays its own share.
- Employees who resigned or were terminated before the payment date. They get a pro-rated amount.
- Employees on maternity leave who received a salary differential, as named in the 2024 advisory.
- Kasambahay (domestic workers). Republic Act No. 10361, the Batas Kasambahay (2013), says plainly that “the domestic worker is entitled to a thirteenth month pay as provided for by law.”
The Revised Guidelines list these exempt employers:
- The government and its political subdivisions, including government-owned or controlled corporations, except those operating essentially as private subsidiaries of the government.
- Employers already paying a 13th month pay or its equivalent. “Equivalent” means a benefit such as a Christmas bonus worth at least 1/12 of basic salary for the year. A smaller bonus has to be topped up.
- Employers of workers paid purely on commission, boundary or task basis, or a fixed amount for a specific job, with no fixed wage. Piece-rate workers remain covered.
The guidelines also listed employers of household helpers, but RA 10361 now gives kasambahay their own entitlement. Managerial employees, as the Labor Code defines them, are outside the mandate. Many companies still give them a 13th month by policy or contract.
No deferment: The 2024 and 2025 DOLE advisories said there are no exemptions and that requests for exemption or deferment will not be accepted. Businesses that lost money, or were hit by a calamity or temporary closure, still owe the pro-rated amount.
What counts as “basic salary”
This is where most computation errors start. The Revised Guidelines define basic salary as all remuneration or earnings paid by the employer for services rendered. They then exclude:
| Usually included | Usually excluded (unless contract, CBA, policy or practice treats it as basic salary) |
|---|---|
| Regular monthly or daily basic pay actually earned | Overtime pay |
| Regular pay for leave days taken with pay (paid as ordinary salary for the period) | Premium pay for rest days and special days |
| COLA that has been integrated into the basic wage | Night shift differential |
| Salary-related benefits your policy, contract or CBA treats as part of basic salary | Holiday pay |
| Sales commissions that are part of a salesperson’s wage (see note) | Cash equivalent of unused vacation and sick leave |
| Cost-of-living allowance (COLA) not integrated into the basic wage, and other non-integrated allowances |
Unpaid absences and leave without pay reduce the base. You divide what was actually earned as basic salary, not the contract rate times twelve.
A note on commissions. The Supreme Court has gone two ways on this. In Philippine Duplicators, Inc. v. NLRC (G.R. No. 110068, 11 November 1993), sales commissions that formed part of a salesman’s wage were included in the 13th month base. In Boie-Takeda Chemicals, Inc. v. De la Serna (G.R. No. 92174, 10 December 1993), the Court excluded commissions it saw as productivity incentives on top of basic salary, and struck down the guideline provision that had included them. If your sales staff earn commissions, have a labor lawyer review your treatment and write it into your payroll policy.
How to compute 13th month pay, step by step
- Fix the period. Use January 1 to December 31 of the current year. For a new hire, start on their first day. For a separated employee, end on their last day.
- List the basic salary actually earned in each payroll period. Use the basic pay lines from your payroll register, not gross pay.
- Remove what is excluded. Take out overtime, premiums, night differential, holiday pay, leave conversions and non-integrated allowances, unless your policy makes them part of basic salary.
- Deduct unpaid absences, tardiness and undertime, if those were already deducted from basic pay during the year.
- Add the remaining amounts to get total basic salary earned.
- Divide by 12. The result is the minimum 13th month pay. A contract, CBA or company policy can grant more.
- Subtract any advance already paid. Some employers pay half before school opens, which the rules allow.
- Apply tax rules. Add the 13th month to other bonuses for the year and compare the total against the ₱90,000 exclusion.
13th month pay formula table
| Situation | Formula |
|---|---|
| Standard (all employees) | Total basic salary earned in the calendar year ÷ 12 |
| Same monthly rate all year, no unpaid absences | Monthly basic salary × 12 ÷ 12 (equal to one month’s basic pay) |
| New hire | Basic salary earned from start date to December 31 ÷ 12 |
| Resigned or terminated | Basic salary earned from January 1 to last day ÷ 12 |
| Daily-paid | (Daily rate × days paid as basic salary) ÷ 12 |
| Salary changed mid-year | (Basic earned at old rate + basic earned at new rate) ÷ 12 |
| With unpaid absences | (Total basic salary − unpaid absence deductions) ÷ 12 |
| Partial advance already paid | (Total basic salary earned ÷ 12) − advance paid |
Worked examples
All names and salary figures below are illustrative. They show the method, not actual rates.
Example 1 — DOLE’s own illustration
Labor Advisory No. 13, Series of 2024 uses an employee whose total basic salary for the year was ₱194,682.50, after unpaid leave and absences.
₱194,682.50 ÷ 12 = ₱16,223.54
Example 2 — Full year, no absences (illustrative)
Ana earns a monthly basic salary of ₱22,000 and had no unpaid absences. Her overtime and night differential are excluded.
₱22,000 × 12 = ₱264,000 ÷ 12 = ₱22,000
Example 3 — Unpaid absences (illustrative)
Ben’s monthly basic is ₱20,000. During the year, ₱2,760 was deducted from his basic pay for unpaid absences.
(₱240,000 − ₱2,760) = ₱237,240 ÷ 12 = ₱19,770
Example 4 — New hire (illustrative)
Carla joined on 1 April at ₱18,000 a month and had no unpaid absences. April to December is 9 months.
₱18,000 × 9 = ₱162,000 ÷ 12 = ₱13,500
Example 5 — Resigned mid-year (illustrative)
Dan earned ₱24,000 a month, paid semi-monthly, and his last day was 15 August. His basic pay from January to July was ₱168,000, and his basic pay for 1–15 August was ₱12,000.
(₱168,000 + ₱12,000) = ₱180,000 ÷ 12 = ₱15,000, paid as part of his final pay
Example 6 — Daily-paid worker (illustrative)
Ella is paid ₱650 a day and received basic pay for 290 days in the year. Her holiday pay and overtime are excluded.
₱650 × 290 = ₱188,500 ÷ 12 = ₱15,708.33
Example 7 — Salary increase in July (illustrative)
Felix earned ₱20,000 a month from January to June and ₱22,000 a month from July to December.
(₱120,000 + ₱132,000) = ₱252,000 ÷ 12 = ₱21,000
Pro-rating for resigned, terminated and new employees
Section 6 of the Revised Guidelines says an employee who resigns or is separated before the payment date gets 13th month pay in proportion to the time worked during the year, counted from the start of the year (or their hire date) to separation. The employee can demand it once the employment relationship ends.
In practice, the pro-rated 13th month goes into final pay. DOLE Labor Advisory No. 6, Series of 2020 lists the pro-rated 13th month pay as part of final pay and says final pay should be released within 30 days of separation, unless a more favourable company policy or agreement applies. Pro-rating does not depend on why the employee left. Resigned, terminated and end-of-contract employees are all covered.
Our guide to payroll systems for Philippine businesses shows how final pay fits into the regular payroll cycle.
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When to pay, and the compliance report
- Payment deadline: On or before December 24 every year (MO 28 and the Revised Guidelines).
- Split payment: The Revised Guidelines let employers pay half before the regular school opening and the rest on or before December 24. The frequency can also be agreed with the employees’ bargaining agent. In 2025 DOLE officials also suggested paying in halves, quarterly or monthly to ease the December cash load.
- Compliance report: Under Labor Advisory No. 16-2025, employers had to submit their 13th month pay report through the DOLE Online Compliance Portal (reports.dole.gov.ph) by 15 January 2026. The 2024 advisory listed what the report contains: establishment name and address, principal product or business, total employment, number of workers who received the benefit, amount per employee, total amount, and the contact person’s name, position and phone number. Expect a similar deadline of mid-January 2027 for this year’s payment, but confirm it in the 2026 advisory.
Not the SSS 13th month pension: The rising Google searches for “SSS 13th month pay” mostly concern the SSS pension. SSS pays a 13th month pension to its retirement, disability and survivorship pensioners each December. That is separate from what employers owe their staff under PD 851.
Is 13th month pay taxable?
Under Section 32(B)(7)(e) of the National Internal Revenue Code, as amended by the TRAIN Law (Republic Act No. 10963), 13th month pay and other benefits are excluded from gross income up to a combined ₱90,000 a year. BIR Revenue Regulations No. 11-2018 say “other benefits” include Christmas bonuses, productivity incentives and similar benefits, and that the exclusion covers benefits paid or accrued during the year. The amount above ₱90,000 is taxable compensation and is subject to withholding tax.
BIR Form 2316, the year-end certificate given to employees, has a non-taxable line for “13th Month Pay and Other Benefits (maximum of ₱90,000)” and a separate line for the taxable excess.
Example — tax treatment (illustrative)
Gina’s 13th month is ₱25,000 and her Christmas bonus is ₱5,000. Total ₱30,000 is under ₱90,000, so it is all non-taxable.
Hector’s 13th month is ₱75,000 and his performance bonus is ₱30,000. Total ₱105,000 is ₱15,000 over the ceiling, so ₱15,000 is added to his taxable compensation.
Watch for changes: Bills to raise income tax thresholds were filed in Congress in 2026. One example is House Bill No. 10345, approved by the House ways and means committee in August 2026, which raises the income tax exemption to ₱350,000 a year. As of 24 October 2026 we found no enacted change to the ₱90,000 ceiling. Check BIR issuances before your December payroll.
The Revised Guidelines also say the mandated 13th month pay is not part of the regular wage for computing overtime and premium pay, or Social Security and Medicare (now PhilHealth) contributions. Confirm the current contribution treatment with SSS, PhilHealth and Pag-IBIG if you are unsure.
Common 13th month payroll mistakes
- Using gross pay instead of basic pay. Overtime, night differential, holiday pay and non-integrated allowances inflate the base unless your policy says otherwise. If you include them, do it on purpose and apply it the same way to everyone.
- Multiplying the contract rate instead of adding actual earnings. This overpays employees who had unpaid absences and gets new hires and mid-year salary changes wrong.
- Leaving out non-regular staff. Probationary, project, seasonal and part-time rank-and-file employees are covered if they worked at least a month.
- Forgetting separated employees. People who left in March are still owed a pro-rated amount, normally through final pay.
- Assuming a Christmas bonus replaces it. A bonus only counts as the “equivalent” if it is at least 1/12 of annual basic salary. Otherwise you owe the difference.
- Taxing it wrongly. Some payrolls tax the full 13th month. Others forget that other bonuses share the same ₱90,000 ceiling.
- Missing the compliance report. Paying on time does not file the report for you. Diarise the January deadline.
- Treating commissions inconsistently. Write down whether sales commissions are in the base, and why.
Most of these come from scattered data. A system that keeps each employee’s basic-pay history makes the year-end number easier to defend. Our HRIS software buying guide explains what to look for.
Where NexHRIS fits
NexHRIS is a cloud HRIS and payroll platform for Philippine businesses. Its payroll computes SSS, PhilHealth and Pag-IBIG contributions and BIR withholding tax on compensation for every payroll run, and produces payslips and payroll reports. Attendance from biometric, QR-code, facial recognition, mobile or GPS-geofenced capture flows into payroll, depending on plan and deployment, so December’s basic-pay figures come from the same records you paid on all year. Your team still sets the policies, such as which pay items count as basic salary, and stays responsible for compliance.
Want year-end payroll without the spreadsheet scramble?
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Frequently asked questions
Is 13th month pay the same as one month’s salary?
Only if the employee worked the whole year at the same basic rate with no unpaid absences. The legal formula is total basic salary actually earned in the year divided by 12, so new hires, separated employees and anyone with unpaid leave get less than a full month’s pay.
Are probationary and part-time employees entitled to 13th month pay?
Yes. All rank-and-file employees who worked at least one month during the calendar year are covered, whatever their employment status or how they are paid.
Do resigned employees get 13th month pay?
Yes, in proportion to the basic salary earned from January 1 (or their hire date) to their last day, divided by 12. It is usually released with final pay, which DOLE Labor Advisory No. 6-2020 says should be paid within 30 days of separation unless a more favourable policy applies.
Can an employer delay 13th month pay because business is slow?
No. The 2024 and 2025 DOLE advisories said requests for exemption or deferment would not be accepted. The deadline is December 24. Paying it in instalments earlier in the year is allowed.
Is 13th month pay included in SSS, PhilHealth and Pag-IBIG contributions?
The Revised Guidelines say mandated 13th month pay is not treated as regular wage for Social Security and Medicare (now PhilHealth) contribution purposes. For current treatment by each agency, check their latest circulars or ask your branch.
Sources
- Presidential Decree No. 851 (13th Month Pay Law) and implementing rules — LawPhil Project, checked 24 Oct 2026
- Memorandum Order No. 28, s. 1986 — LawPhil Project, checked 24 Oct 2026
- Revised Guidelines on the Implementation of the 13th Month Pay Law (16 November 1987) — DOLE, text via ChanRobles Virtual Law Library, checked 24 Oct 2026
- DOLE Labor Advisory No. 13, Series of 2024 — Guidelines on the Payment of Thirteenth-Month Pay — DOLE, copy hosted by Alburo Alburo and Associates Law Offices, checked 24 Oct 2026
- PMAP Circular No. 2025-088: Labor Advisory No. 16, Series of 2025 — People Management Association of the Philippines, checked 24 Oct 2026
- DOLE orders monitoring of 13th month pay compliance (Labor Advisory No. 16-2025) — SunStar / Philippine News Agency, checked 24 Oct 2026
- DOLE reminds employers: Pay 13th-month pay by Dec. 24 — GMA News, checked 24 Oct 2026
- Deadline for 13th month pay report set on January 15, 2026 — GMA News, checked 24 Oct 2026
- DOLE: Release 13th month pay by 24 December — Daily Tribune, checked 24 Oct 2026
- Republic Act No. 10361 (Batas Kasambahay) — LawPhil Project, checked 24 Oct 2026
- Labor Advisory No. 6, Series of 2020 on final pay and certificate of employment — Mondaq, checked 24 Oct 2026
- Boie-Takeda Chemicals, Inc. v. De la Serna, G.R. No. 92174 (1993) — LawPhil Project, checked 24 Oct 2026
- Philippine Duplicators, Inc. v. NLRC, G.R. No. 110068 (1993) — ChanRobles Virtual Law Library, checked 24 Oct 2026
- Republic Act No. 10963 (TRAIN Law) — LawPhil Project, checked 24 Oct 2026
- Revenue Regulations No. 11-2018 (digest) — Bureau of Internal Revenue, checked 24 Oct 2026
- BIR Form No. 2316 (September 2021 ENCS) — Bureau of Internal Revenue, checked 24 Oct 2026
- P350,000 income tax exemption ceiling bill hurdles House panel — Philippine Daily Inquirer, checked 24 Oct 2026
- SSS releases P18.8 billion in 13th month pension to 3.7 million pensioners — Social Security System, checked 24 Oct 2026
