The 13th month pay is a mandatory benefit in the Philippines, defined as the total basic salary earned from January to December, divided by 12 (PD 851, updated under the TRAIN Law 2025). This means every qualified employee receives an extra month’s pay at the end of the year — and employers must comply to avoid penalties.
For employees, understanding how it’s computed ensures you receive the correct amount, even if you were a mid-year hire, daily-paid worker, or on unpaid leave. For employers, accurate computation helps you stay compliant with DOLE guidelines, avoid fines, and maintain employee trust.
In this 2025 comprehensive guide, we’ll show you step-by-step how to compute 13th month pay for:
- Monthly and daily-paid employees
- Mid-year hires and resigned staff
- Employees on maternity leave, unpaid leave, or salary changes
Plus, we’ll provide tables, visual formulas, and scenario-based examples, and so you can compute accurately without guesswork.
What Is 13th Month Pay?
The 13th month pay is a mandatory benefit for employees in the Philippines. Simply put, it is the total basic salary earned from January to December, divided by 12. This benefit is governed by Presidential Decree 851 (PD 851) and updated under the TRAIN Law 2025.
Understanding 13th month pay in the Philippines is crucial not just for employees who want to know what they are entitled to, but also for employers to ensure compliance with labor laws.
Unlike bonuses or incentives, the 13th month pay is purely based on basic salary and does not usually include other forms of compensation such as overtime, allowances, or commissions, unless otherwise stated by the employer.
13th Month Pay vs Bonus vs Incentive
| Type | Included in 13th Month Pay? | Included in Bonus/Incentive? | Notes |
| Basic Salary | ✅ Yes | ❌ No | 13th month pay is based solely on total basic salary earned. |
| Overtime | ❌ No | ✅ Sometimes | Bonuses may include overtime depending on company policy. |
| Commission | ❌ No | ✅ Sometimes | Some employers include commission in performance bonuses. |
| Allowances | ❌ No | ✅ Sometimes | Only taxable allowances may be included in bonuses. |
Formula Box:
13th Month Pay = Total Basic Salary Earned (Jan–Dec) ÷ 12
Tip: Employees receive this benefit automatically by law, so you don’t need to request it — it’s part of your rights under PD 851.
Who Is Eligible for 13th Month Pay?
Not all employees fall under the same rules. Eligibility varies depending on employment type, work arrangement, and length of service. The keyword “13th month pay eligibility 2025” should be kept in mind as we break down each employee category.
Here’s a clear guide to help both employees and HR teams understand who qualifies and how to compute the benefit.
Rank-and-File Employees
Rank-and-file employees are automatically entitled to 13th month pay.
- Full-Year Employees: receive the full computation: total basic salary ÷ 12.
- Mid-Year Hires: 13th month pay is prorated based on months worked.
- Edge Cases: unpaid leave or resignation affects the computation; only paid months count.
Example:
- Employee started in July and earns ₱20,000/month:
13thMonthPay=(₱20,000×6months)÷12=₱10,000
Managers & Supervisors
Some managerial roles may not be entitled depending on company policy and DOLE distinctions.
- Prorated Computation Example: If a manager was promoted mid-year, only months served in a qualifying rank count.
- Clarify: Companies may exclude certain executive-level positions but must document it according to labor law.
Part-Time, Probationary, Contractual, and Project-Based Workers
These employees are generally entitled but require prorated computation:
- Part-Time Workers: compute based on actual hours worked.
- Probationary Employees: salary earned ÷ 12; only months worked count.
- Contractual / Project-Based: prorated based on contract duration.
Example:
- 6-month contract worker earning ₱15,000/month:
13thMonthPay=(₱15,000×6months)÷12=₱7,500Kasambahays
Kasambahays are covered under PD 850 / DOLE Kasambahay Law:
- Monthly-Rate Kasambahays: basic monthly salary ÷ 12.
- Daily-Rate Kasambahays: compute based on days worked, prorated if mid-year hire.
- Unpaid leave and resignation reduce the total eligible months.
| Employee Type | Entitled? | How Computed | Notes / Edge Cases |
| Rank-and-file | ✅ Yes | Total Basic Salary ÷ 12 | Prorate if mid-year hire or resigned |
| Manager/Supervisor | ✅ Usually | Total Basic Salary ÷ 12 | Some managerial roles excluded |
| Part-Time | ✅ Yes | Basic pay earned ÷ 12 | Adjust for hours worked |
| Probationary | ✅ Yes | Salary earned ÷ 12 | Only months worked counted |
| Contractual / Project-Based | ✅ Yes | Salary earned ÷ 12 | Prorated based on contract duration |
| Kasambahay | ✅ Yes | Monthly rate ÷ 12 | Daily-rate workers prorated; legal references applied |
What Counts Toward 13th Month Pay?
Understanding what is included and excluded in 13th month pay is crucial for both employees and HR. Below is a clear breakdown based on Philippine labor law, PD 851, and TRAIN Law 2025 updates.
Basic Salary
The 13th month pay is based on total basic salary earned from January to December. This includes:
- Regular monthly pay
- Daily wage for daily-paid workers (prorated for days worked)
- Adjustments for salary increases mid-year
Formula Box:
13th Month Pay = Total Basic Salary Earned (Jan–Dec) ÷ 12
Tip: Employees are entitled to this automatically by law. HR must ensure accurate records for computation.
Exclusions
Certain types of compensation do NOT count toward 13th month pay:
| Compensation Type | Included in 13th Month Pay? | Notes |
| Overtime Pay | ❌ No | Only part of regular wages are counted |
| Bonuses / Incentives | ❌ No | 13th month is separate from bonuses |
| Commission | ❌ No | Unless included in basic salary by policy |
| Allowances | ❌ No | Only if taxable and part of salary agreement |
⚠️ Remember: 13th month pay = basic salary only. Misclassifying bonuses can lead to compliance issues.
Special Cases
Certain scenarios require adjustments:
| Special Case | How It Affects Computation | Notes |
| Maternity Leave | ✅ Counted as paid salary | Only SSS-paid months are included |
| Hazard Pay | ✅ Counted if part of basic salary | Not counted if separate allowance |
| Retroactive Salary / Salary Increase | ✅ Include only applicable months | Compute additional salary from effective date |
| Leaves / Absences | ❌ Unpaid leaves excluded | Prorate 13th month pay for unpaid days |
Scenario Tip:
“If an employee started mid-year, e.g., July, include salary from July–December only.”
How to Compute 13th Month Pay (Step-by-Step)
Here’s a comprehensive, step-by-step guide for computing 13th month pay for all employee types.
Formula for Monthly Employees
Step 1: Sum total basic salary from Jan–Dec
Step 2: Apply formula:
13th Month Pay = Total Basic Salary ÷ 12
Example:
- Monthly salary = PHP 20,000
- Worked full year: 13th month = 20,000 × 12 ÷ 12 = PHP 20,000
Scenario Tip: For a mid-year hire, sum only the months worked.
Formula for Daily-Paid Employees
Step 1: Sum total basic daily wages received
Step 2: Divide by 12
Example:
- Daily rate = PHP 500
- Worked 200 days in the year: 500 × 200 ÷ 12 = PHP 8,333.33
Semi-Monthly & Commission-Based Employees
Semi-Monthly: Sum all regular semi-monthly salaries → divide by 12
Commission-Based: Sum basic salary portion only → divide by 12
- Commission is excluded unless counted in basic pay agreement
Example Table:
| Employee Type | Total Salary | 13th Month Formula | Result |
| Semi-Monthly | 20,000 × 12 | 240,000 ÷ 12 | 20,000 |
| Commission + Basic | Basic = 15,000 | 180,000 ÷ 12 | 15,000 |
Prorated Computation for Mid-Year Hires or Resigned Staff
Formula:
13th Month Pay = Total Basic Salary Earned ÷ 12
Example:
- Employee joined July, monthly salary = PHP 20,000
- Months worked = 6
- Computation: 20,000 × 6 ÷ 12 = PHP 10,000
Adjustments for Leaves, Absences, Maternity, or Salary Changes
Step 1: Deduct unpaid leave or absences from total salary
Step 2: Add maternity or SSS-covered paid leave
Step 3: Include any retroactive salary adjustments
Example:
| Scenario | Salary Adjustment | Computation | Result |
| Mid-year hire | 6 months | 20,000 × 6 ÷ 12 | 10,000 |
| Unpaid leave in Aug (1 month) | -20,000 | (120,000 – 20,000) ÷ 12 | 8,333.33 |
| Maternity leave (paid 2 months) | +40,000 | (100,000 + 40,000) ÷ 12 | 11,666.67 |
Monthly Breakdown: January–December Computation
Understanding your 13th month pay is easiest when you break it down month by month. This approach helps both employers and employees see how each month’s salary contributes to the total. It also makes proration for mid-year hires or resigned employees simple to compute.
Formula Box:
13th Month Pay = Total Basic Salary Earned (Jan–Dec) ÷ 12
Monthly Breakdown Table (Example – Full-Year Employee)
| Month | Salary (₱) | Absences (Days) | Adjusted Salary (₱) | Cumulative (₱) | 13th Month Allocation (₱) |
| Jan | 20,000 | 0 | 20,000.00 | 20,000.00 | 1,666.67 |
| Feb | 20,000 | 2 | 18,666.67 | 38,666.67 | 3,222.22 |
| Mar | 20,000 | 0 | 20,000.00 | 58,666.67 | 4,888.89 |
| Apr | 20,000 | 0 | 20,000.00 | 78,666.67 | 6,555.56 |
| May | 20,000 | 0 | 20,000.00 | 98,666.67 | 8,222.22 |
| Jun | 20,000 | 0 | 20,000.00 | 118,666.67 | 9,888.89 |
| Jul | 20,000 | 0 | 20,000.00 | 138,666.67 | 11,555.56 |
| Aug | 20,000 | 0 | 20,000.00 | 158,666.67 | 13,222.22 |
| Sep | 20,000 | 0 | 20,000.00 | 178,666.67 | 14,888.89 |
| Oct | 20,000 | 0 | 20,000.00 | 198,666.67 | 16,555.56 |
| Nov | 20,000 | 0 | 20,000.00 | 218,666.67 | 18,222.22 |
| Dec | 20,000 | 1 | 19,333.33 | 238,000.00 | 19,833.33 |
✔ TOTAL 13th Month Pay
₱238,000 ÷ 12 = ₱19,833.33
Scenario Notes:
- Mid-year hires: Only include months worked.
- Resigned employees: Prorate salary up to last working month.
- Unpaid leave: Deduct unpaid days from the monthly salary before computing the cumulative 13th month.
⚡ Tip: Always keep monthly attendance records. It makes prorated 13th month computation transparent and easy to audit.
13th Month Pay and Taxes (TRAIN Law 2025)
Employers need to know when the 13th month pay is taxable. UNDER TRAIN Law 2025, 13th month pay and other benefits are tax-exempt up to ₱90,000 annually. Any excess is subject to withholding tax.
When 13th Month Pay Is Taxable
- Taxable if total annual 13th month pay + other bonuses exceed ₱90,000.
- Includes commission-based bonuses if considered part of total annual compensation.
Tax Computation Example
| Scenario | 13th Month Pay (₱) | Other Bonuses (₱) | Total (₱) | Taxable Portion (₱) |
| Mia – Regular Employee | 20,000 | 50,000 | 70,000 | 0 |
| Paolo – High Income | 40,000 | 70,000 | 110,000 | 20,000 |
Step-by-Step Computation (Paolo):
- Total 13th month + bonuses = 110,000
- Exempt portion = 90,000
- Taxable portion = 110,000 – 90,000 = 20,000
- Apply withholding tax rate according to BIR table
Edge Cases
- Multiple allowances: only non-exempt allowances counted for tax.
- Mid-year hires: prorated 13th month pay combined with bonuses may or may not hit the tax threshold.
- High-income earners: compute carefully to avoid under-withholding.
⚠️ Remember: Miscalculating taxes can lead to penalties from the BIR.
Common Mistakes Employers Make
Many HR teams accidentally miscompute 13th month pay. Here’s what to watch for:
| Mistake | Description | How to Avoid |
| Misunderstanding salary basis | Including OT, allowances, or bonuses in 13th month computation | Only include total basic salary earned Jan–Dec |
| Ignoring proration rules | Paying full 13th month to mid-year hires or resigned employees | Prorate based on months worked |
| Missing deadlines | Paying after Dec 24 | Set payroll schedules to release on or before Dec 24 |
| Failing to include special scenarios | Maternity leave, mid-year hires, unpaid leaves | Follow DOLE rules; adjust computation per scenario |
13th Month Pay Compliance Guide for Employers
Ensuring compliance with 13th month pay rules is crucial for every employer in the Philippines. Failing to meet deadlines or follow DOLE guidelines can lead to penalties, fines, and disputes with employees. This section provides a step-by-step compliance guide, templates, and examples to make your payroll process seamless.
Required Documents & Payroll Records
To properly compute and report 13th month pay, maintain the following records:
| Document | Purpose | Notes |
| Employee Masterlist | Verify eligibility and salary history | Include full-year, mid-year hires, and resigned staff |
| Payroll Summaries | Track monthly salaries and deductions | Include daily-paid, semi-monthly, or project-based employees |
| Leave Records | Account for unpaid leave, absences, and maternity leave | Essential for proration |
| Tax Withholding Forms (BIR) | Ensure proper taxation of 13th month pay | TRAIN Law 2025 compliance |
Tip: Keep both digital and physical copies for audit purposes.
Step-by-Step DOLE Compliance Checklist
Follow these steps to ensure full compliance:
- Verify employee eligibility
- Confirm employee type (rank-and-file, managerial, part-time, contractual, kasambahay).
- Gather payroll records
- Include salaries, allowances, commissions, OT, and bonuses.
- Compute 13th month pay
- Apply proration for mid-year hires or resigned employees.
- Adjust for unpaid leave or salary changes.
- Prepare compliance report
- Fill in employee details, computed 13th month pay, and total disbursement.
- Submit to DOLE (if required)
- Include all supporting documentation and ensure filing deadlines.
- Disburse payment to employees
- Ensure payment is made on or before December 24.
- Keep records for audit
- Retain a copy of report and payroll computation for at least 3 years.
Conclusion
In summary, computing the 13th month pay is straightforward once you understand the formula: total basic salary earned from January to December divided by 12. This mandatory benefit applies to a wide range of employees, including rank-and-file staff, most managers, part-time workers, probationary employees, contractual and project-based staff, and kasambahays.
To ensure compliance, employers must follow DOLE advisories closely, submit accurate payroll reports on time, and maintain proper documentation in case of audits. Failing to meet these requirements can result in penalties, so timely and correct payments are essential to avoid fines or legal complications.
As a helpful tip, using downloadable resources such as a compliance checklist and a sample report can make payroll preparation faster, easier, and more error-free. By keeping these best practices in mind, both employees and employers can ensure smooth, compliant 13th month pay processing year after year.
