The 13th-month pay in the Philippines is a mandatory benefit for rank-and-file employees in the private sector. It is not a discretionary “bonus” but a legally required payment designed to help workers manage year-end expenses, including higher holiday costs and bills. For 2025, employers must release the full 13th-month pay on or before 24 December 2025, in line with Presidential Decree No. 851 and Department of Labor and Employment guidelines. This guide explains who is covered, how the amount is computed, what is included in “basic salary,” common edge cases, and how employees and employers can stay compliant.
Table of Contents
What Is the 13th-Month Pay
The 13th-month pay is a statutory benefit equal to one twelfth of an employee’s total basic salary earned within the calendar year. It applies to rank-and-file private sector employees regardless of the nature of their employment, provided they have rendered at least one month of work during the year. Many companies choose to advance a portion mid-year and pay the balance in December, but the total must still be fully released by 24 December 2025.
Quick Summary Table
Item |
Key Details |
|---|---|
Country |
Philippines |
Scheme |
13th-Month Pay |
Administered By |
Department of Labor and Employment (DOLE) |
Coverage |
Rank-and-file employees in the private sector who worked at least one month during the calendar year |
Core Amount |
Equivalent to 1/12 of total basic salary earned within the year |
Deadline |
On or before 24 December 2025 |
Legal Basis |
Presidential Decree No. 851 and related DOLE issuances |
Official Website |
Legal Basis and Policy Intent
- Presidential Decree No. 851 requires private employers to pay rank-and-file employees a 13th-month pay every year.
- The intent is to support worker welfare by cushioning year-end expenses and recognizing a year of service.
- The benefit is a right. Employers cannot remove or reduce it, except in narrow cases where an employer already provides an equivalent or better benefit under a separate scheme recognized by law and DOLE.
Who Is Covered
The following private sector workers generally qualify if they performed at least one month of service in 2025:
- Regular employees
- Probationary and trial employees
- Project-based and contractual employees whose arrangements fall under employer-employee relationships
- Part-time employees on a prorated basis
- Output-based workers where a clear basic pay component exists and is tracked
Resigned, terminated, or separated workers are still entitled to a prorated 13th-month pay for services rendered within the year.
Who Is Not Covered
- Government employees, who follow a separate compensation and bonus framework
- Freelancers, consultants, and self-employed individuals without an employer-employee relationship
- Household helpers and personal service relationships that are outside the scope of PD 851
- Employers that already provide an equal or better benefit recognized by DOLE may be exempt from duplicating the payment, subject to strict conditions
Computation Rules
General formula
13th-Month Pay = Total Basic Salary Earned During the Calendar Year ÷ 12
Example 1: Full year service
- Monthly basic salary: ₱18,000
- Worked January to December: 12 months
- Total basic salary: ₱18,000 × 12 = ₱216,000
- 13th-month pay: ₱216,000 ÷ 12 = ₱18,000
Example 2: Partial year service
- Monthly basic salary: ₱18,000
- Worked 6 months in 2025
- Total basic salary: ₱18,000 × 6 = ₱108,000
- 13th-month pay: ₱108,000 ÷ 12 = ₱9,000
What counts as basic salary
Include only amounts constituting basic pay under the contract. Do not include overtime premium, night shift differential, holiday premium, cost of living allowance, transportation or clothing allowances, discretionary bonuses, commissions that are not part of basic pay, and profit-sharing.
If allowances or commissions are expressly integrated into basic pay by written agreement and paid as part of the fixed monthly rate, they may form part of the base for computation.
When Employers Must Pay
- The full 13th-month pay must be released on or before 24 December 2025.
- Employers may split the payment, such as mid-year and December, as long as the entire amount is paid by the deadline.
- For separated employees, companies should remit the prorated amount upon or shortly after final pay processing.
Tax Treatment
Under current tax rules, 13th-month pay and other benefits are tax-exempt up to a statutory ceiling. Amounts exceeding the ceiling are subject to withholding tax. Employers should apply the prevailing threshold and guidance issued by the Bureau of Internal Revenue. Employees typically receive the full 13th-month pay tax-free if their combined taxable benefits do not breach the cap.
Compliance, Complaints, and Remedies
- Failure to pay by the deadline can give rise to money claims under labor law.
- Employees may file a complaint with DOLE or the National Labor Relations Commission.
- DOLE routinely conducts year-end inspections and compliance checks, so employers should prepare accurate payroll records, computation sheets, and proof of payment.
Common Edge Cases and How to Handle Them
- Resigned or terminated before December
Compute the prorated 13th-month based on basic salary earned from January to the last day worked, then divide by 12. - Unpaid days, leaves without pay, or absences
Exclude periods without basic pay. Compute using actual basic salary earned, not nominal monthly rate. - Commission-heavy roles
If there is a clear fixed basic pay plus variable commissions, use only the fixed basic portion unless commissions are legally integrated into basic pay. - No complete payroll records
Employers must reconstruct basic salary records. Employees should keep payslips and contracts to support claims. - Mid-year salary changes
Sum the actual basic salaries earned per month across the year, then divide the total by 12.
Employer Readiness Checklist
- Verify who is rank-and-file and covered
- Reconcile basic salary records month by month
- Confirm tax ceilings and withholding if needed
- Prepare a payslip breakdown showing the computation
- Schedule release no later than 24 December 2025
Employee Action List
- Review payslips and confirm basic salary totals for 2025
- Check if any allowances were contractually integrated into basic pay
- If you separated mid-year, ensure prorated payment is included in final pay
- If not paid by the deadline, contact HR, then seek assistance from DOLE if unresolved
Frequently Asked Questions
1) Who gets the 13th-month pay in the Philippines
All rank-and-file private sector employees who worked at least one month during the calendar year are entitled to it.
2) What is the 2025 deadline
Employers must release the full 13th-month pay on or before 24 December 2025.
3) How is the amount computed
It equals 1/12 of total basic salary earned within the year. Include only amounts that form part of basic pay.
4) Do part-time, probationary, or project-based employees qualify
Yes. They receive a prorated amount based on actual basic salary earned during the year.
5) Are government workers covered
No. Government employees follow a separate compensation and bonus system outside PD 851.
Conclusion
The 13th-month pay is a cornerstone of worker protection in the Philippines. Proper computation relies on actual basic salary earned, and timely payout by 24 December 2025 ensures families receive support when year-end expenses peak. Employers should maintain clear payroll records and communicate schedules early. Employees should verify eligibility, track basic pay totals, and raise concerns promptly if issues arise. Adhering to these rules helps both parties remain compliant and preserves a fair, predictable year-end benefit.
Official Website
For authoritative rules, advisories, and complaint channels, visit https://www.dole.gov.ph
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