You might be wondering what does a 13th month pay benefit mean? After all, there are still only 12 months in a year, right?
You’re right, there are still only 12 months every year. Although, if you are a business who has Filipino workers the 13th month pay benefit is essential. In the Philippines, people who work for you within many employment sectors will be expecting their 13th month pay to be paid to them by the 24th December each year.
Philippines Labour Laws
The 13th month pay benefit is a mandatory benefit in the Philippines. It is based on an employee’s basic salary. It is supported by the Department of Labour and Employment and unique to the Philippines and their labour standards.
The 13th month pay should be equivalent to one-twelfth (1/12) of an employee’s basic annual salary. Although, to our knowledge, not everyone is automatically expected to receive this benefit. Contracted employees are one sector who don’t need to be legally paid this benefit. So, if you pay your staff on a contract basis, on a task basis or a fixed amount for specific work, this 13th month pay doesn’t appear to be mandatory.
Here's a sample of how to calculate for the 13th month pay:
Total basic salary earned for the year / 12 months = 13th month pay
|Total basic salary earned for the year||120,000 Php|
13th month pay = 120,000 / 12
Pay Benefit = 10,000 Php
(Source: Philippine Department of Labour and Employment FAQ: http://bwc.dole.gov.ph/faqs-on-13th-month-pay)
Just because it might not be a legality or mandatory to your team, doesn’t mean that you shouldn’t look at paying it. Culturally in the Philippines, it is expected. After all, this is their Christmas bonus. It is also a great way to show your team that you respect their culture and really appreciate all their hard work and the loyalty they have shown you. If you don’t pay the 13th month pay, then you risk upsetting staff relations. If people don’t feel rewarded and nurtured by your business, they will look elsewhere.
After all your contracted staff have bills to pay and responsibilities in their daily life. By doing a good job for you, it is only right they get a bonus which will help make the festive season a happier one.
13th month pay benefit deadline and what to include
The law doesn’t stop employers from paying their 13th month pay early. It does state that it should be paid no later than the 24th December.
When you are calculating their 13th month pay things like overtime, holiday pay, night differential pay is not included. Maternity leave is also not necessary to include. Even though it will have been paid while they were on maternity leave, it is not seen as mandatory because they were not physically working for you at this time.
Employees who terminated their contract
The labour laws in the Philippines has made provisions that cover those individuals who resigned or whose employment contract was terminated, before the 13th month payment. The payment will need to be in alignment with the number of days a resigned employee has rendered.
As we ARE NOT recruitment or legal specialists, we highly recommend that you take advice from an expert within the field of recruitment/employment law, within the Philippines. This is only a guide, so please DON'T take everything written as fact.
Hopefully, this guide to the 13th month pay has shown you the importance of paying this bonus. Through awarding it you will help to keep your team loyal to your business in the year to come.