13th Month Pay: Legal Meaning (PD 851)
Quick answer
13th month pay is an extra yearly pay that employers must give their employees under Presidential Decree No. 851. Under the 1987 Revised Guidelines quoted by the Supreme Court, the minimum is one-twelfth of the total basic salary earned within the calendar year. It is prorated only when the employee resigns or is separated from work.
Also called: Thirteenth month pay, 13th-month pay
What law requires 13th month pay?
Presidential Decree No. 851, issued in 1975. As published, it requires employers to pay their employees "a 13th-month pay not later than December 24 of every year". It is a separate decree, not an article of the Labor Code.
The decree first covered only employees with a basic salary of not more than P1,000 a month. In Honda Phils. v. Samahan ng Malayang Manggagawa sa Honda (G.R. No. 145561, 2005), the Supreme Court explained that the Revised Guidelines issued on November 16, 1987 removed that salary ceiling.
How much is the minimum 13th month pay?
As quoted in Honda, the Revised Guidelines provide "that the minimum 13th month pay required by law shall not be less than one-twelfth (1/12) of the total basic salary earned by an employee within a calendar year."
Basic salary here does not include allowances and benefits that are not part of the regular salary. Honda quotes the guidelines as leaving out the cash equivalent of unused vacation and sick leave credits, overtime premium, night differential, holiday pay and cost-of-living allowances.
When is 13th month pay prorated?
Only when the employee resigns or is separated from work, according to the Revised Guidelines as quoted in Honda. In that case, the Court agreed that the computation "should be based on the length of service and not on the actual wage earned by the worker." The company could not cut the benefit by counting a month-long strike as unworked days, because the workers had no gap in service and full payment was the company's practice.
A benefit that has become company practice also cannot be reduced at will: see Article 100 and Can an employer remove benefits?
Who is not covered?
In Atienza v. Saluta (2019), the Supreme Court said that persons in the personal service of another, such as a family driver, are exempted from 13th month pay, citing the implementing rules of PD 851. Kasambahay are covered by their own law, Republic Act No. 10361.
Example
Made-up illustration: Grace works as a sales clerk in a Bacolod City store. In the year, she receives her basic salary every month, plus overtime pay in December. Her 13th month pay is computed on her basic salary for the year; the overtime pay is not added. If she had resigned at the end of June, she would get a prorated 13th month pay for the months she worked.
To compute an amount, use the 13th month pay calculator. For deadlines, coverage and how to claim, see the 13th month pay guide.
Which provisions use this term?
Which Supreme Court rulings are relevant?
Frequently asked questions
What is 13th month pay in simple words?
It is an extra yearly pay that employers must give their employees under Presidential Decree No. 851. Under the 1987 Revised Guidelines quoted in Honda (2005), it is at least one-twelfth of the total basic salary earned within a calendar year.
What law requires 13th month pay?
Presidential Decree No. 851 (1975). The original decree covered only employees earning not more than P1,000 a month, but the Supreme Court in Honda (2005) explained that the 1987 Revised Guidelines removed that ceiling.
Are overtime and night differential included in the basic salary?
No. As quoted in Honda, basic salary does not include overtime premium, night differential, holiday pay, cost-of-living allowances and the cash equivalent of unused leave credits.
Is 13th month pay prorated if I resign?
Yes. As quoted in Honda, the Revised Guidelines provide for a pro-ration of the benefit only in cases of resignation or separation from work.
Do family drivers and kasambahay get 13th month pay under PD 851?
In Atienza v. Saluta (2019), the Supreme Court said that persons in the personal service of another, such as family drivers, are not covered, citing the implementing rules of PD 851. Kasambahay have their own law, the Batas Kasambahay.
General information, not legal advice. For your case, ask a lawyer, the Public Attorney's Office (PAO) or the agency.
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