I. Overview

The 13th month pay is a mandatory monetary benefit under Philippine labor law. It is generally equivalent to at least one-twelfth of an employee’s basic salary earned within a calendar year. The issue becomes more nuanced when an employee has absences during regular holidays, because Philippine labor law treats regular holidays differently from ordinary working days.

The central question is:

When an employee is absent on a regular holiday, should the holiday pay be included in the computation of the employee’s 13th month pay?

The short answer is: yes, if the employee is entitled to holiday pay for that regular holiday, the amount forms part of the basic salary earned and is generally included in the 13th month pay base. However, if the employee is not entitled to holiday pay because of an unjustified absence immediately before the regular holiday, then there is no holiday pay earned for that day, and nothing from that holiday is included in the 13th month pay computation.

II. Legal Basis of 13th Month Pay

The 13th month pay benefit is principally governed by Presidential Decree No. 851, as amended, and its implementing rules.

Under the law, covered employers are required to pay their rank-and-file employees a 13th month pay not later than December 24 of every year.

The general formula is:

13th Month Pay = Total Basic Salary Earned During the Calendar Year ÷ 12

The important phrase is “basic salary earned.” This means the computation is not always based on the employee’s monthly rate multiplied by twelve. It is based on the actual basic salary earned during the year.

If an employee has unpaid absences, unpaid leaves, suspensions, or other days not worked and not paid, those unpaid amounts are generally excluded from the total basic salary earned.

III. Meaning of Basic Salary for 13th Month Pay Purposes

For purposes of 13th month pay, basic salary generally refers to the employee’s regular compensation for services rendered.

It typically includes:

Regular daily or monthly wage;
Paid regular holidays, when the employee is legally entitled to holiday pay;
Paid leaves, if treated as salary under company policy, contract, or practice;
Other amounts that are integrated into the basic wage.

It generally excludes:

Overtime pay;
Night shift differential;
Holiday premium pay beyond the basic holiday pay;
Rest day premium;
Service incentive leave cash conversion, unless treated as part of basic pay by policy or practice;
Allowances not integrated into the wage;
Bonuses not considered part of salary;
Commissions, unless by law, agreement, or established practice they are treated as part of basic salary.

The key point is that only basic salary earned enters the 13th month pay computation.

IV. Regular Holidays Under Philippine Labor Law

Regular holidays are days when employees are generally entitled to be paid even if no work is performed, provided the conditions for entitlement are met.

Common regular holidays include, among others:

New Year’s Day;
Araw ng Kagitingan;
Maundy Thursday;
Good Friday;
Labor Day;
Independence Day;
National Heroes Day;
Bonifacio Day;
Christmas Day;
Rizal Day;
Eid’l Fitr;
Eid’l Adha.

The exact annual list may vary depending on presidential proclamations, especially for holidays with movable dates.

For 13th month pay purposes, the relevant question is not merely whether the date is a regular holiday. The more important question is:

Was the employee entitled to be paid for that regular holiday?

V. Regular Holiday Pay Rule

The basic rule is:

If the employee does not work on a regular holiday but is entitled to holiday pay, the employee receives 100% of the basic wage for that day.

If the employee works on a regular holiday, the employee is generally entitled to 200% of the basic wage for the first eight hours, subject to applicable labor rules.

For 13th month pay purposes, however, the focus is usually on the basic wage component, not the premium portion.

Example:

An employee’s daily rate is ₱1,000.

If the employee does not work on a regular holiday but is entitled to holiday pay:

Holiday pay: ₱1,000
Amount generally included in 13th month pay base: ₱1,000

If the employee works on a regular holiday:

Total regular holiday pay may be ₱2,000 for the first eight hours
For 13th month pay purposes, the safer general treatment is to include only the basic salary component, unless company policy, contract, or practice treats the full amount as part of basic salary.

VI. Absence Before a Regular Holiday

The most important rule in this topic concerns an employee’s absence immediately before the regular holiday.

Under Philippine holiday pay rules, an employee may lose entitlement to holiday pay if the employee is absent without pay on the working day immediately preceding the regular holiday.

The general rule is:

An employee who is absent without pay on the workday immediately preceding a regular holiday is not entitled to holiday pay, unless the absence is with pay or otherwise authorized under applicable rules, policy, or practice.

This rule is significant because the 13th month pay computation includes only salary actually earned.

Therefore:

If the employee is entitled to holiday pay, include it in the 13th month pay base.
If the employee is not entitled to holiday pay, exclude it because no salary was earned for that holiday.

VII. Absence on the Regular Holiday Itself

An employee who does not report to work on a regular holiday is not necessarily considered “absent” in the same way as on an ordinary working day. A regular holiday is generally a paid non-working day for covered employees, provided the employee satisfies the entitlement conditions.

Thus, where an employee does not work on a regular holiday but is otherwise entitled to holiday pay, that day is treated as paid.

For 13th month pay purposes:

Paid regular holiday = included in basic salary earned.

Example:

Employee’s daily rate: ₱800 Regular holiday: June 12 Employee did not work on June 12 Employee worked or was on paid leave on the immediately preceding workday

Result:

Employee is entitled to ₱800 holiday pay.
The ₱800 forms part of basic salary earned.
It is included in the 13th month pay computation.

VIII. Absence Immediately Before the Regular Holiday

Example:

Employee’s daily rate: ₱800 Regular holiday: June 12 Employee was absent without pay on June 11 Employee did not work on June 12

Result:

Employee may not be entitled to holiday pay for June 12.
No ₱800 holiday pay is earned.
Nothing for June 12 is included in the 13th month pay base.

This is not because regular holiday pay is excluded from 13th month pay as a category. Rather, it is because the employee did not earn holiday pay under the holiday pay rules.

IX. Absence After the Regular Holiday

An absence after the regular holiday generally does not affect entitlement to holiday pay for the holiday, unless a specific rule, policy, or abuse issue applies.

The usual holiday pay rule focuses on the workday immediately preceding the regular holiday.

Example:

Employee’s daily rate: ₱900 Regular holiday: August 21, assuming it is treated as applicable under the relevant holiday category Employee worked on August 20 Employee was absent without pay on August 22

Result:

Absence after the holiday generally does not defeat holiday pay entitlement.
Holiday pay for the regular holiday is included in basic salary earned.
The unpaid absence on August 22 is excluded from the 13th month pay base.

X. Paid Leave Before the Regular Holiday

If the employee was on paid leave on the workday immediately preceding the regular holiday, the employee is generally considered paid for that day.

Example:

Employee’s daily rate: ₱1,000 Regular holiday: December 25 Employee was on approved vacation leave with pay on December 24 Employee did not work on December 25

Result:

Employee is generally entitled to regular holiday pay.
The December 25 holiday pay is included in the 13th month pay computation.

The rationale is simple: the employee was not absent without pay before the holiday. The preceding day was paid.

XI. Approved Leave Without Pay Before the Regular Holiday

A more sensitive case is approved leave without pay immediately before the regular holiday.

Even if the leave is approved, if it is without pay, the employee may not be entitled to holiday pay under the general rule, unless company policy, contract, collective bargaining agreement, or established practice provides a more favorable benefit.

Example:

Employee’s daily rate: ₱1,000 Regular holiday: May 1 Employee was on approved leave without pay on April 30 Employee did not work on May 1

Possible result:

Under the general statutory rule, the employee may not be entitled to holiday pay because the preceding workday was unpaid.
If the company has a more favorable policy granting holiday pay despite approved leave without pay, then the employee earns holiday pay.
If holiday pay is granted, it is included in the 13th month pay base.

XII. Monthly-Paid Employees

Monthly-paid employees are commonly paid a fixed monthly salary regardless of the number of regular holidays in a month. Their monthly salary is usually understood to already include pay for regular holidays, unless the employment arrangement clearly provides otherwise.

For monthly-paid employees, regular holiday absences are less visible in payroll because the salary is usually not reduced for a regular holiday.

Example:

Monthly salary: ₱30,000 Employee is paid the full ₱30,000 for the month despite regular holidays

For 13th month pay purposes:

The full paid monthly salary is generally included in the annual basic salary earned.
There is no need to separately add holiday pay if it is already included in the monthly salary.
There should also be no deduction merely because the employee did not work on a regular holiday, provided the employee is entitled to holiday pay.

However, if the employee had unpaid absences that lawfully reduced the monthly salary, then the actual salary earned for that month may be lower, and the reduced amount becomes the basis for the 13th month computation.

XIII. Daily-Paid Employees

For daily-paid employees, regular holiday pay is usually more explicit. Payroll may separately show:

ordinary days worked;
paid regular holidays not worked;
regular holidays worked;
unpaid absences.

For daily-paid employees, the rule is straightforward:

Include paid regular holidays in the 13th month pay base. Exclude unpaid regular holidays.

Example:

Daily rate: ₱700 Employee worked 250 ordinary paid days Employee was paid for 10 regular holidays Employee had 5 unpaid absences

Basic salary earned:

Ordinary paid days: 250 × ₱700 = ₱175,000
Paid regular holidays: 10 × ₱700 = ₱7,000
Total basic salary earned: ₱182,000

13th month pay:

₱182,000 ÷ 12 = ₱15,166.67

XIV. Regular Holiday Worked: What Portion Is Included?

When an employee works on a regular holiday, the employee may receive more than the normal daily wage. For example, a regular holiday worked may be paid at 200% for the first eight hours.

The question is whether the full 200% is included in 13th month pay.

The conservative and common approach is:

Include the basic wage component, but exclude the premium portion, unless the employer’s policy, contract, CBA, or established practice treats the premium as part of basic salary.

Example:

Daily rate: ₱1,000 Employee works on a regular holiday Holiday work pay for first eight hours: ₱2,000

Breakdown:

Basic wage component: ₱1,000
Holiday premium component: ₱1,000

For 13th month pay:

Generally included: ₱1,000
Generally excluded: ₱1,000 premium

Reason: 13th month pay is based on basic salary, not premiums.

XV. Regular Holiday Not Worked but Paid

If the employee does not work on the regular holiday but is entitled to holiday pay, the holiday pay is not a premium. It is the employee’s statutory paid wage for that day.

Therefore, it is generally part of basic salary earned.

Example:

Daily rate: ₱1,200 Regular holiday not worked but paid: ₱1,200

For 13th month pay:

Include ₱1,200 in the basic salary earned.

XVI. Special Non-Working Days Distinguished

Regular holidays must be distinguished from special non-working days.

For a regular holiday, the rule is commonly summarized as:

No work, with pay, subject to entitlement conditions.

For a special non-working day, the general rule is:

No work, no pay, unless there is a favorable company policy, contract, CBA, or practice.

This distinction affects 13th month pay.

If an employee does not work on a special non-working day and is not paid, then nothing is included in the 13th month pay base for that day.

If the employer voluntarily pays the employee for the special non-working day and treats it as basic salary, it may be included depending on the nature of the payment and company practice.

XVII. Service Incentive Leave and Regular Holidays

Service incentive leave is a separate statutory benefit. When an employee uses paid leave immediately before a regular holiday, this may preserve holiday pay entitlement because the employee was paid on the preceding workday.

Example:

Employee uses paid service incentive leave on April 8 April 9 is a regular holiday Employee does not work on April 9

Result:

The employee was paid on the day immediately preceding the holiday.
The employee is generally entitled to holiday pay.
The holiday pay is included in the 13th month pay base.

However, the cash conversion of unused service incentive leave at year-end is generally not part of basic salary for 13th month pay purposes, unless treated otherwise by policy, agreement, or practice.

XVIII. Maternity Leave, Paternity Leave, Solo Parent Leave, and Other Statutory Leaves

Paid statutory leaves may affect holiday pay and 13th month pay depending on whether the employee receives salary from the employer, benefits from the government, or both.

A practical distinction should be made:

Employer-paid salary during leave may be part of basic salary earned.
Government-paid benefits are generally not salary paid by the employer.
Salary differential paid by the employer may be considered compensation, depending on the applicable benefit and payroll treatment.

For regular holiday entitlement, if the employee is on a paid leave arrangement, the employee is generally not considered absent without pay.

For 13th month pay, only amounts that qualify as basic salary earned from the employer should be included.

XIX. Suspension, Floating Status, and Leave Without Pay

If an employee is on unpaid suspension, floating status without pay, or leave without pay during a period that includes a regular holiday, the holiday pay consequence depends on whether the employee is considered entitled to holiday pay.

If no salary is paid for the relevant period and the employee is not entitled to holiday pay, then there is no amount to include in the 13th month pay computation.

Example:

Employee is on unpaid disciplinary suspension from December 20 to December 26. December 25 is a regular holiday.

Possible result:

No holiday pay may be due.
No amount for December 25 is included in the 13th month pay base.

However, if the suspension is later found illegal and backwages are awarded, the computation may change because backwages can include salary and benefits that the employee should have earned.

XX. Resigned, Terminated, or Separated Employees

Employees who resign or are separated before the end of the year are still entitled to proportionate 13th month pay, based on the basic salary they actually earned during the year before separation.

Formula:

Pro-rated 13th Month Pay = Basic Salary Earned from January 1 to Separation Date ÷ 12

Regular holiday pay earned before separation is included.

Example:

Daily rate: ₱900 Employee resigns effective June 30 Basic salary earned from January to June, including paid regular holidays: ₱135,000

13th month pay:

₱135,000 ÷ 12 = ₱11,250

If a regular holiday occurred before separation and the employee was entitled to holiday pay, that holiday pay is included in the ₱135,000.

If the employee was not entitled to holiday pay because of an unpaid absence before the holiday, it is excluded.

XXI. Employees Paid by Results, Task, or Piece Rate

Workers paid by results may still be entitled to 13th month pay if they are considered employees and are not validly excluded under applicable law.

For holiday pay, entitlement may depend on the nature of employment and applicable rules. If the employee receives regular holiday pay as part of legally required or contractually granted compensation, such pay may be included in the 13th month pay base if it constitutes basic salary earned.

Piece-rate payroll systems should carefully distinguish between:

actual production earnings;
statutory holiday pay;
premiums;
allowances;
incentives.

Only amounts properly classified as basic salary earned should enter the 13th month pay base.

XXII. Managerial Employees

The statutory 13th month pay benefit generally applies to rank-and-file employees. Managerial employees may be excluded from the statutory coverage of 13th month pay.

However, managerial employees may still receive equivalent or superior benefits under:

employment contract;
company policy;
collective or executive compensation plan;
established employer practice.

If a managerial employee receives a contractual 13th month pay or guaranteed bonus, the computation depends on the governing agreement or policy.

For regular holiday absences, the same conceptual question remains: whether the holiday was paid as part of salary. But the statutory basis may differ if the employee is outside rank-and-file coverage.

XXIII. Minimum Wage Earners

Minimum wage earners are entitled to statutory labor standards benefits, including holiday pay and 13th month pay, unless specifically excluded by law.

For minimum wage earners, the inclusion of paid regular holidays in the 13th month pay base is especially important because excluding paid holidays may reduce the benefit below the legally required amount.

Example:

Daily minimum wage: ₱610 Paid regular holidays during year: 12 Holiday pay earned: ₱7,320

The ₱7,320 forms part of basic salary earned and should be counted in the annual base for 13th month pay.

XXIV. The “Basic Salary Earned” Principle

The cleanest way to resolve most issues is to apply this test:

Step 1: Was the regular holiday paid?

If yes, proceed to Step 2. If no, exclude it.

Step 2: Was the payment basic salary or a premium/extra?

If basic salary, include it. If premium, generally exclude it.

Step 3: Does a company policy, contract, CBA, or established practice provide a more favorable rule?

If yes, follow the more favorable rule. If no, apply the statutory minimum.

This approach avoids the common mistake of saying that “holiday pay is always excluded” or “holiday pay is always included.” The better rule is more precise:

Regular holiday pay is included in 13th month pay if it forms part of the employee’s basic salary earned. Holiday premiums are generally excluded. Unpaid holidays are excluded.

XXV. Common Scenarios

Scenario 1: Employee worked before the regular holiday and did not work on the holiday

Employee worked on the preceding workday and did not work on the regular holiday.

Result:

Employee is entitled to holiday pay.
Holiday pay is included in 13th month pay base.

Scenario 2: Employee was absent without pay before the regular holiday

Employee was absent without pay on the working day immediately before the holiday.

Result:

Employee may not be entitled to holiday pay.
No holiday pay is earned.
Nothing is included in the 13th month pay base for that holiday.

Scenario 3: Employee was on paid leave before the regular holiday

Employee used approved paid leave before the holiday.

Result:

Employee is generally entitled to holiday pay.
Holiday pay is included in the 13th month pay base.

Scenario 4: Employee was on leave without pay before the regular holiday

Employee was on approved leave without pay before the holiday.

Result:

Employee may not be entitled to holiday pay under the minimum rule.
If company policy grants holiday pay anyway, include it.
If no holiday pay is granted, exclude it.

Scenario 5: Employee worked on the regular holiday

Employee worked on the regular holiday and received 200%.

Result:

Basic wage component is included.
Holiday premium is generally excluded unless treated as basic salary by policy, agreement, or practice.

Scenario 6: Monthly-paid employee received full monthly salary

Employee did not work on regular holidays but received full monthly pay.

Result:

Full paid monthly salary is included in annual basic salary earned.
No separate deduction for regular holidays should be made if already paid.

Scenario 7: Daily-paid employee was not paid for the holiday

Employee was daily-paid and did not receive holiday pay because of an unpaid absence before the holiday.

Result:

No holiday pay earned.
No inclusion in 13th month pay base.

XXVI. Sample Computations

A. Daily-Paid Employee With Paid Regular Holidays

Daily rate: ₱800 Ordinary paid days: 250 Paid regular holidays: 12 Unpaid absences: 8

Computation:

Ordinary salary: 250 × ₱800 = ₱200,000

Regular holiday pay: 12 × ₱800 = ₱9,600

Total basic salary earned: ₱200,000 + ₱9,600 = ₱209,600

13th month pay: ₱209,600 ÷ 12 = ₱17,466.67

B. Daily-Paid Employee With Some Unpaid Holiday Absences

Daily rate: ₱800 Ordinary paid days: 250 Regular holidays in year: 12 Paid regular holidays: 9 Unpaid regular holidays due to disqualification: 3

Computation:

Ordinary salary: 250 × ₱800 = ₱200,000

Paid regular holidays: 9 × ₱800 = ₱7,200

Unpaid regular holidays: 3 × ₱0 = ₱0

Total basic salary earned: ₱207,200

13th month pay: ₱207,200 ÷ 12 = ₱17,266.67

C. Monthly-Paid Employee With Unpaid Absences

Monthly salary: ₱30,000 Months fully paid: 11 One month salary reduced by unpaid absences: ₱27,000

Total basic salary earned:

₱30,000 × 11 = ₱330,000 ₱330,000 + ₱27,000 = ₱357,000

13th month pay:

₱357,000 ÷ 12 = ₱29,750

If regular holidays were already included in the paid monthly salary, they are already part of the computation.

D. Regular Holiday Worked

Daily rate: ₱1,000 Employee worked on one regular holiday and received ₱2,000

For 13th month pay:

Basic salary component: ₱1,000 Holiday premium component: ₱1,000

Generally included in 13th month base: ₱1,000 Generally excluded: ₱1,000 premium

XXVII. Payroll Treatment

Employers should clearly classify payroll items. Poor classification often causes disputes.

Recommended payroll categories:

Basic salary;
Regular holiday pay not worked;
Regular holiday worked basic component;
Regular holiday premium;
Overtime;
Night shift differential;
Rest day premium;
Allowances;
Leave pay;
Unpaid absences.

For 13th month computation, the payroll system should be able to identify which items are part of basic salary earned.

A common compliance error is excluding all holiday-related payments from the 13th month base. This may be wrong where the payment is regular holiday pay equivalent to the basic wage.

Another common error is including all holiday work premiums. This may overstate the statutory 13th month pay unless the employer has adopted that treatment as a company benefit.

XXVIII. Effect of Company Policy, CBA, or Practice

Philippine labor law sets minimum standards. Employers may provide more favorable benefits.

A company may validly adopt a policy that includes:

all holiday pay;
holiday premiums;
paid leaves;
allowances;
commissions;
bonuses;

in the 13th month pay base.

Once a benefit has ripened into company practice, the employer may not freely withdraw it if withdrawal would violate the principle of non-diminution of benefits.

Thus, even if the statutory minimum excludes a certain premium, the employer may be bound to include it if it has consistently, deliberately, and voluntarily done so over time.

XXIX. Non-Diminution of Benefits

The principle of non-diminution of benefits means that benefits voluntarily and consistently granted by the employer may become demandable if employees have come to rely on them.

In the context of 13th month pay and regular holiday absences, this may arise where the employer has consistently computed 13th month pay based on:

gross pay rather than basic salary;
all holiday premiums;
all paid and unpaid holidays;
fixed monthly rate without deductions;
a more generous formula than the statutory minimum.

If this practice is established, the employer should be cautious before changing the formula.

XXX. Burden of Payroll Accuracy

Employers are expected to maintain accurate payroll records. If a dispute arises, payroll documents become crucial.

Important records include:

daily time records;
leave applications;
payroll registers;
payslips;
holiday pay computations;
company policies;
employment contracts;
CBA provisions, if any;
prior 13th month pay computations.

Where records are unclear, disputes may be resolved based on available evidence, labor standards rules, and the constitutional policy of protection to labor.

XXXI. Practical Rule for Employers

For each regular holiday, employers should ask:

Was the employee covered by holiday pay rules?
Was the immediately preceding workday paid?
Was the employee on paid leave, unpaid leave, suspension, or unauthorized absence?
Was holiday pay actually earned?
Was the amount basic pay or premium pay?
Does a more favorable company policy apply?
Has there been a consistent practice of including similar amounts?

Then classify the amount accordingly.

XXXII. Practical Rule for Employees

Employees reviewing their 13th month pay should check:

total basic salary paid for the year;
whether paid regular holidays were included;
whether unpaid absences were deducted;
whether holiday premiums were excluded;
whether the employer’s formula matches past practice;
whether company policy or CBA gives a better benefit;
whether the final amount equals at least one-twelfth of basic salary earned.

If a paid regular holiday was excluded from the computation, the employee may have a valid concern.

If the holiday was unpaid because the employee was absent without pay on the preceding workday, exclusion is generally consistent with the basic salary earned rule.

XXXIII. Common Misconceptions

Misconception 1: “Holiday pay is never included in 13th month pay.”

Incorrect. Paid regular holiday pay may form part of basic salary earned and may be included.

Misconception 2: “All holiday payments are included.”

Not necessarily. Holiday premiums are generally not part of basic salary unless company policy, contract, CBA, or practice provides otherwise.

Misconception 3: “A monthly-paid employee’s 13th month pay should be reduced for holidays not worked.”

Incorrect if the employee received full monthly salary and was entitled to holiday pay. Those holidays are already paid.

Misconception 4: “Approved leave without pay before a holiday always preserves holiday pay.”

Not necessarily. The key issue is whether the preceding workday was paid. Approved leave without pay may still result in loss of holiday pay, unless a more favorable rule applies.

Misconception 5: “Absence after the holiday removes holiday pay.”

Usually incorrect. The relevant day is generally the workday immediately preceding the regular holiday.

XXXIV. Recommended Legal Position

The legally sound position is:

For purposes of 13th month pay, regular holiday pay should be included when it represents basic salary earned by the employee. If the employee is not entitled to holiday pay because of an unpaid absence immediately before the regular holiday, then the unpaid holiday is excluded. If the employee works on a regular holiday, only the basic salary component is generally included, while the premium component is excluded unless a more favorable policy, agreement, or practice applies.

This position harmonizes three principles:

13th month pay is based on basic salary earned;
regular holiday pay is a statutory wage benefit when earned;
premium pay is generally excluded from basic salary unless integrated by policy or practice.

XXXV. Conclusion

Regular holiday absences affect 13th month pay only through the concept of basic salary earned.

Where the employee is legally entitled to be paid for the regular holiday, that holiday pay is generally included in the 13th month pay computation because it forms part of the employee’s paid basic compensation.

Where the employee is not entitled to holiday pay, usually because of an unpaid absence on the workday immediately preceding the regular holiday, no salary is earned for that holiday and no amount is included in the 13th month pay base.

The correct computation depends on the interaction of labor standards law, payroll classification, employee status, actual payment, company policy, CBA provisions, and established practice. The safest formula remains:

13th Month Pay = Total Basic Salary Actually Earned During the Calendar Year ÷ 12

For regular holidays, the decisive question is always:

Was the regular holiday paid as basic salary?

If yes, include it. If no, exclude it.