Below is a consolidated legal-practice primer on 13ᵗʰ-month pay when an employee is dismissed for theft (or any other “just cause”) in the Philippines. Everything is grounded in current statutes, Department of Labor and Employment (DOLE) issuances, and Supreme Court doctrine up to 15 July 2025. Use it as a starting point for advice or policy drafting—but always confirm with the latest DOLE advisories and case law before taking action.
1. Statutory Foundations
| Instrument | Key Take-away | Current citation |
|---|---|---|
| Presidential Decree No. 851 (Dec 16 1975) | Mandates a 13ᵗʰ-month pay for all rank-and-file employees who have worked at least one (1) month within the calendar year. | PD 851, as amended |
| Implementing Rules & Regulations (IRR) of PD 851 | Defines “basic salary,” pro-rating, reporting, and exemptions. | Ministry Order No. 28-L (1976) and subsequent DOLE circulars |
| Labor Code of the Philippines – Art. 297 [282] | Lists just causes for dismissal (e.g., serious misconduct, fraud, theft). If dismissal is for a just cause, no separation pay is required. | P.D. 442, as amended |
| Labor Code – Art. 113 & 116 | Sets limits on wage deductions and prohibits withholding except under specific circumstances. | |
| DOLE Labor Advisory No. 06-20 (Final Pay) | Requires employers to release final pay—including proportionate 13ᵗʰ-month pay—within 30 calendar days from termination clearance. | DOLE-BWC Advisory, 2020 |
| BIR Rev. Regs. 10-2020 | Exempts the first PHP 90,000 of 13ᵗʰ-month pay/other benefits from income tax. |
2. Who Is Always Entitled?
- Rank-and-file employees—irrespective of employment status (regular, probationary, project, seasonal) so long as they have rendered ≥ 1 month of service between 1 January and 31 December.
- Managerial employees are not covered by PD 851, but many companies grant an equivalent benefit by policy or CBA; if so, it becomes demandable under non-diminution of benefits.
- Foreign nationals, drivers, household helpers, and gov’t employees remain outside the ambit of PD 851 unless a company policy/CBA says otherwise.
3. How the Benefit “Accrues”
| Event | Effect on 13ᵗʰ-Month Accrual |
|---|---|
| Daily/Hourly Work | Every day/hour worked adds to the year-to-date “basic salary” base on which the 1/12 multiplier is later applied. |
| Unpaid Absences, AWOL, strike days | These reduce the basic-salary base (they are not “worked” days). |
| Paid leaves (VL, SL, maternity, etc.) | Count as “worked” days for 13ᵗʰ-month purposes because the leave pay forms part of basic salary. |
| Suspension (no work, no pay) | No accrual during suspension days. |
4. Dismissal for Theft: What Changes and What Does NOT?
4.1 Just-Cause Termination ≠ Forfeiture of Earned Wages
Theft squarely falls under “serious misconduct,” “fraud,” and “commission of a crime against the employer” (Art. 297). Once just cause and due process are established, the employee loses:
- Job tenure
- Separation pay (unless a CBA grants a grace benefit)
- Future bonuses/benefits post-dismissal date
However, amounts already earned before the effective dismissal date remain demandable, including:
- Accrued salaries/wages up to last working day
- Pro-rated 13ᵗʰ-month pay for the portion of the calendar year already worked
- Accrued leave conversions, commission differentials, etc.
Why? Under Art. 103 (Time of Payment of Wages) and PD 851, the 13ᵗʰ-month pay is part of “wages.” Philippine jurisprudence treats earned wages as property which cannot be forfeited except under clear statutory authority, which PD 851 does not provide.
4.2 Possible Offsets/Deductions
An employer may deduct losses caused by the employee’s theft only if:
- There is written consent from the employee or a final court/administrative judgment ordering restitution (Art. 113).
- The deduction is quantified (specific peso amount).
- Deductions do not exceed 20% of the employee’s earnings per payroll period—unless it is the final pay, in which case the full payable amount may be withheld until the claim is resolved.
- The employer observes due process and bookkeeping requirements.
4.3 Clearance & Final Pay Timeline
- DOLE Advisory 06-20 requires the employer to release all monetary entitlements—including 13ᵗʰ-month pay—within 30 days from completion of clearance.
- If the employer is pursuing criminal charges or civil restitution, they may escrow the disputed amount—but must release any undisputed portion of 13ᵗʰ-month pay on time.
5. Leading Case Law
| Case | G.R. / Date | Principle Relevant to 13ᵗʰ-Month Pay |
|---|---|---|
| PLDT v. NLRC | G.R. L-23415, 29 Mar 1968 (pre-PD 851) | Even before PD 851, benefits already earned accrue to the employee and are not forfeited by dismissal. |
| Paguio v. Overseas Liner | G.R. L-29062, 15 Oct 1976 | Earned wages are property protected by due process; forfeiture requires clear legal basis. |
| Santos v. San Miguel | G.R. 240053, 08 Jun 2020 | Clarified that 13ᵗʰ-month pay is part of basic compensation and must be included in back-wage computation (a fortiori, it cannot be withheld if already earned). |
| Abbott Laboratories v. Alcaraz | G.R. 192571, 23 Apr 2013 | Restated dual-due-process rule; failure to observe due process triggers nominal damages even when dismissal is for just cause. |
| Wenphil Corp. v. NLRC | G.R. 80587, 08 Feb 1989 | Landmark on due-process penalties; helpful for computing nominal damages that may coexist with forfeiture disputes. |
No Supreme Court decision to date specifically allows an employer to withhold 13ᵗʰ-month pay because the dismissal ground is theft. Employers have succeeded only when they prove (a) actual monetary loss and (b) that the withheld amount is applied strictly as restitution after judgment.
6. Tax & Reporting Notes
- Tax-free ceiling: The first PHP 90,000.00 of combined 13ᵗʰ-month pay and other benefits per employee per year remains exempt (BIR Rev. Regs. 10-2020).
- Alphalist reporting: Employers must report amount actually paid; if the employee is dismissed mid-year, only the pro-rated amount is reported.
- Withheld benefit later paid (e.g., after a court ruling) is reported in the year of payment, not the year of accrual.
7. Employer Compliance Checklist
Confirm completion of procedural due process (notice-answer-hearing-decision).
Compute pro-rated 13ᵗʰ-month pay up to date of effectivity of dismissal.
Determine any proven monetary loss:
- If not yet adjudged, pay the 13ᵗʰ-month pay and sue separately (or escrow).
- If adjudged, apply offset via authorized deduction rules.
Release final pay within 30 days of clearance; issue BIR Form 2316 reflecting partial-year income.
Keep vouchers & affidavits: For future DOLE inspection, keep a signed payroll computation and release receipt.
8. Employee Remedies
- Money Claim: File a complaint with the National Labor Relations Commission (NLRC) within three (3) years from accrual to recover withheld amounts plus legal interest.
- Illegal Deduction: If employer deducted without legal basis, claim refund and 10% attorney’s fees.
- Nominal Damages: Even if dismissal is valid, employee may recover PHP 30,000 (standard) for due-process breach (Abbott formula).
- Criminal Counter-charge: An employer’s baseless theft accusation can give rise to perjury, malicious prosecution, or libel.
9. Practical Illustrations
Example 1 – Valid Dismissal, No Proven Loss
Fact: María worked Jan 1 – Jun 30, 2025. On Jul 1 she was dismissed for pilferage; company lost no money. Computation: Basic salary Jan–Jun = PHP 240,000. 13ᵗʰ-month = 240,000 ÷ 12 = PHP 20,000. Action: Release ₱20k with final pay by Jul 31. No separation pay.
Example 2 – Valid Dismissal, Proven Loss Greater than Benefit
Fact: Ben stole inventory worth PHP 60,000. Earned 13ᵗʰ-month equivalent is ₱18,000. Action: Employer may withhold the ₱18k and still sue Ben for the ₱42k balance once a court judgment is obtained. If no judgment yet, the ₱18k must be paid or escrowed.
10. Key Take-aways
- 13ᵗʰ-month pay “vests” as you earn it; dismissal does not erase that fact.
- Only separation pay disappears when dismissal is for a just cause like theft.
- Forfeiture of already-earned 13ᵗʰ-month pay requires a lawful ground for deduction (court order or written employee consent).
- Employers should document losses and follow statutory deduction rules; Employees should claim the benefit through the NLRC if withheld.
Disclaimer
This article is for informational purposes only and not a substitute for individualized legal advice. Statutes, revenue regulations, and DOLE issuances are periodically amended; always consult the latest texts or a Philippine labor-law specialist for specific cases.