13ᵗʰ-Month Pay & Employee Theft in the Philippines

A practitioner’s full-length guide to the statutory benefit, the limits of wage withholding, and the interplay with criminal or administrative action for theft or qualified theft

1. Overview

The Philippines is one of only a handful of jurisdictions that mandates a 13ᵗʰ-month pay for rank-and-file employees. Because the benefit is statutory—not merely contractual—questions often arise when the employee is later found (or suspected) to have stolen company funds or property:

May the employer withhold or forfeit the 13ᵗʰ-month pay to offset its loss?
Does a pending criminal case affect the obligation?
What if the employee has already been dismissed for serious misconduct or loss of trust and confidence—are they still entitled to a pro-rated share?

This article answers those questions by weaving together relevant statutes, administrative issuances, and Supreme Court jurisprudence, and by flagging practical pitfalls for HR practitioners and counsel.

2. Legal Basis of 13ᵗʰ-Month Pay

Instrument	Key Points
Presidential Decree (PD) 851 (1975)	– Required all rank-and-file employees in the private sector who have worked at least one month to receive an additional month’s pay each year. – Originally set at ½ month salary, later raised to ¹⁄₁₂ of “basic salary” earned within the calendar year.
Implementing Rules & Regs (Ministry Order no. 6-P, 1975; and Labor Advisories)**	– Clarified that “basic salary” excludes allowances and monetary value of benefits not integrated into basic pay. – Employers must pay on or before 24 December (some split 50% in mid-December).
TRAIN Law (RA 10963, 2017)	– 13ᵗʰ-month pay (together with other bonuses) is income-tax-exempt up to ₱90,000 per annum (from the previous ₱82,000 ceiling).

Coverage: Aside from government-owned and controlled corporations already following the Salary Standardization Law, almost every private employer—including those employing only one person—is covered unless a legitimate exemption certificate is issued by DOLE (distressed employer, seasonal nature, etc.). Non-waivability: Because PD 851 is a social-justice measure, the benefit cannot be waived by either party; any waiver is void for being against public policy.

3. Employee Theft & Dishonesty: Dual‐Track Liability

3.1 Labor-Law Aspect

Grounds for dismissal – Theft, qualified theft, estafa, or any act of dishonesty is “serious misconduct” or “loss of trust and confidence” (Labor Code art. 297[282] [b-c]).
Due-process requirement – Twin-notice rule: (1) written charge; (2) opportunity to be heard; (3) decision notice. Not following this exposes the company to nominal damages even if the dismissal is substantively valid (Agabon doctrine).

3.2 Criminal Aspect

Theft (RPC art. 308–309) or Qualified Theft (art. 310) if the offender is a domestic servant or by abuse of confidence.
Estafa (art. 315) if the property is received in trust.
Conviction requires proof beyond reasonable doubt; labor dismissal only substantial evidence. Thus an acquittal in criminal court does not automatically mean reinstatement.

4. Can the Employer Withhold or Deduct 13ᵗʰ-Month Pay to Cover the Loss?

4.1 Statutory Restrictions on Wage Deductions

The Labor Code art. 113 & art. 116 forbid deductions from wages except:

Employee-authorized in writing and for the worker’s benefit;
Employer-facilitated insurance or union dues;
Court or administrative orders (e.g., writ of garnishment, DOLE/NLRC award);
Other deductions allowed by law (e.g., SSS, Pag-IBIG, PhilHealth).

Unilateral set-off for shortages, breakages or losses—even if caused by the employee’s fault—is illegal unless the employee distinctly authorizes the deduction after the amount has been duly determined in a proper hearing (see art. 114 on liability for damages).

Practical upshot: An employer who simply withholds the 13ᵗʰ-month pay to “compensate” for an alleged theft exposes itself to an illegal deduction complaint (money claim) and, in many cases, wage-order penalties.

4.2 Key Supreme Court Decisions

Case	G.R. No.	Doctrine
Songco v. NLRC	50999, 23 Aug 1984	Even if the employee was dismissed for fraud, statutory benefits earned up to dismissal (incl. 13ᵗʰ-month pay) must be paid.
Rubberworld (Phils.) v. NLRC	122991, 26 Jan 1999	Employer may recover losses only after proving liability in a separate civil action or after judgment; cannot offset wages or benefits.
Del Monte Philippines v. Velasco	153477, 15 Jun 2005	13ᵗʰ-month pay is part of “ordinary earnings” that accrue even during the period covered by an illegal dismissal award.
Philippine National Construction Corp. v. NLRC	101586, 30 Oct 1992	A shortage proven through audit did not justify forfeiture of the worker’s accrued wages; the firm must first obtain a court judgment for restitution.

(Citations are illustrative; consult the official SCRA/PhilReports for the full text.)

4.3 Effect of Pending Criminal Case

Presumption of innocence – Until a final conviction, the employer cannot treat the employee’s pay or benefits as a “trust fund” to satisfy restitution.
Payroll guidelines – Best practice is to:
1. Compute and set aside the amount of 13ᵗʰ-month pay or final pay;
2. Serve a notice of suspension of release subject to the outcome of the criminal or civil case and with the employee’s written conformity; or
3. Release the amount but simultaneously file a civil action for recovery and seek attachment.

Failure to adopt any of the above may be construed as an unjustified withholding and expose the employer to damages and attorney’s fees.

5. Entitlement When the Employee Is Dismissed

Scenario	Entitlement
Dismissed for just cause (theft proven)	Pro-rated 13ᵗʰ-month pay up to actual last day of service. Cannot be forfeited.
Dismissed but later acquitted in criminal case	Employee may seek reinstatement or backwages (which include 13ᵗʰ-month) if the dismissal is found illegal.
Dismissed for serious misconduct but employer failed procedural due process**	Pro-rated 13ᵗʰ-month still due; plus nominal damages of ₱30,000 (Jaka doctrine, adjusted in later cases).
Resigns voluntarily	Pro-rated 13ᵗʰ-month pay must be released within 30 days from effective resignation date (Labor Advisory 06-20 on final pay).

6. Employer Remedies After Proving Theft

Civil Action for Damages – May be combined with the criminal information (art. 100, RPC; Rule 111, Rules of Crim. Proc.) or pursued separately.
Restitution Through Garnishment – Upon judgment, employer may levy on the employee’s property, including bank accounts or future wages.
Agreement to Off-Set – If the employee voluntarily signs a quitclaim specifying the exact amount owed and authorizes offsetting, the practice is generally upheld, provided the quitclaim is voluntary, fully‐informed, and supported by consideration (PCL Shipping v. NLRC).

7. HR & Compliance Checklist

Step	Action
1	Internal audit to quantify loss; secure CCTV, inventory logs, or witness affidavits.
2	Twin-notice hearing; place employee under preventive suspension (max 30 days, with pay) if continued presence is a threat.
3	Compute pro-rated 13ᵗʰ-month pay up to suspension/dismissal date; prepare to release on or before 24 December (or upon exit), unless the employee voluntarily agrees in writing to its temporary escrow.
4	File criminal complaint &/or civil action for recovery.
5	Update DOLE records (annual 13ᵗʰ-Month Pay Compliance Report, submitted by 15 Jan of the following year).
6	Keep accurate payroll & deduction documents; secure authorizations where deductions are lawful.

8. Penalties for Non-Payment or Unlawful Withholding

Labor Code art. 302 (303) – Unfair labor practice fines and possible imprisonment (rarely imposed).
Wage Order violations – Administrative fines of ₱25,000 per incidence plus possible closure orders.
Moral & exemplary damages – Imposed by courts where employer acts in bad faith or with malice.

9. Frequently Asked Practical Questions

Question	Short Answer
Can we “apply” the 13ᵗʰ-month pay against a cash shortage pending audit?	No, unless the employee expressly authorizes after the shortage is fully established and quantified; safer to withhold release with consent or after a court order.
If the employee disappears and cannot be reached, may we hold the benefit indefinitely?	You must nonetheless report and book the liability. After 3 years the employee’s claim may prescribe, but the obligation to remit to DOLE’s nearest field office may arise.
Does the tax-exempt ceiling of ₱90k cover 13ᵗʰ-month withheld for escrow?	Yes; the tax treatment attaches to the benefit in the year it is earned, not when released.

10. Conclusion

The 13ᵗʰ-month pay is a creature of social legislation aimed at protecting labor. A charge of employee theft—no matter how grave—does not automatically defeat the worker’s entitlement to the benefit already earned. Employers frustrated by loss should:

Strictly observe due process in dismissal;
Avoid unilateral deductions or offsets unless squarely within art. 113 exceptions;
Pursue separate civil or criminal actions for restitution; and
Implement robust preventive controls to minimize future risk.

Handled correctly, an employer can recover its losses without incurring liability for non-payment of a statutory benefit—and employees receive both the protection and accountability that Philippine labor-and criminal-law frameworks intend.

—End of Article—