Yes. Unpaid absences, tardiness, undertime, and leave without pay can reduce your 13th month pay because the benefit is based on the basic salary you actually earned during the calendar year. However, the employer should not treat attendance deductions as a separate penalty against your 13th month pay or deduct the same amount twice.

The practical distinction is simple: if an absence or late arrival lawfully reduced your gross basic salary for a payroll period, it will normally reduce the annual basic salary used in computing your 13th month pay. If you were on paid leave, used a company grace period, or suffered no salary deduction, there should generally be no reduction on that account.

How 13th Month Pay Is Computed in the Philippines

The minimum 13th month pay is:

Total basic salary earned during the calendar year ÷ 12

For example, an employee who earned a total basic salary of ₱240,000 from January to December should receive at least:

₱240,000 ÷ 12 = ₱20,000

The legal basis is Presidential Decree No. 851, as modified by Memorandum Order No. 28, series of 1986. Memorandum Order No. 28 removed the original salary ceiling and requires employers to pay their rank-and-file employees no later than December 24. Current Department of Labor and Employment guidelines continue to use one-twelfth of the employee’s total basic salary earned during the year. (Lawphil)

The word earned is important. The computation is not automatically equal to one full month of the employee’s current salary. It depends on the employee’s actual basic salary during the year, including changes caused by:

Unpaid absences;
Tardiness or undertime with salary deductions;
Leave without pay;
Hiring or separation partway through the year;
Salary increases or decreases during the year; and
Periods when no basic salary was earned.

Are Absences Deducted From 13th Month Pay?

Unpaid absences reduce the computation

An unpaid absence reduces the basic salary earned for the affected payroll period. Because the annual total becomes lower, the resulting 13th month pay also becomes lower.

Suppose an employee has a monthly basic salary of ₱20,000. The employee’s expected annual basic salary is:

₱20,000 × 12 = ₱240,000

During the year, the employee incurred ₱4,800 in lawful salary deductions for unpaid absences and leave without pay. The basic salary actually earned would be:

₱240,000 − ₱4,800 = ₱235,200

The minimum 13th month pay would therefore be:

₱235,200 ÷ 12 = ₱19,600

The employer is not technically imposing a ₱400 “absence deduction” on the 13th month pay. Instead, the employee earned ₱4,800 less in basic salary during the year, and one-twelfth of that reduction is reflected in the final computation.

Paid leave generally does not cause the same reduction

When an employee uses approved leave with pay and continues receiving the full basic salary for the payroll period, there is normally no unpaid-time deduction to reduce the annual basic salary.

The latest DOLE 13th month pay guidelines illustrate this distinction by showing an employee receiving the full monthly salary during a period involving leave with pay, while leave without pay reduces the salary included in the annual computation. (BWC Dole)

This may apply to properly paid leave benefits such as:

Vacation leave with pay;
Sick leave with pay;
Service incentive leave with pay;
Solo parent leave with pay;
Paid leave provided by company policy or a collective bargaining agreement; and
Other approved paid leave that does not reduce the employee’s basic salary.

The payroll treatment still matters. Employees should check whether the payslip shows a reduction in gross basic salary, rather than relying only on the leave label used by the company.

Is Tardiness Deducted From 13th Month Pay?

Tardiness can reduce 13th month pay when the employer deducts the salary corresponding to the minutes or hours not worked.

For example, assume that an employee’s basic salary for one payroll period should have been ₱10,000. Because of accumulated tardiness and undertime, the employee earned only ₱9,700 in gross basic salary for that period. The amount included in the annual 13th month pay base would generally be ₱9,700, not ₱10,000.

Tardiness will ordinarily have no effect when:

The company provides a grace period and the employee remains within it;
The employee is under an approved flexible work arrangement;
The employee makes up the lost time under a valid company policy;
The tardiness is recorded but no salary is deducted; or
The employer voluntarily treats the employee as having earned the full basic salary.

An employer may enforce a reasonable attendance policy and discipline habitual tardiness, subject to the company rules and due process. That is separate from the mathematical computation of 13th month pay.

Attendance Deductions Should Not Be Counted Twice

One common payroll error is double deduction.

Suppose an employee’s payroll already shows that unpaid absences reduced the annual gross basic salary from ₱240,000 to ₱235,200. The employer should compute:

₱235,200 ÷ 12 = ₱19,600

The employer should not compute ₱19,600 and then deduct another amount for the same absences or tardiness. The effect of the attendance issue has already been included in the lower annual basic salary.

Employees should question a computation that appears to contain both:

Reduced monthly basic salaries because of absences or lateness; and
A separate “absence deduction,” “late deduction,” or “attendance penalty” taken directly from the resulting 13th month pay.

What Should and Should Not Reduce the Computation?

Payroll item or situation	Usual effect on 13th month pay
Unpaid absence	Reduces the basic salary earned
Leave without pay	Reduces the basic salary earned
Tardiness with salary deduction	Reduces the basic salary earned
Undertime with salary deduction	Reduces the basic salary earned
Approved leave with full pay	Normally no reduction
Tardiness within a paid grace period	No reduction
Flexible schedule with no salary loss	No reduction
SSS, PhilHealth and Pag-IBIG contributions	Do not reduce basic salary earned
Withholding tax	Does not reduce basic salary earned
Employee loan or cash-advance deduction	Does not reduce basic salary earned
Overtime pay	Ordinarily excluded from the base
Night shift differential	Ordinarily excluded from the base
Rest-day or holiday premium pay	Ordinarily excluded from the base
Allowances not integrated into basic salary	Ordinarily excluded
Benefits consistently treated as part of basic salary	May have to be included

The computation should be based on gross basic salary earned, not the employee’s take-home or net pay.

SSS, PhilHealth, Pag-IBIG, withholding tax, company loans and similar payroll deductions are taken after the employee earns the salary. They do not turn the employee’s gross basic salary into a lower 13th month pay base.

By contrast, unpaid time means the employee did not earn basic salary for the corresponding period.

What Is Included in “Basic Salary”?

The implementing rules define basic salary as remuneration or earnings paid for services rendered. As a general rule, the following are not included unless an employment agreement, collective bargaining agreement, company policy or established practice treats them as part of basic salary:

Overtime pay;
Night shift differential;
Premium pay;
Cost-of-living allowances;
Profit-sharing payments;
Cash equivalent of unused leave credits;
Non-integrated transportation, meal or communication allowances; and
Other fringe benefits that are separate from regular basic salary.

The Supreme Court has repeatedly explained that amounts outside basic salary are ordinarily excluded. In Boie-Takeda Chemicals, Inc. v. De la Serna, the Court discussed the statutory exclusions and emphasized that the character of the compensation—not simply the name placed on it by payroll—determines whether it belongs in the base. (Supreme Court E-Library)

Commissions require special attention. A discretionary incentive or productivity-based commission may be excluded, while a commission that forms an integral part of the employee’s regular wage structure may be included. In Philippine Duplicators, Inc. v. NLRC, the Supreme Court treated the sales commissions involved in that case as part of the employees’ wage or salary. (Lawphil)

Can an Employer Impose an Extra Attendance Penalty?

The employer may deduct pay corresponding to time that was genuinely not worked, subject to the employee’s schedule, contract, company policy and applicable wage rules. But an employer should not invent an additional monetary fine and simply take it from wages or 13th month pay.

Article 113 of the Labor Code restricts deductions from wages. The Supreme Court has ordered employers to return deductions involving unauthorized penalties, shortages and other amounts where the legal requirements for wage deductions were not satisfied. (Supreme Court E-Library)

A questionable deduction may include:

Charging more than the salary value of the time not worked;
Deducting one full hour for a few minutes of lateness without a valid rounding policy;
Deducting an attendance “fine” on top of the no-work deduction;
Taking alleged losses, shortages or damages from 13th month pay without proper basis;
Applying an attendance deduction twice; or
Using net take-home pay instead of gross basic salary earned.

An attendance policy may provide disciplinary consequences, but salary deductions must still comply with labor law.

How to Check Your Own 13th Month Pay

1. Collect your payroll records

Gather the following:

Payslips for the entire calendar year;
Employment contract;
Salary increase notices;
Daily time records or attendance reports;
Leave applications and approvals;
Company handbook or attendance policy;
Collective bargaining agreement, if applicable;
Payroll summary or year-to-date earnings report; and
The employer’s written 13th month pay computation.

2. Identify the gross basic salary for every payroll period

Do not use net pay. Start with the amount identified as basic salary before SSS, PhilHealth, Pag-IBIG, taxes, loans and other post-earnings deductions.

3. Confirm each unpaid-time deduction

Match deductions against attendance records. Check:

Date of absence or tardiness;
Number of unpaid minutes, hours or days;
Daily or hourly rate used;
Payroll divisor applied;
Whether the leave was paid or unpaid; and
Whether a grace period, flexible schedule or offsetting arrangement applied.

Different employers may use different lawful salary divisors depending on the employee’s workweek and whether the monthly rate covers rest days and holidays. The company should be able to explain the divisor and formula used.

4. Add the basic salary earned for the year

Add all gross basic salary amounts after valid unpaid-time adjustments, but before statutory contributions, tax, loans and similar deductions.

5. Divide the total by 12

The result is the statutory minimum, unless a contract, collective bargaining agreement, company policy or established practice provides a more favorable benefit.

Company Practice May Give Employees a Higher Benefit

The statutory formula is only the minimum.

An employer may have consistently included allowances, leave-related payments, premiums or other benefits in the 13th month pay computation. If the practice is deliberate, consistent and has continued long enough to become an established benefit, the employer may be prohibited from suddenly removing it under the Labor Code’s non-diminution principle.

In Sevilla Trading Company v. Semana, the Supreme Court ruled that the employer’s long-standing voluntary inclusion of non-basic benefits in its 13th month pay computation had ripened into a company practice that could not simply be withdrawn. (Supreme Court E-Library)

Employees should therefore compare the current computation not only with the statutory minimum but also with:

Previous years’ computations;
The employment contract;
The collective bargaining agreement;
Written company policies; and
Consistent payroll practice.

What to Do if Your 13th Month Pay Appears Too Low

Ask HR or payroll for a written breakdown. Request the total basic salary used, the months covered, and every adjustment applied.
Compare the breakdown with your payslips. Check for unpaid absences, tardiness, salary changes and periods of leave without pay.
Look for double deductions. Confirm that attendance deductions were not taken from monthly salary and again from the computed 13th month pay.
Submit a written payroll dispute. Identify the specific dates and amounts you believe were incorrectly deducted. Attach copies of payslips, attendance records and leave approvals.
Use the company grievance process or union procedure. A collective bargaining agreement may require the issue to pass through a grievance mechanism.
File a Request for Assistance under DOLE’s Single Entry Approach. A worker may file online through the DOLE Assistance for Request Management System or personally at a DOLE regional, provincial or field office. SEnA provides a 30-day mandatory conciliation-mediation process intended to settle labor disputes before they become full cases. (DOLE ARMS)

Claims for unpaid or underpaid 13th month pay are money claims arising from employment. Under Article 306 of the Labor Code, these claims generally must be filed within three years from the time the claim accrued. Delaying the complaint can prevent recovery of older amounts. (Supreme Court E-Library)

Special Situations

Employees who resigned or were terminated

A rank-and-file employee who worked for at least one month during the calendar year remains entitled to proportionate 13th month pay.

For example, an employee who earned ₱180,000 in basic salary before leaving the company should receive:

₱180,000 ÷ 12 = ₱15,000

DOLE guidelines generally require final pay to be released within 30 days from separation or termination unless a more favorable company policy, agreement or arrangement applies. Final pay normally includes the employee’s proportionate 13th month pay. (Department of Labor and Employment)

Employees hired during the year

An employee does not need to complete a full year. A covered rank-and-file employee who has worked for at least one month is entitled to a proportionate amount based on the basic salary actually earned. (BWC Dole)

Employees with a salary increase

Compute using the actual salary earned at each rate.

For example:

January to June: ₱20,000 × 6 = ₱120,000
July to December: ₱24,000 × 6 = ₱144,000
Total basic salary: ₱264,000
13th month pay: ₱264,000 ÷ 12 = ₱22,000

The employer should not simply use the December salary of ₱24,000 for all 12 months unless company policy provides a more favorable formula.

Foreign employees working in the Philippines

Nationality alone does not remove an employee from Philippine labor standards. A foreign employee working for a private employer in the Philippines may be covered when the employee is rank-and-file and an employer-employee relationship exists.

Many expatriates occupy managerial positions, however. Managerial employees are not covered by the statutory 13th month pay requirement under PD 851, although their employment contract or company policy may grant an equivalent or better benefit.

Government employees

PD 851 primarily governs rank-and-file employees in the private sector. National government employees, local government personnel and employees of government agencies generally receive year-end bonuses and cash gifts under separate government compensation rules rather than statutory 13th month pay under PD 851.

Frequently Asked Questions

Are all absences deducted from 13th month pay?

No. Unpaid absences ordinarily reduce the basic salary earned. Approved paid leave generally does not reduce the computation when the employee continues receiving the full basic salary.

Can my employer deduct every minute of tardiness?

An employer may generally withhold the salary corresponding to time not worked, subject to the employment contract, schedule and company policy. The employer should not impose an arbitrary additional fine or use an unexplained computation that exceeds the actual unpaid time.

Are SSS, PhilHealth and Pag-IBIG deductions subtracted before computing 13th month pay?

No. These contributions reduce take-home pay, not the gross basic salary already earned. The 13th month pay base should not be computed from net pay.

Does leave without pay reduce 13th month pay?

Yes. Leave without pay means no basic salary was earned for the affected period, so the annual total used in the computation becomes lower.

Does sick leave reduce 13th month pay?

Paid sick leave ordinarily causes no reduction when the employee receives the full basic salary. Unpaid sick leave can reduce the annual basic salary earned.

Can an employer deduct cash advances or loans from 13th month pay?

A valid and authorized loan or cash-advance deduction may affect the amount released to the employee, but it does not change the underlying gross 13th month pay computation. The payslip or clearance should separately show the gross benefit and the authorized deduction.

Is overtime included in 13th month pay?

Ordinarily, no. Overtime pay is not part of basic salary for the statutory computation unless an agreement, policy or established company practice treats it more favorably.

Can a company give less than the legal amount because of poor attendance?

The company may use the employee’s actual basic salary earned after valid unpaid-time adjustments. It cannot reduce the amount further as a discretionary punishment for poor attendance.

Is a Christmas bonus the same as 13th month pay?

Not necessarily. Statutory 13th month pay is legally required for covered employees. A Christmas bonus may be voluntary, contractual or based on company policy. Payroll records should clearly identify how the employer is complying with the statutory obligation.

When must 13th month pay be released?

Covered employers must pay it no later than December 24. An employer may release part of it earlier, provided the employee receives at least the full required amount by the deadline. (Department of Labor and Employment)

Key Takeaways

Unpaid absences, leave without pay, tardiness and undertime can reduce 13th month pay when they reduce the employee’s gross basic salary.
Paid leave or lateness that causes no salary deduction should generally have no effect.
The formula is total basic salary earned during the calendar year divided by 12.
Compute from gross basic salary, not take-home pay after SSS, PhilHealth, Pag-IBIG, tax or loan deductions.
The same absence or tardiness should not be deducted twice.
Overtime, premiums, night differential and non-integrated allowances are ordinarily excluded unless a more favorable agreement or established company practice applies.
Employees should obtain the payroll breakdown, compare it with attendance records and raise unexplained deductions in writing.
Underpaid 13th month pay may be brought through DOLE’s SEnA process, subject to the three-year period for employment money claims.