Are Probationary Employees Entitled to 13th-Month Pay in the Philippines?

Yes. In the private sector, probationary rank-and-file employees are entitled to 13th-month pay so long as they have worked at least one (1) month within the calendar year. This right exists regardless of probationary status and irrespective of how wages are paid (monthly, daily, piece-rate, or with commissions), subject to the rules below.


Legal Foundations

  • Presidential Decree No. 851 (13th-Month Pay Law) – mandates 13th-month pay for private-sector employees.

  • Memorandum Order No. 28 (1986) – removed the salary ceiling and clarified that all rank-and-file employees are covered, regardless of pay level.

  • Implementing Rules and Regulations (IRR) of PD 851 – detail computation, coverage, exclusions, and timing.

  • National Internal Revenue Code (as amended) – provides tax treatment; 13th-month pay and “other benefits” are tax-exempt up to ₱90,000 in a year under current rules.

  • Special statutes (for context):

    • RA 10361 (Kasambahay Law) requires a 13th-month pay for domestic workers.
    • Labor Code money-claims prescriptive period: 3 years.

Public-sector employees are covered by separate “year-end bonus/cash gift” rules, not PD 851.


Who Is Covered (Private Sector)

Covered:

  • Rank-and-file employees in the private sector, including probationary, project, seasonal, piece-rate, paid-by-results, and those with salary-plus-commission arrangements—provided they have earned basic salary for at least a month in the year.

Not covered (typical categories):

  • Managerial employees (as legally defined: primary duty is management, exercise of discretion/independent judgment, authority over hiring/firing, etc.).
  • Government employees (receive separate benefits).
  • Workers paid purely by commission or on a “boundary” system with no basic wage component (e.g., some commission-only agents, taxi boundary drivers). If there is a basic wage plus commissions, the basic wage counts; commissions do not.
  • Employers that were exempt under narrow, now-rare carve-outs (e.g., those already paying a legally recognized “13th-month equivalent”). These are uncommon today and closely construed.

Probationary status does not remove coverage. If you earned basic salary for at least a month, you are entitled—pro-rated if applicable.


Amount and Formula

Minimum benefit: not less than 1/12 of total basic salary earned within the calendar year.

Standard formula: [ \textbf{13th-Month Pay} = \frac{\text{Total Basic Salary Earned in the Calendar Year}}{12} ]

What counts as “basic salary” (generally included):

  • Contracted wage for work performed.
  • Paid regular days, paid rest days if part of basic pay scheme, and paid company-approved leave that is treated as salary (e.g., VL/SL if company policy treats them as wage continuity).

What is generally excluded from “basic salary”:

  • Commissions (variable sales-based amounts), overtime pay, premium pay, night shift differential, holiday pay (statutory add-ons), COLA, cash allowances, profit-sharing, and other monetary benefits not integrated into the basic wage.
  • SSS-funded benefits (e.g., maternity benefit) and similar amounts not treated as employer-paid basic salary.

Company policy or a CBA may be more generous (e.g., include certain items or pay higher than the minimum), but cannot go below the statutory floor.


Timing of Payment

  • Deadline: on or before December 24 of every year.
  • Installments: Many employers pay in two tranches (e.g., mid-year and December). Either way, the total due by Dec 24 must meet the statutory minimum.

Upon separation (resignation, end of probation, termination):

  • The employee is entitled to pro-rated 13th-month pay based on basic salary actually earned in the year up to the last day of work. This is typically released with final pay (commonly within 30 days from separation, per DOLE final-pay guidance).

Probationary Employees: Practical Scenarios

  1. Probationary for 6 months then regularized

    • Compute 13th-month on the entire year’s basic salary (probation + regular), divided by 12.
  2. Probationary did not pass and leaves after 4 months

    • Entitled to pro-rated 13th-month based on the 4 months’ basic salary earned.
  3. Hired mid-year on probation

    • Compute using actual basic salary earned from hiring date to year-end, ÷ 12.
  4. Salary plus commissions during probation

    • Include basic salary only; exclude commissions.
  5. On unpaid leave or no-work-no-pay days during probation

    • Those days reduce “basic salary earned,” and therefore lower the 13th-month figure.
  6. Maternity leave during the year

    • SSS maternity benefit is not basic salary; if the employer continues to pay any basic wage portions, those parts count; the SSS benefit does not.
  7. Piece-rate probationary workers

    • If the pay is treated as basic wage for outputs, they are covered; compute using total wage actually earned (excluding allowances and statutory premiums), ÷ 12.

Sample Computations

A) Full-Year Probationary → Regularized

  • Basic salary: ₱20,000/month
  • Worked Jan–Dec (no unpaid absences)
  • Total basic salary earned: ₱240,000
  • 13th-month: ₱240,000 ÷ 12 = ₱20,000

B) Did Not Pass Probation (4 Months Worked)

  • Basic salary: ₱18,000/month
  • Worked Aug–Nov only (no unpaid absences)
  • Total basic salary earned: ₱72,000
  • 13th-month (pro-rated): ₱72,000 ÷ 12 = ₱6,000

C) Salary + Commission

  • Basic salary: ₱16,000/month + average commissions ₱10,000/month
  • Worked Jan–Dec
  • Total basic salary earned: ₱192,000 (commissions excluded)
  • 13th-month: ₱192,000 ÷ 12 = ₱16,000

D) Unpaid Absences

  • Basic salary: ₱15,000/month
  • Unpaid absences reduced June pay by ₱3,000
  • Total basic salary earned (year): ₱15,000×12 − ₱3,000 = ₱177,000
  • 13th-month: ₱177,000 ÷ 12 = ₱14,750

Tax Treatment

  • Tax-exempt cap: 13th-month pay plus other benefits are income-tax-exempt up to ₱90,000 per year.
  • Excess over ₱90,000 is subject to withholding tax following BIR rules.

Employers should withhold taxes correctly in December recomputations to reflect the exemption and any excess.


“13th-Month Equivalent” and Company Bonuses

  • Some employers grant bonuses (e.g., Christmas bonus, profit-sharing, productivity incentives).
  • A benefit may be credited as a “13th-month equivalent” only if it is at least the statutory minimum and clearly meets DOLE criteria.
  • Important: If the employer’s bonus is contingent/discretionary, or less than the statutory 1/12 of basic salary earned, the employer must top up to meet the legal minimum.

Employer Compliance & Employee Remedies

  • Documentation: Employers should maintain payroll records showing basic salary earned and 13th-month computations.
  • Non-payment or underpayment: Employees may (a) raise the issue internally/through HR, (b) seek assistance from DOLE’s Single-Entry Approach (SEnA) desk for conciliation-mediation, or (c) file a labor standards complaint.
  • Back claims: Monetary claims (including unpaid 13th-month) generally prescribe after 3 years from when the cause of action accrued.

Frequently Asked Questions

Does a probationary employee need to complete 6 months to be entitled? No. Working at least one month in the calendar year suffices; the amount is pro-rated.

If I resign during probation, do I still get it? Yes, pro-rated up to your last day of work. It is usually released with your final pay.

Are managerial probationary employees covered? If you are truly managerial under the legal definition, you are excluded. Titles alone don’t decide—actual duties do.

Do allowances and commissions count? Generally no. The law looks at basic salary. Commissions and allowances are excluded, unless a specific company policy/CBA validly integrates them into basic pay (which is uncommon).

Can a company agree to “no 13th-month during probation”? No. Statutory benefits cannot be waived or reduced by company policy or contract.

When must my former employer pay the pro-rated amount? With your final pay—commonly within 30 days of separation.


Compliance Checklist for HR

  1. Identify coverage: All private-sector rank-and-file, including probationary.
  2. Aggregate “basic salary earned” for Jan 1–Dec 31 (or from date of hire).
  3. Exclude commissions, COLA, overtime, differentials, and non-integrated allowances.
  4. Compute: total basic salary ÷ 12.
  5. Schedule payment: in full on/before Dec 24 (or by final pay upon separation).
  6. Apply tax rules: observe ₱90,000 tax-exempt threshold for 13th-month + other benefits.
  7. Recordkeeping: keep payroll proofs and computation sheets.
  8. Handle separations: compute pro-rata and release with final pay.

Bottom Line

A probationary rank-and-file employee in the Philippine private sector who has worked for at least one month in the year is entitled to 13th-month pay. The benefit is pro-rated when service covers less than a year, computed strictly on basic salary earned, and must be paid not later than December 24 (or with final pay upon separation). Company policies may be more generous but cannot diminish these minimum standards.

Disclaimer: This content is not legal advice and may involve AI assistance. Information may be inaccurate.