A company’s financial losses do not allow it to unilaterally cancel, withhold, or postpone the statutory 13th-month pay of covered employees. In the Philippines, 13th-month pay is a legal obligation—not a discretionary reward tied to company profits. A private employer must generally pay it on or before December 24, even if the business had a bad year, lost customers, or experienced serious cash-flow problems. (Lawphil)

The practical questions are whether the worker is legally covered, how much is due, and what remedy is available if the employer still refuses to pay. Business losses may justify cost-cutting, retrenchment, or even closure when legal requirements are met, but they do not automatically erase 13th-month pay that employees have already earned.

Can an Employer Refuse to Pay 13th-Month Pay Because the Company Lost Money?

Generally, no.

Presidential Decree No. 851, commonly called the 13th-Month Pay Law, requires covered employers to pay 13th-month pay. Memorandum Order No. 28 later removed the old salary ceiling and required employers to pay all covered rank-and-file employees regardless of how high their basic salary is. (Lawphil)

The latest annual guidance issued by the Department of Labor and Employment, Labor Advisory No. 16, Series of 2025, expressly states that no request or application for exemption from payment—or for deferment of payment—will be allowed. The required amount must be paid by the statutory deadline. (BWC Dole)

This means an employer cannot legally announce:

“The company had a net loss, so there will be no 13th-month pay.”
“Payment will be moved to January or February when collections improve.”
“Only profitable branches will receive 13th-month pay.”
“Employees must waive their 13th-month pay to help the company survive.”

A genuine financial crisis may explain why the employer is struggling, but it does not by itself create a legal exemption.

Why some older sources mention an exemption for “distressed employers”

The original implementing rules issued in the 1970s contained a procedure under which financially distressed employers could seek prior authorization for an exemption. That historical rule is why some old articles, company manuals, and online summaries still say that business losses may excuse payment.

However, the Supreme Court explained in Dentech Manufacturing Corporation v. NLRC, G.R. No. 81477, April 19, 1989 that an employer could never exempt itself merely by claiming financial distress. The Court also noted that Presidential Decree No. 1364 had directed the labor department to stop accepting applications for exemption. Dentech’s unsupported claim that it was in bad financial condition was therefore insufficient. (Lawphil)

Current DOLE advisories remove any practical doubt: employers may not apply for exemption or deferment of the annual 13th-month pay obligation.

Who Is Entitled to 13th-Month Pay?

The benefit generally applies to rank-and-file employees in the private sector who have worked for at least one month during the calendar year.

Coverage does not depend solely on the employee’s job title. What matters is the employee’s actual authority and duties.

Worker or arrangement	General rule
Regular employee	Covered if rank-and-file
Probationary employee	Covered
Project or fixed-term employee	Covered while an employer-employee relationship exists
Seasonal or casual employee	Covered
Part-time employee	Covered
Daily-paid or piece-rate employee	Generally covered
Employee who resigned or was terminated	Entitled to proportionate 13th-month pay
Supervisor	Often covered unless the person is legally a managerial employee
Managerial employee	Not automatically covered by P.D. No. 851, but may be covered by a contract, CBA, policy, or company practice
Genuine independent contractor	Not covered because there is no employer-employee relationship
Government employee	Governed by separate laws and government compensation rules
Pure-commission, boundary, or task-basis worker	Requires closer review under the implementing guidelines and the actual employment arrangement

The law covers eligible workers regardless of whether their wages are paid monthly, daily, weekly, by piece, or through another lawful method. An employer cannot avoid payment simply by calling a worker “contractual,” “freelance,” or “consultant” when the actual relationship shows that the company controls how, when, and where the person works. (ChanRobles)

Kasambahays are also entitled

Although the older 1987 guidelines excluded household helpers, the later Domestic Workers Act or Republic Act No. 10361 of 2013 expressly granted kasambahays the right to 13th-month pay. A household employer’s financial difficulties therefore do not automatically cancel a kasambahay’s entitlement. (Dole Car)

How Much 13th-Month Pay Should an Employee Receive?

The minimum amount is:

Total basic salary actually earned during the calendar year ÷ 12

The Supreme Court has repeatedly applied this one-twelfth formula. It is based on the employee’s total basic salary earned during the relevant calendar year—not automatically on the employee’s salary in December. (Lawphil)

Example: Full year of employment

An employee received a basic salary of ₱30,000 every month from January to December.

Total basic salary: ₱360,000
₱360,000 ÷ 12
13th-month pay: ₱30,000

The result does not become lower merely because the employer reported a business loss.

Example: Employee resigned in September

An employee earned a basic salary of ₱28,000 per month from January through September.

Total basic salary earned: ₱252,000
₱252,000 ÷ 12
Proportionate 13th-month pay: ₱21,000

Resignation, dismissal, redundancy, or the expiration of a contract does not ordinarily forfeit the portion already earned.

Example: Salary increased during the year

Suppose an employee earned:

₱25,000 per month from January to June: ₱150,000
₱30,000 per month from July to December: ₱180,000

Total basic salary earned is ₱330,000.

₱330,000 ÷ 12
13th-month pay: ₱27,500

What is normally excluded from the computation?

Unless treated as part of basic salary by an employment agreement, collective bargaining agreement, company policy, or established practice, the following are generally excluded:

Overtime pay
Night-shift differential
Holiday and premium pay
Cash equivalent of unused leave
Allowances not integrated into basic salary
Reimbursements
Discretionary bonuses

Unpaid absences and leave without pay may reduce the total basic salary actually earned, but company losses do not. (ChanRobles)

When Must the Company Pay It?

The statutory deadline is on or before December 24 of each year.

An employer may pay half before the opening of the regular school year and the balance on or before December 24. A more favorable payment arrangement may also arise from a collective bargaining agreement or established company policy. The employer cannot simply move the unpaid balance into the following year because it lacks cash. (ChanRobles)

An employee who leaves before December may demand the proportionate amount upon the end of the employment relationship. Under DOLE Labor Advisory No. 06-20, final pay—which normally includes proportionate 13th-month pay—should generally be released within 30 days from separation, unless a more favorable company policy or agreement applies. (Department of Labor and Employment)

13th-Month Pay Is Different From a Christmas Bonus

This distinction is important when a company says it cannot afford “bonuses.”

13th-month pay is mandatory. A Christmas bonus is usually discretionary unless it has become enforceable through:

An employment contract
A collective bargaining agreement
A written company policy
A consistent and deliberate company practice that employees have come to rely on

A company experiencing losses may sometimes discontinue a purely discretionary Christmas party, gift, profit-sharing payment, or special bonus. It cannot use the same reasoning to cancel the statutory 13th-month pay. (Dole Car)

A payment described as a “Christmas bonus” also does not automatically satisfy the 13th-month pay obligation. The payroll records, company policy, purpose of the payment, and amount must be examined. Where the employer has paid less than the legally required amount, the employee may claim the difference.

What to Do if the Company Withholds 13th-Month Pay

1. Confirm that you are covered

Check whether you are a rank-and-file employee and whether you worked for at least one month during the calendar year.

Do not rely solely on your title. A “manager,” “team leader,” or “consultant” may still be covered if the person does not actually formulate management policies, hire or dismiss employees, or effectively recommend managerial decisions.

2. Calculate the amount independently

Add all basic salary actually earned from January through December—or up to your last day of employment—and divide the result by 12.

Ask payroll to provide a written computation if:

The amount is missing
Only part was paid
Unexplained deductions were made
The computation used only the latest monthly salary
The company excluded months that you actually worked

3. Send a written request to HR or management

A calm written request often resolves payroll mistakes before they become formal disputes.

The request should state:

Your full name and position
Employment dates
Basic salary or salary history
Your own computation
The amount received, if any
The unpaid balance
The date payment became due
A request for payment and a written payroll breakdown

Keep proof that the company received the request. Email, a signed receiving copy, a ticket from an HR portal, or a registered letter is useful.

Avoid relying only on verbal promises such as “next payroll” or “when clients pay.” A written record is important if the three-year filing period later becomes an issue.

4. Preserve supporting documents

Document	Why it helps
Employment contract or job offer	Shows salary, position, employer, and agreed benefits
Payslips and payroll summaries	Establish basic salary earned
Bank statements	Show actual payments and missing amounts
Daily time records or attendance records	Help establish months and days worked
BIR Form 2316	May confirm annual compensation and benefits reported
Company memo about withholding payment	Shows the employer’s stated reason
Emails or messages with HR	Prove demand, admissions, and promised payment dates
Resignation, termination, or redundancy notice	Establishes the end of employment
Final-pay computation or clearance	Shows what the employer included or excluded
Company ID and government-issued ID	Help establish employment and identity

A notarized demand letter is generally unnecessary for the initial internal request or SEnA filing. Formal proceedings may later require verified pleadings, sworn statements, or affidavits.

5. File a Request for Assistance under SEnA

An employee may file a Request for Assistance, or RFA, through the Single Entry Approach known as SEnA.

Filing may be done:

Online through the DOLE Assistance for Request Management System
At a DOLE Regional, Provincial, District, or Field Office
At an NLRC Regional Arbitration Branch
At an appropriate National Conciliation and Mediation Board office

SEnA uses a 30-calendar-day conciliation-mediation process. A SEnA officer contacts the parties, clarifies the claim, reviews available records, and tries to achieve a voluntary settlement without full litigation. (DOLE ARMS)

The RFA should identify the correct employer. Use the company’s registered corporate or business name, office address, and known representatives—not merely the store name, brand, or supervisor’s nickname.

6. Proceed with a formal labor complaint if SEnA fails

If no settlement is reached, the SEnA officer may issue a referral to the proper adjudicating or enforcement office.

Depending on the amount, the relief requested, the number of workers involved, and whether illegal dismissal or reinstatement is also claimed, the matter may proceed before:

The appropriate DOLE Regional Office
A Labor Arbiter of the National Labor Relations Commission
Another office with jurisdiction over the particular employment arrangement

Employees may personally file NLRC complaints, and NLRC public guidance states that no filing fee is required. Costs may still arise for photocopying, transportation, notarization of affidavits, or representation. (NLRC)

Conciliation may result in payment within days or weeks. A contested Labor Arbiter case commonly takes several months, while appeals and enforcement can take longer. The biggest practical bottlenecks are often incomplete payroll records, repeated nonappearance by the employer, use of the wrong corporate name, business closure, and difficulty locating company assets after a judgment.

7. Do not wait beyond the prescriptive period

Claims for unpaid 13th-month pay are generally money claims that must be filed within three years from the time the claim accrued under Article 306 of the Labor Code.

Each year’s unpaid 13th-month pay normally creates a separate claim. An employee should not assume that repeated promises, internal discussions, or an informal demand automatically preserve the claim indefinitely. (NLRC)

Common Business-Loss Scenarios

The employer pays only half and promises the rest next year

The unpaid half remains due. Unless the first half was paid earlier under a lawful split-payment arrangement, the complete statutory amount should be paid by December 24.

Record the partial payment and claim only the deficiency. On any receipt, consider writing that the amount was received as partial payment without waiver of the remaining balance.

The company closes before December

Employees remain entitled to proportionate 13th-month pay based on the basic salary earned before closure.

Serious business losses may affect whether separation pay is required in a valid closure or retrenchment under Article 298 of the Labor Code. That is a separate question. It does not ordinarily extinguish accrued salaries, proportionate 13th-month pay, or other benefits already earned. (Lawphil)

Management asks employees to sign a waiver

Do not sign a document stating that all benefits have been fully paid when the amount is incorrect.

Philippine labor tribunals examine whether a quitclaim was voluntary, supported by a reasonable settlement, and free from fraud or intimidation. A document imposed as a condition for receiving an amount that is already legally due may be challenged.

The company offers installments

An employee may voluntarily accept a written installment settlement, particularly during SEnA, when immediate full payment is realistically impossible. The agreement should clearly state:

The total admitted amount
Each installment amount
Exact payment dates
Payment method
What happens in case of default
That the claim is considered settled only after full payment

An installment agreement made after nonpayment is a settlement of an existing obligation. It does not mean that business losses originally gave the company a legal right to defer the payment.

The company is insolvent or has disappeared

The legal obligation may exist even when collection is difficult.

File promptly, identify the correct corporation or business owner, preserve proof of employment, and determine whether the company is under court-supervised rehabilitation, liquidation, or formal closure. Delaying until the employer has transferred or disposed of all assets can make enforcement considerably harder.

Corporate directors and officers are not automatically personally liable for every unpaid company obligation. Personal liability usually requires a specific legal basis, such as bad faith, fraud, gross negligence, or circumstances in which the law permits the corporate personality to be disregarded.

Foreign Employees and Filipinos Working Abroad

A foreign national employed in the Philippines by a private-sector employer is generally assessed under the same coverage rules. Nationality alone does not remove the right to 13th-month pay. The important questions are whether an employer-employee relationship exists and whether the worker is rank-and-file or managerial.

Many expatriates occupy genuine managerial positions and may therefore fall outside the statutory coverage of P.D. No. 851. Their employment contract, company handbook, assignment letter, or international compensation policy may nevertheless grant a contractual 13th-month payment.

For Filipinos working abroad for a foreign employer, Philippine 13th-month pay law does not automatically apply merely because the worker is Filipino. The employment contract, applicable Department of Migrant Workers rules, collective agreement, and law of the country of employment must be reviewed.

A worker currently abroad may use the online SEnA system where applicable. If a Philippine representative must sign or appear on the worker’s behalf, the receiving office may request a special power of attorney. The worker should confirm whether notarization, Philippine consular authentication, or an apostille is required before incurring authentication expenses.

Frequently Asked Questions

Can a company delay 13th-month pay until January because it has no cash?

No. The statutory deadline is on or before December 24. Lack of cash does not automatically authorize deferment. An employee may later accept a voluntary written settlement, but the unpaid amount was still legally due by the deadline.

Can a company pay less because its sales went down?

No. The minimum amount is based on the employee’s basic salary actually earned, not the company’s revenue, sales, or profits.

Am I entitled if I resigned before December?

Yes. A covered employee is entitled to proportionate 13th-month pay based on the total basic salary earned before resignation. It normally forms part of final pay.

Can the employer forfeit my 13th-month pay because I was dismissed for misconduct?

Dismissal does not ordinarily cancel the portion already earned. The employer may pursue a valid and properly proven claim for losses or damages through lawful means, but it cannot simply declare the statutory benefit forfeited.

Does a Christmas bonus replace 13th-month pay?

Not automatically. A discretionary bonus and statutory 13th-month pay are different benefits. Payroll records and company policies must show whether a payment was genuinely intended and legally sufficient as a 13th-month equivalent. Any deficiency remains payable.

Is overtime included in the computation?

Normally, no. Overtime, holiday premiums, night differential, and non-integrated allowances are generally excluded unless an agreement, policy, or established company practice treats them as part of basic salary.

Is 13th-month pay taxable?

Under Republic Act No. 10963 or the TRAIN Law, 13th-month pay and other covered benefits are excluded from taxable income up to a combined annual ceiling of ₱90,000. The excess may be taxable. (Lawphil)

Can I file even if I no longer work for the company?

Yes. Former employees may claim unpaid or deficient proportionate 13th-month pay. Filing should be made within the applicable three-year prescriptive period.

Can several employees file together?

Yes. A group of workers may file a SEnA Request for Assistance involving the same company and issue. Each employee should still prepare an individual computation because salaries, absences, employment dates, and prior payments may differ.

Can a foreign employee file a claim?

Yes, when the foreign employee worked under an employer-employee relationship in the Philippines and is otherwise covered. Immigration or work-permit issues may create separate concerns, but they do not automatically allow an employer to keep benefits already earned.

Key Takeaways

A private company generally cannot withhold or defer statutory 13th-month pay because of business losses.
Current DOLE guidance allows no application for exemption or deferment.
The minimum benefit is total basic salary actually earned during the calendar year divided by 12.
Resigned, dismissed, retrenched, and separated employees remain entitled to proportionate payment.
Business closure and separation-pay issues are legally separate from accrued 13th-month pay.
Employees should request a written computation, preserve payroll evidence, and file through SEnA if payment is refused.
Money claims should generally be filed within three years from accrual.