I. Introduction

The 13th month pay and service incentive leave (SIL) are two of the most fundamental monetary benefits guaranteed to rank-and-file employees under Philippine labor law. Non-payment or underpayment of these benefits remains one of the most common labor violations in the country.

Employees who have been denied these benefits — whether due to employer refusal, erroneous computation, resignation, termination, or company closure — have a clear legal right to recover them, together with damages and attorney’s fees in appropriate cases.

This article exhaustively discusses the nature of both benefits, who are entitled, how they are computed, the prescriptive period, and the complete step-by-step procedure for claiming unpaid amounts, including the latest DOLE and NLRC rules as of December 2025.

II. The 13th Month Pay

Legal Basis

Presidential Decree No. 851 (1975), as amended by Memorandum Order No. 28 (1986) which removed the salary ceiling
Revised Guidelines on the Implementation of the 13th Month Pay Law (DOLE Handbook on Workers’ Statutory Monetary Benefits, latest edition)
DOLE Explanatory Bulletin No. 2017-01 on Pro-rating of 13th Month Pay

Who Are Entitled (Coverage)

All rank-and-file employees in the private sector, regardless of the following:

Nature of employment (regular, probationary, casual, project, seasonal)
Designation or title
Method or amount of payment of wages
Total amount of earnings (no more salary ceiling)

as long as they have worked for at least one (1) month during the calendar year.

Who Are Excluded

Government employees (including GOCCs with original charters) – covered by separate laws/DBM circulars
Domestic helpers/kasambahay (RA 10361)
Persons in the personal service of another (e.g., family drivers paid by the family)
Workers paid purely by commission, boundary, or task basis with no guaranteed minimum wage
Employees of retail and service establishments regularly employing not more than 10 workers (exempted by DOLE when certain conditions are met)
Employers of household helpers and persons in personal service
Field personnel who regularly perform their duties away from the principal office and whose time and performance are unsupervised

Managerial employees are NOT entitled to the statutory 13th month pay (although most companies voluntarily grant equivalent bonuses).

Computation Formula

13th Month Pay = Total Basic Salary earned in the calendar year ÷ 12

“Total Basic Salary” includes:

Basic monthly salary
Regular holiday pay
Regular special day pay
Paid regular non-working days under compressed workweek
Maternity/paternity/solo parent leave pay
Regular night shift differential (if part of basic pay)

“Total Basic Salary” EXCLUDES:

Overtime pay
Premium pay
Cash equivalent of unused vacation/sick leave
Monetized value of unused service incentive leave
Allowances (rice, transportation, housing, COLA if not integrated into basic pay)
Bonuses that are not guaranteed or are discretionary
13th month pay of previous years
Commissions (unless the employee has a guaranteed wage + commission)

When It Must Be Paid

Not later than December 24 of every year.

An employer may pay in two (2) installments:

First half: on or before May 15
Second half: on or before December 24

Pro-rated 13th Month Pay

Employees who did not work the entire year are entitled to pro-rated 13th month pay according to this DOLE formula:

Period Worked	Multiplier
January to December (full year)	1
Resigned/terminated in December	1
Resigned/terminated in November	11/12
Resigned/terminated in October	10/12
Resigned/terminated in September	9/12
And so on…
Worked only one month	1/12

Suspended employees are entitled to pro-rated 13th month pay based on actual days considered as paid (preventive suspension exceeding 30 days is unpaid).

Tax Status

The mandatory 13th month pay and other benefits (14th month, Christmas bonus, productivity bonus, etc.) not exceeding P90,000.00 per year are exempt from income tax (RA 10963 – TRAIN Law). Excess is taxable.

III. Service Incentive Leave (SIL)

Legal Basis

Article 95 of the Labor Code, as amended by RA 10706 (Seafarers) and DOLE Advisory No. 02-04

Entitlement

Every employee who has rendered at least one (1) year of service is entitled to five (5) days service incentive leave with full pay every year.

“One year of service” means service within twelve (12) months, whether continuous or broken, reckoned from the date the employee started working.

Coverage and Exclusions

Same exclusions as holiday pay and 13th month pay:

Managerial employees
Field personnel
Domestic helpers
Persons in personal service of another
Workers paid purely by results
Government employees
Retail/service establishments with ≤10 workers (when exempted)

Usage and Commutation to Cash

The employee may use the leave for vacation or sick purposes.
If unused at the end of the year, it may be converted to cash.
Upon resignation or separation, the unused SIL must be paid in cash (proportional if less than one year from last anniversary).
It is commutable even if the employee does not resign, provided the CBA or company policy allows.

Is SIL Cumulative?

Jurisprudence is settled: Service incentive leave is NOT cumulative unless the CBA, company policy, or contract expressly provides for accumulation (Imasen Philippine Manufacturing Corp. v. Alcon, G.R. No. 194884, October 22, 2014, reiterated in 2023-2024 cases).

However, many CBAs provide for conversion of accumulated SIL upon separation.

IV. Prescription Period

Both 13th month pay and SIL are money claims arising from employer-employee relations.

Under Article 291 (now Article 306 of the Labor Code, as renumbered by RA 10151), money claims prescribe in three (3) years from the time the cause of action accrued.

Accrual Dates

13th month pay: December 24 of the year it becomes due
Unused SIL: end of the calendar year or upon separation from employment (whichever comes first for the cash conversion)

Thus, an employee has until December 24, 2028 to claim the unpaid 13th month pay for 2025.

The three-year period is interrupted by the filing of a Request for Assistance (SEnA) or complaint with DOLE/NLRC, or by written extrajudicial demand acknowledged by the employer.

V. Step-by-Step Procedure for Claiming Unpaid Benefits

Step 1: Written Demand to Employer (Highly Recommended)

Send a formal letter demanding payment within 7–10 days, with computation. Keep proof of sending (registered mail, LBC, email with read receipt, or notarized if possible). This serves as evidence of extrajudicial demand and may interrupt prescription.

Step 2: File Request for Assistance under Single Entry Approach (SEnA) – MANDATORY

File at the DOLE Regional/Provincial/Field Office having jurisdiction over the workplace (free of charge).
Forms: SEAD Form (downloadable from DOLE website).
Attach: employment contract, payslips, ID, demand letter, computation.
Within 30 calendar days, mandatory conciliation conference will be held.
If settlement is reached → Settlement Agreement (executory, enforceable like an NLRC decision).
If no settlement → DOLE issues Certificate of No Settlement, and refers the case to NLRC for compulsory arbitration within 5 days.

SEnA is mandatory for all money claims including 13th month and SIL (DOLE Department Order No. 151-16 and DOLE D.O. 174-17).

Step 3: File Formal Complaint at NLRC (if SEnA fails)

Venue: NLRC Regional Arbitration Branch where the workplace is located or where complainant resides (at complainant’s option).
Filing fee: none (labor cases are non-litigious).
Required forms: Verified Complaint (with Certificate to File Action from SEnA or proof of compliance).
Attachments: same documents as in SEnA + Referral from DOLE.
Labor Arbiter will conduct mandatory conference within 30 days, then position papers if no settlement.
Decision within 30 days after submission for decision (no extension).

Execution of Judgment

If the employee wins, the Labor Arbiter’s decision becomes final and executory after 10 calendar days if no appeal. Writ of execution follows automatically.

Alternative Remedy: Small Money Claims (up to P400,000 as of 2025)

If the total claim (including all monetary awards) does not exceed P400,000, the case may be filed under the 30-day Small Money Claims Adjudication procedure (NLRC En Banc Resolution No. 07-19). Only one hearing, decision within 30 days, no appeal (except petition for certiorari under Rule 65).

VI. Remedies Available to the Employee

Full payment of unpaid/underpaid 13th month pay or SIL
Legal interest of 6% per annum from date of finality until fully paid (Nacar v. Gallery Frames, G.R. No. 189871, August 13, 2013 – still the rule in 2025)
Moral and exemplary damages if bad faith is proven
Attorney’s fees of 10% of amounts awarded (Article 111, Labor Code)
Criminal liability for violation of PD 851 (imprisonment of up to 3 years or fine, although rarely prosecuted)

VII. Special Situations

Resigned or Terminated Employee

Still entitled to pro-rated 13th month pay and cash conversion of unused SIL. Claim must be included in final pay; if not, file within 3 years.

Company Closed, Bankrupt, or No Longer Operating

File claim with NLRC; the monetary award becomes a lien on company assets. If insolvency proceedings, file as preferred credit under Article 110 of the Labor Code (worker’s claims rank first).

Employee Already Received “Christmas Bonus”

If the bonus is labeled discretionary or gratuitous, the employee can still claim the mandatory 13th month pay (separate and distinct). Only if the employer issued a written statement that the bonus is in lieu of or includes the 13th month pay can it be offset.

Commission-Based Employees

If the employee receives a guaranteed minimum wage + commission, the guaranteed wage is included in the 13th month computation. Pure commission earners are exempt.

VIII. Conclusion

The right to 13th month pay and service incentive leave is non-waivable and constitutionally protected. Employers who deliberately refuse payment commit a serious violation that exposes them to monetary awards, damages, and possible criminal prosecution.

Employees are strongly advised to act within the three-year prescriptive period and to immediately avail of the free, speedy SEnA procedure. With proper documentation and computation, recovery of these benefits is almost always successful.

For the latest forms and regional office contacts, visit the DOLE website (www.dole.gov.ph) or the nearest DOLE field office.