Entitlement to 13th-Month Pay Upon Resignation in the Philippines

This article lays out—clearly and completely—how 13th-month pay works when an employee resigns in the Philippines: who’s entitled, what counts in the computation, timing of release, taxes, edge cases, and practical tips for both employees and employers. It’s written for the private sector and reflects prevailing DOLE rules, long-standing practice, and jurisprudential principles.

1) Legal foundation (quick primer)

Presidential Decree No. 851 (1975) created the 13th-month pay and its Implementing Rules and Regulations (IRR) define coverage, exemptions, and the computation (1/12 of basic salary earned within the calendar year).
Subsequent DOLE issuances and practice clarified timing, coverage of non-traditional pay schemes, and what counts as “basic salary.”
TRAIN Law (RA 10963) set the current tax-exempt cap for 13th-month and other benefits.

Bottom line: 13th-month pay is a statutory benefit for rank-and-file employees, computed on a calendar-year basis (Jan 1–Dec 31), and resigning employees get a prorated share based on actual basic salary earned for that year.

2) Who is entitled when resigning?

Entitled (private sector):

All rank-and-file employees who have earned at least one (1) month of basic salary during the calendar year—including probationary, fixed-term, casual, project-based, and piece-rate workers (so long as they are rank-and-file).
Employees who resign at any time in the year (January to December) receive prorated 13th-month pay covering basic salary actually earned from January 1 up to the date of resignation.

Not legally required for:

Managerial employees (those with the power to hire, transfer, suspend, lay off, recall, discharge, assign or discipline employees, or to effectively recommend such actions). Many companies voluntarily extend 13th-month to managers via policy/CBA—if so, that rule controls.
Domestic helpers and those in the personal service of another (outside the Labor Code’s standard private-sector employment scope).
Workers paid purely on commission, boundary, or task basis without a fixed or guaranteed basic wage.
- If there is a basic wage plus commission, the basic wage portion is the basis for 13th-month pay.
- Piece-rate workers (paid per unit but under employer control/supervision) are covered; their “basic salary” is their piece-rate earnings that function as wages.

Special note on “already receiving its equivalent”: If an employer grants a bonus or benefit at least equal to 1/12 of the employee’s basic annual earnings and it is expressly in lieu of 13th-month pay, the legal requirement may be deemed satisfied. Ambiguity is construed in favor of the employee.

3) What exactly is the computation?

Core formula (calendar-year basis):

13th-Month Pay = (Total Basic Salary Earned within the Calendar Year) ÷ 12

For a resigning employee, you compute using the basic salary actually earned from January 1 up to the resignation date (not the entire year), then divide by 12.

“Basic salary” includes:

The contracted base pay for work actually done.
Paid regular leaves (e.g., vacation leave with pay) because these are part of normal wage.
Piece-rate earnings that are the worker’s wage for output (not “bonus”).

“Basic salary” typically excludes:

Overtime pay, premium pay (rest days/holidays), night-shift differential.
Allowances (e.g., COLA, transport, meal, clothing), unless a policy or contract integrates them into the basic wage.
Cash equivalents of unused benefits (e.g., leave conversions), separation pay, or any pure bonus not constituting wages.
SSS/PhilHealth/Pag-IBIG benefits (e.g., maternity benefit paid by SSS) because those are not wages; months on unpaid leave or paid via SSS benefit rather than employer payroll generally reduce the “basic salary earned” figure.

Proration mechanics (examples):

Monthly-paid employee resigns on Aug 15
- Basic monthly salary: ₱20,000
- Actual basic salary received Jan–Jul = ₱140,000
- Pro-rata Aug (half month) = ~₱10,000
- Total basic salary earned = ₱150,000
- 13th-month pay = ₱150,000 ÷ 12 = ₱12,500
With unpaid absences
- Deduct the unpaid days from monthly basic to get actual “basic salary earned,” then divide the year-to-date total by 12.
Basic + commission
- Compute only on basic. Commissions don’t count unless they are contractually treated as part of basic wage (rare).

4) Timing of payment upon resignation

The prorated 13th-month pay accrues as you earn basic salary and becomes due upon separation as part of final pay.
Final pay (including prorated 13th-month) should typically be released within 30 calendar days from the employee’s separation date, unless a company policy or CBA provides an earlier timeline.

Employers may use a standard clearance process, but clearance cannot forfeit a statutory benefit. Lawful, authorized deductions (e.g., clearly documented cash advances, unreturned property per a signed undertaking) may be offset—as long as they’re valid and not used to evade payment.

5) Taxes and statutory deductions

Tax treatment: 13th-month pay (together with “other benefits” like productivity incentives and Christmas bonus) is income-tax-exempt up to ₱90,000 per year under the TRAIN Law. Any amount above the ₱90,000 cap is subject to withholding tax.
Government contributions/loan deductions: SSS/PhilHealth/Pag-IBIG do not require contribution deductions from 13th-month pay itself (they’re computed on regular wages). However, authorized loan repayments (Pag-IBIG/SSS salary loans) may be deducted if you’ve signed up for payroll deduction.

6) Resignation vs. other separations

Termination for just or authorized cause: The employee is still entitled to prorated 13th-month pay for basic salary earned up to the separation date. (This is separate from any separation pay, which depends on cause and tenure.)
Retirement: Same principle—prorated 13th-month plus any retirement benefits under law/CBA/company plan.
End of fixed-term/project: Prorated 13th-month applies to the actual period worked within the calendar year, not the entire project duration if it straddles years.

7) Edge cases & FAQs

Q: I resigned in March after being hired in February. I worked only 6 weeks—am I entitled? A: Yes, if you’re rank-and-file and earned at least one month of basic salary in the calendar year, you get a prorated amount.

Q: I’m a probationary employee who resigned—do I get it? A: Yes, probationary is still rank-and-file. You get a prorated 13th-month based on basic salary earned that year.

Q: I didn’t render the full 30-day notice. Can my 13th-month be withheld? A: The statutory entitlement cannot be forfeited. However, if you signed a clear agreement on salary in lieu of notice or there are lawful deductions (e.g., unreturned property), the employer may offset documented amounts consistent with law/policy.

Q: I was on maternity leave for two months before resigning. How does that affect the computation? A: Maternity benefits paid by SSS are not “basic salary.” Those months don’t add to your basic wage earned. Your 13th-month is computed on the actual employer-paid basic pay you received that year.

Q: I’m on a basic-plus-commission scheme. Are commissions included? A: No. The 13th-month is computed on basic salary only, unless your contract explicitly integrates commissions into basic wage (uncommon).

Q: Piece-rate worker here—am I covered? A: Yes, if you’re rank-and-file. Use your piece-rate earnings (as wages) during the year to determine the total “basic salary,” then divide by 12.

Q: Our company gives managers a 13th-month by policy. I resigned—does proration apply? A: Yes—company policy/CBA governs when the law doesn’t require the benefit. Apply the policy’s computation and timing rules; where silent, proration and final-pay timelines typically mirror rank-and-file practice.

8) Employer compliance checklist (upon an employee’s resignation)

Identify status: rank-and-file vs. managerial; confirm coverage or policy/CBA extension.
Compute basis: pull actual basic salary earned YTD (Jan 1 to separation date). Exclude allowances, OT, premiums, and SSS-paid benefits.
Apply formula: total basic salary earned ÷ 12.
Handle deductions lawfully: only authorized/lawful deductions; document everything.
Release with final pay: generally within 30 calendar days from separation. Provide a payslip breakdown.
Tax: withhold only if the 13th-month + other benefits exceed ₱90,000 for the year.

9) Practical documentation tips (for smooth release)

Employee: Keep copies of payslips, attendance/leave records, and your resignation letter with the effective date; return company property promptly and secure clearance.
Employer: Issue a final payslip showing the 13th-month computation (YTD basic salary, divisor, prorated result), taxes (if any), and authorized deductions with bases.

10) Quick worksheet you can mirror

Dates: Jan 1–[Resignation Date]
Basic salary actually earned (month by month; note unpaid days)
Total = Σ (basic per month actually paid)
13th-month = Total ÷ 12
Tax check: Add this amount to other “13th-month & other benefits” received this year → exempt up to ₱90,000; withhold on any excess.
Final Pay Release Target: within 30 days of separation.

11) Key takeaways

Yes, resigning employees are entitled to prorated 13th-month pay (if rank-and-file, or if policy/CBA extends it).
Compute using actual basic salary earned in the calendar year to date, then divide by 12.
Exclude allowances, OT, premiums, and SSS-paid benefits (unless integrated into basic).
Release with final pay—generally within 30 days from separation.
Tax-exempt up to ₱90,000 (combined 13th-month & “other benefits”).

If you want, I can turn this into a one-page calculator and a printable checklist tailored to your company’s payroll templates.