For employees with changing salaries, commissions, unpaid absences, part-time hours, rotating schedules, or irregular attendance, 13th month pay is not computed by guessing one “average month.” In the Philippines, the safest rule is this: identify the employee’s total basic salary actually earned during the calendar year, then divide that amount by 12. The difficulty is knowing what counts as “basic salary,” what must be excluded, and how to treat commissions, unpaid leave, maternity leave, daily wages, piece-rate pay, and mid-year resignation.

Quick Answer: 13th Month Pay Formula in the Philippines

The basic formula is:

13th Month Pay = Total Basic Salary Earned During the Calendar Year ÷ 12

For employees with regular monthly pay, this is usually simple.

For employees with variable pay or irregular attendance, the computation should be based on the actual basic salary earned from January 1 to December 31, not merely the number of months appearing on the payroll.

Example:

Month	Basic Salary Actually Earned
January	₱25,000
February	₱22,500
March	₱25,000
April	₱18,000
May	₱25,000
June	₱25,000
July	₱25,000
August	₱20,000
September	₱25,000
October	₱25,000
November	₱25,000
December	₱25,000
Total Basic Salary Earned	₱290,500

₱290,500 ÷ 12 = ₱24,208.33

The employee’s minimum 13th month pay is ₱24,208.33.

Legal Basis of 13th Month Pay

The main law is Presidential Decree No. 851, which requires employers to pay 13th month pay not later than December 24 of every year.

The original ₱1,000 salary ceiling in P.D. 851 was later removed by Memorandum Order No. 28, s. 1986. Because of that amendment, the benefit now generally applies to rank-and-file employees in the private sector regardless of salary amount, provided they meet the service requirement.

The current DOLE position is reflected in annual labor advisories such as DOLE Labor Advisory No. 16, Series of 2025, which reiterates the usual rules:

13th month pay is for covered rank-and-file employees in the private sector.
It must be paid not later than December 24.
The minimum amount is one-twelfth (1/12) of the total basic salary earned within the calendar year.
No exemption or deferment is allowed.

Who Is Entitled to 13th Month Pay?

A private-sector employee is generally entitled to 13th month pay if:

The employee is rank-and-file.
The employee has worked for at least one month during the calendar year.
The person is an employee, not a true independent contractor or freelancer.
The employer is not one of the excluded employers under the 13th month pay rules.

The law covers employees regardless of employment label, such as:

Regular employees
Probationary employees
Casual employees
Project employees
Seasonal employees
Fixed-term employees
Part-time employees
Daily-paid employees
Piece-rate employees, subject to the correct classification
Employees paid a fixed or guaranteed wage plus commission

The employee’s job title is not controlling. What matters is the actual nature of the work, the employer’s control, and the employee’s real compensation structure.

What Counts as “Basic Salary”?

For 13th month pay, basic salary generally means the pay given for the employee’s regular work or services.

It usually includes:

Pay Item	Included in 13th Month Computation?	Practical Note
Monthly basic salary	Yes	Use actual basic salary earned per month.
Daily wage for regular workdays	Yes	Add the basic wage actually earned.
Hourly wage for regular hours	Yes	Add regular hourly pay, not overtime premium.
Paid leave treated as regular salary	Usually yes	If the employee continues receiving basic salary during approved paid leave.
Salary differential under maternity leave	Yes	DOLE treats the employer-paid salary differential as part of basic salary for 13th month computation.
Sales commission forming part of wage structure	Often yes	Especially when tied directly to individual work and paid with fixed or guaranteed wage.
Piece-rate earnings	Yes, if covered	Use total earnings from production or output during the year.

It usually excludes:

Pay Item	Included in 13th Month Computation?	Practical Note
Overtime pay	No	Excluded unless integrated into basic salary by agreement or long company practice.
Night shift differential	No	Excluded unless treated as basic salary by contract, CBA, policy, or practice.
Holiday pay or holiday premium	No	Usually excluded as a statutory premium.
Rest day premium	No	Usually excluded.
Cost-of-living allowance	No	Unless integrated into basic pay.
Meal, transport, rice, clothing, or communication allowance	No	Unless clearly integrated into basic salary.
Reimbursement of expenses	No	Not salary.
Profit-sharing	No	Not basic salary.
Cash conversion of unused vacation or sick leave	No	Specifically treated separately from basic salary.
Christmas bonus or 14th month pay	No	Separate benefit unless company policy says otherwise.
SSS maternity benefit	No	This comes from SSS, not from employer-paid basic salary.

A helpful Supreme Court reference is Central Azucarera de Tarlac v. Central Azucarera de Tarlac Labor Union-NLU, G.R. No. 188949, July 26, 2010, where the Court discussed that allowances and monetary benefits not integrated into regular or basic salary are generally excluded, but benefits may become part of the computation if company practice, agreement, or policy consistently treats them as part of basic salary.

How Irregular Attendance Affects 13th Month Pay

Unpaid absences reduce 13th month pay because the employee did not earn basic salary for those unpaid days.

This commonly happens when the employee has:

Leave without pay
Unpaid sick days
Unpaid vacation leave
Absences without leave
Suspension without pay
Undertime deductions
Tardiness deductions
No-work-no-pay arrangements
Intermittent work schedules

The key is to compute the employee’s basic salary actually earned, not the salary the employee would have earned with perfect attendance.

Example: Monthly Employee With Unpaid Absences

Employee’s monthly basic salary: ₱30,000

In April, the employee had unpaid absences and undertime deductions totaling ₱5,000.

Actual basic salary earned in April:

₱30,000 - ₱5,000 = ₱25,000

For 13th month pay, April should be counted as ₱25,000, not ₱30,000.

If the employee earned ₱30,000 for 11 months and ₱25,000 for April:

(₱30,000 × 11) + ₱25,000 = ₱355,000
₱355,000 ÷ 12 = ₱29,583.33

Minimum 13th month pay: ₱29,583.33

How to Compute 13th Month Pay for Daily-Paid Employees

For daily-paid employees, do not simply multiply the daily rate by 12 months. Add the actual basic wages earned during the year.

Example: Daily-Paid Employee With Varying Workdays

Daily basic wage: ₱650

Total paid regular workdays during the year: 245 days

₱650 × 245 = ₱159,250
₱159,250 ÷ 12 = ₱13,270.83

Minimum 13th month pay: ₱13,270.83

Do not include overtime, night differential, rest day premium, or holiday premium in the total unless the employer has clearly integrated those items into basic salary through contract, collective bargaining agreement, company policy, or consistent company practice.

How to Compute 13th Month Pay for Part-Time Employees

Part-time employees are still entitled to 13th month pay if they are rank-and-file employees and have worked at least one month during the calendar year.

Example: Part-Time Employee Paid Hourly

Hourly basic rate: ₱180

Total regular hours worked during the year: 720 hours

₱180 × 720 = ₱129,600
₱129,600 ÷ 12 = ₱10,800

Minimum 13th month pay: ₱10,800

If the employee also earned overtime pay, that overtime pay is excluded unless it has been integrated into basic salary by agreement, policy, or long-standing practice.

How to Compute 13th Month Pay With Salary Increase During the Year

Use the actual basic salary earned at each salary level.

Example: Salary Increase in July

Period	Monthly Basic Salary	Number of Months	Total
January to June	₱22,000	6	₱132,000
July to December	₱26,000	6	₱156,000
Total Basic Salary Earned			₱288,000

₱288,000 ÷ 12 = ₱24,000

Minimum 13th month pay: ₱24,000

The employee does not automatically get the latest salary rate as the full 13th month pay. The correct approach is to use the total basic salary actually earned during the calendar year.

How to Compute 13th Month Pay for New Hires

A new hire who worked for at least one month during the calendar year is entitled to a pro-rated 13th month pay.

Example: Employee Hired on July 1

Monthly basic salary: ₱24,000

Months worked: July to December = 6 months

₱24,000 × 6 = ₱144,000
₱144,000 ÷ 12 = ₱12,000

Minimum 13th month pay: ₱12,000

This is why people often say the employee receives “half” of the 13th month pay if hired exactly halfway through the year. But for irregular attendance, the better method is still to add the actual basic salary earned, then divide by 12.

How to Compute 13th Month Pay for Resigned or Terminated Employees

An employee who resigns or is separated before December is still entitled to proportionate 13th month pay based on the basic salary earned during the year.

Example: Employee Resigned on August 31

Monthly basic salary: ₱28,000

Basic salary earned from January to August:

₱28,000 × 8 = ₱224,000
₱224,000 ÷ 12 = ₱18,666.67

Minimum 13th month pay: ₱18,666.67

This should normally be included in the employee’s final pay. Under DOLE Labor Advisory No. 06-20 on final pay, final pay should generally be released within 30 days from separation, unless a more favorable company policy, agreement, or practice applies.

How to Treat Commissions and Variable Incentives

This is where many payroll disputes happen.

The word “commission” is not enough. You must look at the nature of the payment.

When Commissions Are Usually Included

Commissions are more likely to be included when they are:

Paid for the employee’s own sales or output
Part of the employee’s regular wage structure
Earned as direct remuneration for services rendered
Paid together with a fixed or guaranteed wage
Not merely discretionary
Not profit-sharing
Not a one-time management bonus

In Philippine Duplicators, Inc. v. NLRC, G.R. No. 110068, the Supreme Court upheld the inclusion of sales commissions in computing 13th month pay where the employees received fixed wages plus sales commissions.

In Philippine Agricultural Commercial and Industrial Workers Union-TUCP v. NLRC, G.R. No. 107994, involving bus drivers and conductors, the Court emphasized that what matters is not the label attached to the compensation but the nature of the remuneration. Employees who received a guaranteed wage plus commission were entitled to 13th month pay based on total earnings.

When Variable Pay Is Usually Excluded

Variable pay is more likely to be excluded when it is:

A discretionary bonus
A productivity bonus not integrated into basic pay
Profit-sharing
A management incentive
A Christmas bonus
A performance bonus outside the wage structure
A reimbursement or allowance
A non-recurring gratuity

Practical Test for Commissions

Ask these questions:

Is the commission automatically earned when the employee completes a sale, booking, collection, or output?
Is it part of the regular compensation package?
Is it paid repeatedly and predictably under the employment arrangement?
Is the employee receiving a fixed or guaranteed wage plus commission?
Is it direct compensation for the employee’s own work?

If the answer is mostly yes, the commission has a stronger argument for inclusion.

If the payment depends on company profit, management discretion, or a general bonus pool, it has a stronger argument for exclusion.

How to Compute 13th Month Pay for Employees With Fixed Pay Plus Commission

Example: Sales Employee

Monthly fixed basic salary: ₱18,000

Total fixed salary for the year:

₱18,000 × 12 = ₱216,000

Total sales commissions earned during the year: ₱144,000

If the commissions are part of the employee’s wage structure and directly tied to the employee’s sales:

₱216,000 + ₱144,000 = ₱360,000
₱360,000 ÷ 12 = ₱30,000

Minimum 13th month pay: ₱30,000

If the “commission” is actually a discretionary bonus or profit-sharing benefit, it may be excluded. The payroll documents, employment contract, commission plan, payslips, and company practice matter.

How to Compute 13th Month Pay for Piece-Rate Workers

Piece-rate workers are paid based on output, such as per unit, per item, per kilo, per piece, or per completed production quantity.

For covered piece-rate employees, the usual formula is:

Total Earnings From Production or Output During the Year ÷ 12

Example: Piece-Rate Worker

Total piece-rate earnings for the year: ₱210,000

₱210,000 ÷ 12 = ₱17,500

Minimum 13th month pay: ₱17,500

Be careful not to confuse piece-rate work with a true task-basis or fixed specific work arrangement. In David v. Macasio, G.R. No. 195466, the Supreme Court discussed the treatment of a worker paid on “pakyaw” or task basis and the exemptions under the rules implementing P.D. 851. The classification can be fact-sensitive.

Employees Paid Purely on Commission, Boundary, or Task Basis

The implementing rules of P.D. 851 contain exemptions for employers of certain workers paid on purely commission, boundary, or task basis, and those paid a fixed amount for performing specific work regardless of time consumed.

But in real disputes, labels are often misleading.

A worker called “commission-based” may still be entitled if, in reality, the worker:

Has a guaranteed wage;
Is on the regular payroll;
Works under the control of the employer;
Receives commission as part of wages; or
Is covered by company policy, contract, or collective bargaining agreement.

This is why payroll labels should not be used to defeat statutory benefits. Philippine labor law generally looks at the actual relationship and the real nature of compensation.

Maternity Leave, Paternity Leave, and Other Leaves

Maternity Leave

Under Republic Act No. 11210, or the Expanded Maternity Leave Law, a covered female worker may receive SSS maternity benefits and, when applicable, an employer-paid salary differential.

For 13th month computation:

Item	Included?	Reason
SSS maternity benefit	No	It is an SSS benefit, not employer-paid basic salary.
Employer-paid salary differential	Yes	Treated as part of basic salary for 13th month pay purposes.

Paid Vacation or Sick Leave

If the employee takes approved paid leave and continues receiving regular basic salary, that paid salary is generally counted.

But the cash conversion of unused leave credits is usually excluded because it is not regular basic salary for services rendered during a work period.

Leave Without Pay

Leave without pay is not included because no basic salary was earned for those days.

Foreign Employees and Expats in the Philippines

Foreign employees working in the Philippines may also be entitled to 13th month pay if they are employees of a private-sector employer and fall within the covered rank-and-file category. Nationality does not automatically remove labor standards protection.

Common situations:

Situation	Likely Treatment
Foreigner employed locally by a Philippine company as rank-and-file	Usually covered.
Foreigner in a managerial or executive role	Statutory 13th month may not apply, but contract or company policy may grant it.
Remote foreign consultant with no employment relationship	Usually not covered as an employee.
Expat assigned to a Philippine entity through a local employment contract	Review local contract, payroll, and actual role.
Foreign worker without proper work permit	Immigration issues may exist, but unpaid wages and labor standards issues can still arise from actual work performed.

For expats and foreign workers, the practical documents to review are the employment contract, assignment letter, local payroll records, tax withholding records, Alien Employment Permit documents if applicable, and company handbook.

13th Month Pay Is Different From Christmas Bonus

13th month pay is mandatory for covered employees.

A Christmas bonus is usually voluntary unless it has become demandable because of:

Employment contract
Company policy
Collective bargaining agreement
Long, consistent, and deliberate company practice

Article 100 of the Labor Code embodies the rule against elimination or diminution of benefits. This matters when an employer has consistently granted a benefit over a long period and then suddenly removes or reduces it without valid basis.

Tax Treatment of 13th Month Pay

Under Republic Act No. 10963, known as the TRAIN Law, and BIR rules such as Revenue Regulations No. 11-2018, 13th month pay and other benefits are generally tax-exempt up to an aggregate ceiling of ₱90,000.

This ₱90,000 ceiling usually covers combined benefits such as:

13th month pay
Christmas bonus
Productivity incentives
Loyalty awards
Other similar benefits

Amounts above the ceiling may be subject to withholding tax, depending on the employee’s full compensation situation.

Step-by-Step Guide to Checking Your 13th Month Pay

1. Confirm that you are covered

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

Do not rely only on your job title. Review your actual duties and whether you have real managerial authority.

2. Gather your payroll documents

Useful documents include:

Employment contract
Appointment letter
Company handbook or compensation policy
Payslips from January to December
Time records or attendance logs
Leave records
Commission plan
Payroll register, if available
Final pay computation, if resigned or separated
BIR Form 2316, when relevant

3. Separate basic salary from non-basic pay

Make a table of your pay items. Mark each as included or excluded.

For example:

Pay Item	Amount	Include in 13th Month Base?
Basic salary	₱25,000	Yes
Overtime	₱4,500	No
Night differential	₱1,200	No
Transportation allowance	₱2,000	No
Sales commission	₱8,000	Depends on nature
Reimbursement	₱1,500	No

4. Add only the includible amounts

For each month, add the actual basic salary earned.

If commissions are part of basic earnings under the employee’s wage structure, include them. If they are discretionary bonuses or profit-sharing, exclude them.

5. Divide the annual total by 12

Use the formula:

Total Includible Basic Salary Earned During the Year ÷ 12

6. Deduct any 13th month advances already paid

Some employers pay in two installments, commonly mid-year and December. That is allowed as long as the full required amount is paid not later than December 24.

Example:

Item	Amount
Correct 13th month pay	₱28,000
Mid-year 13th month advance	₱14,000
Balance due by December 24	₱14,000

7. Compare with what was actually paid

If there is a shortfall, ask for the payroll basis. Many disputes are resolved by checking whether the employer excluded commissions, deducted unpaid absences, or used the wrong salary rate after an increase.

Common Payroll Mistakes

Mistake 1: Using the latest salary rate for the whole year

If the employee received a salary increase in July, the employer should usually compute based on the actual salary earned before and after the increase.

Mistake 2: Ignoring unpaid absences

Unpaid absences reduce basic salary earned. The employee cannot usually demand 13th month pay based on perfect attendance if there were leave-without-pay deductions.

Mistake 3: Excluding commissions without checking their nature

Some commissions are part of basic earnings. Others are not. A blanket “commissions are always excluded” rule can be wrong.

Mistake 4: Including overtime and night differential by default

Overtime, night differential, holiday premiums, and rest day premiums are generally excluded unless integrated into basic salary by contract, CBA, company policy, or long-standing practice.

Mistake 5: Refusing to pay resigned employees

Resigned, terminated, or separated employees may still be entitled to proportionate 13th month pay based on basic salary earned before separation.

Mistake 6: Calling someone a “freelancer” to avoid benefits

The label is not conclusive. If the employer controls how, when, and where the person works, and the facts show an employer-employee relationship, labor standards may still apply.

What to Do if Your 13th Month Pay Seems Wrong

Start with documents. A clear computation is more useful than a general complaint.

Practical steps

Request your payslips or payroll breakdown.
Compute your total basic salary earned for the year.
Identify the pay items the employer excluded.
Check your employment contract, commission plan, CBA, or company policy.
Ask HR or payroll for the basis of computation in writing.
If unresolved, file a Request for Assistance under DOLE’s Single Entry Approach.

The Single Entry Approach or SEnA is a mandatory conciliation-mediation process for labor and employment issues, usually designed to run within 30 days. It is often the first practical step for unpaid or underpaid 13th month pay.

If the dispute is not settled, the matter may proceed to the proper DOLE office or the National Labor Relations Commission, depending on the amount, issues, and whether there are related claims such as illegal dismissal, reinstatement, damages, or other money claims.

Money claims arising from employer-employee relations generally prescribe in three years under Article 306 of the Labor Code, formerly Article 291.

Employer Compliance Requirements

Employers should not only pay the benefit. They should also keep proper payroll records and submit the required compliance report.

Requirement	Usual Rule
Payment deadline	Not later than December 24
Exemption or deferment	Not allowed under current DOLE advisories
Compliance report	Submitted through the DOLE Establishment Report System
Usual report deadline	Not later than January 15 of the following year
Records to keep	Payroll, payslips, attendance records, proof of payment, computation sheets

Good payroll practice is to provide employees with a clear 13th month pay breakdown, especially when they have unpaid absences, salary changes, commissions, or irregular schedules.

Frequently Asked Questions

How do I compute 13th month pay if my salary changes every month?

Add the basic salary you actually earned for each month from January to December, then divide the total by 12. Do not use only your highest salary month or your latest salary rate unless that is what you actually earned for the whole year.

Are unpaid absences deducted from 13th month pay?

Yes. Unpaid absences reduce the basic salary earned for the year. Since 13th month pay is based on total basic salary actually earned, leave without pay, unpaid absences, undertime, and suspension without pay can reduce the computation.

Is overtime included in 13th month pay?

Usually no. Overtime pay is generally excluded from the 13th month pay computation because it is not part of basic salary. It may be included only if an employment contract, CBA, company policy, or long-standing company practice treats it as part of basic salary.

Are commissions included in 13th month pay?

It depends on the nature of the commission. If the commission is part of the employee’s wage structure and is direct compensation for the employee’s own work, especially where the employee receives fixed or guaranteed pay plus commission, it may be included. If it is discretionary, profit-based, or merely a bonus, it is usually excluded.

Do probationary employees get 13th month pay?

Yes, if they are rank-and-file employees and worked for at least one month during the calendar year. Probationary status does not automatically remove entitlement to 13th month pay.

Do part-time employees get 13th month pay?

Yes, if they are employees and not independent contractors. The computation is based on the basic salary or regular hourly wages actually earned during the year, divided by 12.

I resigned before December. Am I still entitled to 13th month pay?

Yes, if you are a covered employee and worked for at least one month during the calendar year. Your 13th month pay is computed proportionately based on the basic salary you earned before resignation or separation.

Is maternity leave included in 13th month pay computation?

The SSS maternity benefit itself is not included. However, the employer-paid salary differential under the Expanded Maternity Leave Law is treated as part of basic salary for 13th month pay computation.

Can my employer delay 13th month pay because the company has no funds?

Current DOLE advisories state that no exemption or deferment from payment of 13th month pay is allowed. Covered employers must pay not later than December 24.

Is 13th month pay taxable in the Philippines?

It is generally tax-exempt together with other benefits up to an aggregate ceiling of ₱90,000. Amounts exceeding that ceiling may be subject to withholding tax, depending on the employee’s compensation and applicable BIR rules.

Key Takeaways

The correct formula is total basic salary earned during the calendar year divided by 12.
For irregular attendance, use the employee’s actual basic salary after unpaid absences, undertime, or leave-without-pay deductions.
Overtime, night differential, holiday pay, allowances, reimbursements, profit-sharing, and leave conversions are usually excluded.
Commissions may be included if they are part of the employee’s wage structure and direct compensation for work.
New hires, resigned employees, part-time employees, probationary employees, and daily-paid employees may still be entitled if they meet the coverage rules.
13th month pay must be paid not later than December 24.
Employers cannot avoid payment by calling the amount a “bonus” or by claiming deferment under current DOLE advisories.
Employees should verify the computation using payslips, attendance records, commission plans, and payroll breakdowns.