Introduction

In the Philippines, the 13th month pay is a mandatory benefit provided to employees under labor laws, designed to give workers an additional financial boost during the holiday season. This benefit is enshrined in Presidential Decree No. 851 (PD 851), issued in 1975, and further clarified by subsequent Department of Labor and Employment (DOLE) guidelines. A common question arises when an employee resigns: Are they still entitled to this benefit? The answer is generally yes, but with specific conditions and computations based on the period of service. This article explores the legal framework, entitlement rules, computation methods, and related considerations for resigned employees in the Philippine context.

Legal Basis for 13th Month Pay

The 13th month pay requirement stems from PD 851, which mandates that all employers in the private sector pay their rank-and-file employees a 13th month pay equivalent to at least one-twelfth (1/12) of their basic salary earned within a calendar year. This decree was enacted to ensure that employees receive an extra month's worth of pay annually, typically disbursed before Christmas.

Key amendments and clarifications include:

Department Order No. 18-02 (2002) and subsequent DOLE issuances, which expanded coverage and provided guidelines on implementation.
The Labor Code of the Philippines (Presidential Decree No. 442, as amended), which integrates this benefit into the broader framework of employee rights and protections.

The benefit is non-negotiable and cannot be waived by employees or replaced by other forms of compensation unless explicitly allowed by law. It applies to all private sector employers, including domestic helpers, but excludes government employees covered under separate laws like Republic Act No. 6686 for Christmas bonuses.

Who is Entitled to 13th Month Pay?

Under PD 851 and DOLE guidelines, entitlement to 13th month pay is broad but subject to certain criteria:

Rank-and-File Employees: All employees not in managerial or supervisory positions are covered, regardless of their employment status (regular, probationary, casual, contractual, or project-based).
Minimum Service Requirement: An employee must have worked for at least one month during the calendar year to qualify for pro-rated 13th month pay.
Inclusions: This covers piece-rate workers, those paid on commission (if they have a basic salary component), and seasonal workers who meet the service threshold.
Exemptions:
- Employers already providing a benefit equivalent to or better than the 13th month pay (e.g., a 14th month pay under a collective bargaining agreement).
- Employees paid purely on commission, task, or output without a fixed basic salary.
- Government employees, household helpers in certain cases (though recent rulings have included them), and those in enterprises with fewer than 10 employees if exempted by DOLE (though this is rare).
- Managerial employees, as they are presumed to have negotiated better terms.

For resigned employees, the law does not discriminate based on the reason for separation. As long as the employee has rendered at least one month of service in the calendar year, they are entitled to a pro-rated amount.

Entitlement for Resigned Employees

Resigned employees are explicitly entitled to 13th month pay under Philippine law. DOLE Advisory No. 02-04 and various labor jurisprudence affirm that resignation does not forfeit this benefit. The key principle is that 13th month pay is earned based on services rendered during the year, not contingent on continued employment until year-end.

Pro-Rata Basis: If an employee resigns mid-year, they receive 13th month pay proportional to the months worked. For example, an employee who resigns after six months is entitled to half of their average monthly basic salary.
Timing of Payment: Employers must pay the pro-rated amount upon resignation or separation, or by December 24 of the year, whichever comes first. Failure to do so can lead to claims for underpayment.
Voluntary Resignation vs. Other Separations: The rules apply similarly to voluntary resignations, terminations for just cause, or even illegal dismissals (where backpay may include 13th month components). In cases of illegal dismissal, the Supreme Court has ruled in decisions like Wesleyan University-Philippines v. Maglaya (G.R. No. 212774, 2017) that reinstated employees are entitled to accrued 13th month pay during the pendency of the case.
Special Cases:
- Probationary Employees: If they resign during probation but have worked at least one month, they qualify.
- Contractual or Project-Based: Entitled if the contract ends (akin to resignation) and service meets the threshold.
- Retirees: Treated similarly to resigned employees; they receive pro-rated pay for the year of retirement.
- Deceased Employees: Heirs are entitled to the pro-rated amount.

If an employer withholds 13th month pay citing resignation, this could constitute a violation, leading to DOLE complaints or labor arbitration.

Computation of 13th Month Pay for Resigned Employees

The computation is straightforward and based solely on basic salary, excluding allowances, overtime, holiday pay, and other non-basic earnings. DOLE guidelines emphasize accuracy to avoid disputes.

Basic Formula

The 13th month pay is computed as:

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

For resigned employees, this is adjusted pro-rata:

[ \text{Pro-Rated 13th Month Pay} = \left( \frac{\text{Total Basic Salary Earned During Employment Period}}{12} \right) \times \text{Number of Months Worked} ]

More precisely, it's the total basic salary divided by 12, where "months worked" includes any fraction of a month counted as a full month if 15 days or more are worked.

Step-by-Step Computation

Determine Total Basic Salary: Sum the employee's basic salary for the months worked. Basic salary is the fixed wage excluding bonuses, allowances (e.g., COLA, meal allowances), overtime, holiday pay, night differentials, and profit-sharing.
- Example: An employee with a monthly basic salary of PHP 20,000 who resigns after 5 months has earned PHP 100,000 in basic salary.
Count Months Worked: Include any month where the employee worked at least one day. A partial month (e.g., resigning on the 15th) counts as a full month.
- In the example: 5 months.
Apply the Formula:
- Pro-rated amount = (PHP 100,000) / 12 = PHP 8,333.33.
Note: If the employee worked a fraction of a month, adjust accordingly, but DOLE often rounds up partial months.
Adjustments:
- Absences and Leaves: Unpaid absences are deducted from the total basic salary.
- Salary Increases: Use the actual salary rates during each period.
- Minimum Wage Workers: Computation remains the same, but ensure compliance with regional wage orders.
- Taxes: 13th month pay up to PHP 90,000 is tax-exempt under the TRAIN Law (Republic Act No. 10963); amounts above are taxable.

Example Scenarios

Full-Year Resignation: An employee resigns on December 1 with a PHP 15,000 monthly basic salary. Total basic: PHP 165,000 (11 months full + partial December). 13th Month: PHP 165,000 / 12 = PHP 13,750.
Mid-Year Resignation: Resigns on June 30, basic salary PHP 25,000/month. Total basic: PHP 150,000. 13th Month: PHP 150,000 / 12 = PHP 12,500.
Variable Salary: If salary increased from PHP 18,000 to PHP 20,000 mid-year, calculate based on actual earnings per month.

Employers must provide a payslip or computation sheet upon payment to ensure transparency.

Payment Timeline and Procedures

Deadline: For ongoing employees, payment must be made not later than December 24. For resigned employees, it should be included in the final pay (quitclaim process), typically within 30 days of resignation.
Mode of Payment: Usually via payroll, bank transfer, or cash. It can be paid in one lump sum or two installments (half by May 24, half by December 24), but for resigned employees, it's typically lump sum.
Documentation: Employees may request a Certificate of Payment from DOLE if disputes arise.

Penalties for Non-Compliance

Employers who fail to pay 13th month pay to resigned employees face:

Administrative Sanctions: Fines from DOLE ranging from PHP 1,000 to PHP 50,000 per violation, plus backpay with interest.
Civil Claims: Employees can file complaints with the National Labor Relations Commission (NLRC) for money claims.
Criminal Liability: In extreme cases, imprisonment under the Labor Code.
Double Indemnity: Under Article 288 of the Labor Code, willful non-payment can result in paying twice the amount due.

Supreme Court cases like Honda Phils., Inc. v. Samahan ng Malayang Manggagawa sa Honda (G.R. No. 145561, 2005) underscore that denial of 13th month pay is unlawful.

Related Benefits and Considerations

Integration with Other Benefits: 13th month pay is separate from service incentive leave, overtime, or retirement pay. However, in separation pay computations (e.g., for redundancy), it may be factored in.
Collective Bargaining Agreements (CBAs): CBAs can provide better terms, like a 14th month pay, but cannot diminish the statutory minimum.
DOLE Oversight: Employers with issues can seek advisory opinions from DOLE regional offices.
Impact of COVID-19 and Economic Crises: During the pandemic, DOLE issued advisories allowing deferred payments for MSMEs, but resigned employees' rights remained intact.
Overseas Filipino Workers (OFWs): If employed by Philippine-based companies, they are entitled; otherwise, host country laws apply.

Conclusion

In summary, resigned employees in the Philippines are entitled to 13th month pay on a pro-rated basis, provided they have worked at least one month in the calendar year. This benefit underscores the protective nature of Philippine labor laws, ensuring workers are compensated for their contributions regardless of employment duration. Employers must adhere to the computation and payment rules to avoid legal repercussions, while employees should be aware of their rights to claim this benefit upon resignation.