1) The short legal basis: 13th Month Pay is mandatory, and the law sets a deadline—not a “no-earlier-than” date

In the Philippines, the 13th Month Pay is a statutory benefit under Presidential Decree No. 851 (PD 851) and its Implementing Rules/Guidelines (as later clarified by labor issuances). The law’s key timing rule is straightforward:

It must be paid not later than December 24 of every year.

That wording sets a latest permissible payment date. It does not prohibit earlier payment. As a result, early release of 13th month pay is generally legal—provided the employer still complies with all mandatory rules on computation, coverage, and minimum amounts.

2) What “early release” usually means (and why it’s typically allowed)

Employers commonly “release early” in several ways:

Full payment ahead of December 24 (e.g., November or early December).
Two installments (e.g., half mid-year and half in November/December).
More frequent partial releases (less common, but possible if total paid meets or exceeds the required minimum by year-end).

Philippine labor rules allow payment in installments because the law is concerned with ensuring the employee receives at least the required 13th month pay by the deadline. Paying early or in parts is typically treated as a management prerogative and a permissible method of compliance.

Bottom line: Early payment is lawful as long as (a) it is at least the legally required amount, and (b) all covered employees receive it, and (c) the deadline is met.

3) Who is entitled to 13th Month Pay

General rule: Rank-and-file employees are covered

13th Month Pay is mandatory for rank-and-file employees, whether paid:

monthly,
daily,
hourly, or
purely on commission (subject to the “basic salary” rules discussed below).

Who is generally excluded

Common exclusions under the PD 851 framework include:

Managerial employees (those who primarily manage and have authority in hiring/discipline or effectively recommend such actions, and who exercise discretion and independent judgment).
Household helpers and persons in the personal service of another (traditionally excluded under PD 851’s coverage rules; note that domestic workers have separate protections under other laws, but PD 851 coverage is classically framed around employer-employee establishments rather than personal household service).
Employees of employers that are exempt under the implementing guidelines (more on exemptions below).

Employment status: Regular, probationary, contractual, seasonal

Entitlement is not limited to regular employees. As long as the person is rank-and-file and has worked for at least one (1) month during the calendar year, they are typically entitled to a pro-rated 13th month pay.

4) Exemptions (when 13th Month Pay may not be legally required)

Employers may be exempt in specific circumstances recognized by the implementing rules/issuances, such as certain:

government entities (depending on whether covered by civil service rules and existing compensation laws),
employers already paying an equivalent (e.g., a “13th month” or “bonus” that meets the legal equivalency standards), or
categories historically recognized in DOLE issuances (the details depend on the employer’s nature, existing benefits, and compliance history).

Important practical point: Employers sometimes label a benefit “13th month” but structure it in a way that is not legally equivalent. If the arrangement does not meet the equivalency rules, the employer may still owe the statutory 13th month pay.

5) How 13th Month Pay is computed (the core compliance risk with early release)

The statutory formula

The minimum 13th month pay is:

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

If the employee did not work the full year, it’s the same formula using the basic salary actually earned during the period worked that year, divided by 12.

“Basic salary” — what counts and what doesn’t

In general, “basic salary” includes compensation for services rendered but excludes many allowances and non-wage benefits.

Common inclusions/exclusions:

Typically included in “basic salary”:

The employee’s base pay (salary or wage).
Cost-of-living allowance (COLA) is commonly treated as included for 13th month computations under Philippine guidelines.
For certain pay schemes, the portion considered as the employee’s base wage.

Typically excluded from “basic salary”:

Overtime pay
Holiday pay and premium pay
Night shift differential
Service charges (for covered establishments, usually treated separately)
Incentives and non-integrated allowances (e.g., certain transportation, meal, or representation allowances), unless they’ve become part of the wage by practice/contract in a way that effectively makes them wage components.

Commission-based pay: a frequent issue

A classic rule in Philippine labor treatment is:

If the employee is paid purely on commission, the commission may be treated as part of basic salary for 13th month purposes depending on the nature of the commission scheme (for example, commissions that are effectively the wage for services rendered).
If the commission is on top of a fixed basic salary, typically the fixed salary is the “basic salary,” while the commission treatment depends on whether it is integrated into wage.

Because commission structures vary widely, early payment can be risky if the employer later discovers the “basic salary earned” base was understated.

6) So is early release legal? Yes—but do it correctly

A) Early release as compliance (full or partial)

It is legal for an employer to pay the 13th month pay earlier than December 24, even as early as mid-year, if the employee ultimately receives at least the required amount.

B) Early release as an “advance”

Many employers call early release an “advance” because:

The final amount due can only be perfectly determined after the end of the year (or after the employee’s last working day in the year).
Later payroll changes (salary increases, additional months worked, absences without pay affecting basic salary earned, etc.) may require a year-end recomputation.

A legally safe approach is:

Pay an installment early (e.g., 50%).
Recompute at year-end.
Pay any balance on or before December 24.

C) Early release cannot reduce the legal minimum by year-end

Early payment does not allow an employer to:

Pay less than the computed statutory minimum by December 24, or
Reclassify the 13th month pay into something else to avoid compliance.

7) Early release and employee separation: resignation, termination, retirement

A major question with early release is what happens if the employee:

resigns,
is terminated,
retires,
is laid off, or
otherwise separates before year-end.

General rule: 13th month is pro-rated and must be included in final pay

When employment ends, the employee is generally entitled to a pro-rated 13th month pay based on basic salary earned in that calendar year up to the last day worked.

If the employer already released 13th month early

Two common scenarios:

Early payment is less than the pro-rated amount due at separation
- Employer must pay the difference in the final pay.
Early payment exceeds the pro-rated amount due at separation
- Whether the employer may legally recover the excess depends on:
  - the agreement/policy the employee accepted (e.g., a written authorization that excess payments may be offset),
  - rules on lawful deductions and due process for set-offs,
  - and whether the payment was clearly an advance rather than a discretionary bonus.

In practice, employers often manage this by:

Documenting early release as an advance subject to final recomputation, and/or
Releasing only an amount unlikely to exceed pro-rated entitlements for most separation timelines.

8) Early release and lawful deductions / offsets

Philippine wage rules generally restrict deductions from employee compensation. While 13th month pay is a mandatory benefit, employers still need to respect rules on deductions and set-offs.

Best practice (and risk reducer):

If an employer intends early release to be an advance that may be offset later (especially upon separation), the employer should have:
- a clear written policy,
- employee acknowledgment/authorization consistent with labor standards, and
- transparent computation and reconciliation.

Unilateral deductions without proper legal basis or authorization can create disputes even if the original early release was well-intentioned.

9) Interaction with company bonuses and “14th month pay”

Distinguishing 13th month pay from bonuses

13th month pay is a legal obligation (for covered employees).
Bonuses are generally discretionary unless:
- promised in a contract/CBAs,
- given consistently such that they become a company practice that employees can demand,
- or are structured as part of compensation.

Can a Christmas bonus be treated as 13th month pay?

Sometimes. A company may credit a “bonus” as compliance only if it is:

paid to covered employees,
at least equal to the required amount,
and genuinely functions as the 13th month pay equivalent under rules (including timing and computation consistency).

If a “bonus” is conditional (e.g., dependent on profits or performance) and not assured, it is less likely to be a clean substitute for the mandated benefit.

10) Tax treatment (why early release can affect payroll planning)

Under Philippine tax rules (TRAIN-era framework), 13th month pay and other benefits are excluded from taxable income up to a statutory cap (commonly applied at ₱90,000 combined for 13th month and certain other benefits). Amounts exceeding the cap are generally taxable.

Early release is lawful, but it can affect:

withholding timing,
year-end adjustments,
and how employers pool “other benefits” (bonuses, cash gifts, etc.) relative to the exemption cap.

(Exact tax handling is typically coordinated with payroll policy and BIR rules on withholding and annualization.)

11) Common compliant early-release structures (Philippine workplace practice)

Structure 1: Two-installment method

June: 50% of estimated 13th month
November/December: remaining balance after recomputation

Compliance key: final payment on or before December 24, with correct recomputation.

Structure 2: Early full payment with year-end reconciliation

Employer pays the full computed-to-date estimate earlier (e.g., late November).
Employer conducts final recomputation for any changes before year-end and pays any shortfall by Dec 24 (or includes it in final pay if separation occurs).

Risk: underpayment if salary adjustments occur after early payout; manage via a clear reconciliation mechanism.

Structure 3: Early release as a discretionary benefit on top of statutory 13th month

Some employers give a partial “gift” early but still compute and pay statutory 13th month separately.

Compliance key: avoid confusing labels; employees must receive the statutory amount regardless of how the discretionary part is framed.

12) Practical compliance checklist (what matters legally)

Early release is legal when all of the following are satisfied:

Coverage: All covered rank-and-file employees receive it.
Timing: Statutory minimum is fully satisfied not later than December 24 (or earlier if separation occurs earlier).
Correct base: Computation uses total basic salary earned during the year (with correct inclusions/exclusions).
Pro-rating: Employees who worked at least one month receive pro-rated amounts.
Reconciliation: Installments/advances are reconciled so there is no underpayment by the legal deadline (or by separation date).
No improper deductions: Any offsets or recoveries are handled lawfully and transparently.

13) Key takeaways

Yes, early release of 13th month pay is legal in the Philippines. The law sets a deadline (on or before December 24), not a prohibition against earlier payment.
The real legal risks are not about when it’s paid early, but about correct computation, complete payment, proper pro-rating, and lawful handling of separations and deductions.
Early release is best treated as an installment/advance subject to final recomputation, with a clear payroll policy and year-end reconciliation.