Prorated 13th‑Month Pay for Resigned Employees in the Philippines
1. Overview
The 13th‑month pay is a mandatory monetary benefit equal to one‑twelfth (1/12) of the basic salary earned within a calendar year. When an employee resigns before 31 December, the benefit does not disappear—it is simply prorated so that the worker receives the amount corresponding to the months actually served.
2. Legal Foundations
| Source | Key Provision |
|---|---|
| Presidential Decree No. 851 (1975) | Requires all employers to pay rank‑and‑file employees a 13th‑month benefit not later than 24 December of every year. |
| Labor Advisory No. 18‑20 (DOLE, 2020) | Clarifies computation for employees who resigned or were terminated any time before the payout deadline. |
| Labor Code, Art. 294‑296 (Security of Tenure) | Separation of any kind does not forfeit accrued monetary benefits, including 13th‑month pay. |
| Bureau of Internal Revenue (BIR) Regs. No. 8‑2018 | Makes the first ₱90,000 of 13th‑month pay and other bonuses income‑tax‑exempt. |
No statute or issuance conditions 13th‑month pay on continued employment up to the payout date; entitlement arises from service actually rendered.
3. Who Are Covered After Resignation?
- Rank‑and‑file employees—regardless of status (regular, probationary, casual, project‑based, seasonal) who worked at least one (1) month in the calendar year.
- Voluntary or involuntary separation—resignation, authorized cause termination (retrenchment, redundancy, closure), or dismissal for just cause all leave the earned portion payable.
- Field personnel & commission‑only workers—still covered so long as they earn a basic wage component.
- Managerial employees—still generally exempt under PD 851, but many companies grant the benefit contractually.
4. How to Compute the Prorated Amount
Formula:
$$ \text{13th‑Month Pay} ;=; \frac{\text{Total Basic Salary Earned from 1 Jan to Separation Date}}{12} $$
- Basic salary excludes overtime, premium pay, night‑shift differential, unused leave conversions, allowances and monetary value of benefits in kind.
- If paid on commission or “no work, no pay,” include only the fixed‑salary component (or the guaranteed wage, if any).
| Example | Figures |
|---|---|
| Monthly basic wage | ₱25,000 |
| Employment period | 1 Jan – 15 Aug (7.5 months) |
| Total basic salary earned | ₱187,500 |
| Prorated 13th‑month pay | ₱187,500 ÷ 12 = ₱15,625 |
5. Payment Deadline After Resignation
- Labor Advisory 18‑20 treats the prorated amount as part of “final pay.”
- Deadline: within 30 calendar days from date of clearance/resignation effectivity, unless the CBA or company policy prescribes an earlier release.
- Employers may pay earlier (e.g., together with last salary) but may not go beyond 30 days.
6. Tax Treatment
| Situation | Tax Rule |
|---|---|
| Total 13th‑month pay ≤ ₱90,000 | Fully exempt from income tax and withholding. |
| Total > ₱90,000 | Only the excess over ₱90,000 is taxable. |
| Resigned mid‑year with new employer | Each employer must separately check the ₱90k cap; the employee must consolidate for annual tax return. |
7. Relevant Jurisprudence & DOLE Opinions
| Case / Opinion | Principle Established |
|---|---|
| Inter‑Banking Corp. v. NLRC (G.R. 80723, 1991) | 13th‑month pay is a statutory obligation; a resignation waiver cannot bar its recovery. |
| Ridgefield Trading, Inc. v. NLRC (G.R. 97186, 1993) | Dismissed employees remain entitled to the proportionate benefit for months actually worked. |
| DOLE Opinion, 29 Nov 1996 | Employers must compute on the basic wage actually earned, not on full‑year equivalents. |
| DOLE Handbook of Workers’ Statutory Monetary Benefits (2024 ed.) | Provides sample prorated calculations and reiterates 30‑day final pay rule. |
8. Exceptions & Exemptions
PD 851 allows the Secretary of Labor to grant exemptions (e.g., to distressed entities, startups, or seasonal establishments). In practice, since 1986 DOLE has rarely issued new exemptions; prior certificates must be renewed annually.
9. Penalties for Non‑Compliance
| Violation | Consequence |
|---|---|
| Failure/refusal to pay | Money claim before DOLE or NLRC; employer may be ordered to pay double indemnity under RA 8188 (twice the unpaid amount) plus legal interest. |
| Delayed release beyond 30 days | Considered unlawful withholding of wages; subject to the same money‑claim mechanism. |
| Retaliation (e.g., withholding clearance) | Possible illegal deduction charge; may aggravate liability in constructive‑dismissal suits. |
10. Filing a Claim
- Single‑Entry Approach (SEnA). File a Request for Assistance at the nearest DOLE Regional Office.
- If unresolved, file a complaint with the NLRC within the 3‑year prescriptive period (Art. 306, Labor Code).
- Small‑money claims (< ₱5,000) may go through DOLE’s Regional Arbitration under Art. 129.
11. Interaction with Other Final Pay Components
| Benefit | Interaction Rule |
|---|---|
| Unused vacation/SIL | Paid in addition to prorated 13th‑month pay. |
| Separation pay (if any) | Computed under Art. 298‑299; independent of the 13th‑month benefit. |
| Backwages / final commissions | Added to total basic salary before dividing by 12, if the items form part of basic wage. |
12. Practical Tips
- Request an itemized breakdown of final pay; it should list the prorated 13th‑month component.
- Submit clearance documents promptly; delays attributable to the employee may toll the 30‑day deadline.
- Keep pay slips & contracts — they are primary evidence if a dispute arises.
- For employers: maintain payroll registers for at least 3 years as required by DOLE inspectors.
13. Common Misconceptions
| Myth | Correct Rule |
|---|---|
| Must stay until December to qualify. | False. One month of service in the year suffices. |
| Resigned employees lose the benefit. | False. They receive the prorated amount. |
| Commissions and allowances are part of the computation. | Generally false. Only basic salary counts, unless the allowance is treated as part of wage by agreement or law. |
| Employer may offset company losses against 13th‑month pay. | Not allowed. Statutory benefits are non‑negotiable. |
Conclusion
In Philippine labor law, service rendered automatically accrues a proportionate right to 13th‑month pay—whether the employment ends by resignation, termination, or expiration of contract. Understanding the statutory formula, deadlines, and enforcement mechanisms empowers both workers and employers to comply fully and avoid costly disputes.