Executive Summary

Private-sector rank-and-file employees are entitled to a pro-rated 13th-month pay based on the basic salary actually earned within the calendar year up to the date of separation, whether the separation is by resignation, termination, retirement, or completion of contract. As a practical rule, employers release the pro-rated 13th-month with the final pay, subject to lawful deductions and clearances. This article lays out who is covered, how to compute, when to release, tax treatment, permissible deductions, common disputes, and sample computations—all in the Philippine labor context.

Legal Character & Coverage

What it is: A statutory benefit equal to at least 1/12 of the basic salary earned in a calendar year.
Who is covered: Rank-and-file employees in the private sector, regardless of position, pay method (daily/monthly/piece-rate), or employment status (probationary, project, fixed-term, regular), so long as they earned basic salary during the year.
Who may be outside minimum statutory coverage:
- Managerial employees (as defined in labor standards) are not within the minimum coverage of the 13th-month statute, although many employers grant it by policy/CBA.
- Workers paid purely by commission or boundary with no basic wage component may fall outside, depending on facts and jurisprudence. If there is a guaranteed basic wage, pro-rating applies to that wage; commissions are generally excluded from the base unless a CBA/policy or controlling jurisprudence treats a particular incentive as part of basic salary.
Public sector: Government personnel have separate rules; this article focuses on private employment.

Right Upon Resignation or Other Separation

Entitlement: If you earned basic salary in the current calendar year before separation, you are entitled to a pro-rata 13th-month for that period.
No forfeiture: The benefit cannot be forfeited due solely to resignation or failure to complete the year; it must be paid pro-rata for services actually rendered.

Computation Basics

Formula (statutory floor)

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

“Basic salary” includes: the employee’s contractual basic wage for work actually performed (or deemed paid for regular workdays under company policy/CBA). If a wage order has integrated COLA into the basic wage, it forms part of the base.
“Basic salary” excludes: overtime, premium pay, night differential, holiday pay, hazard pay, cash value of unused leaves, allowances (transport, meal, rice, clothing, representation), bonuses and incentives not part of basic wage, and SSS/PhilHealth/Pag-IBIG benefits.
No-work-no-pay periods (e.g., LWOP, long unpaid suspensions) do not add to the base. Paid days that reduce actual salary (e.g., unpaid absences) proportionally lower the base.

Common edge cases

Maternity leave: If employer-paid salary continues, it counts; if pay came solely from SSS benefit (no employer salary), it does not form part of the basic-salary base unless policy/CBA says otherwise.
New hires/resigned mid-year: Compute on actual basic salary earned from date of hire up to separation date—then divide by 12, not by months worked.
Project/fixed-term/seasonal: Same pro-rata rule on the basic wage earned during the stint.

Release & Timing

When to pay after resignation: Best practice—and widely observed—is to release the pro-rated 13th-month with the final pay, within 30 calendar days from separation (or earlier if company policy/CBA provides a shorter period).
Annual deadline for continuing employees: On or before December 24 each year. This does not bar earlier payment to separated employees.

Tax Treatment

Tax-exempt ceiling: 13th-month and other benefits are income-tax-exempt up to the statutory cap in force for the year (commonly ₱90,000 under TRAIN).
Excess over the cap is subject to withholding tax. For separated employees with small pro-rated amounts, tax is typically nil unless other benefits push the aggregate above the cap.

Deductions, Clearances, and Offsets

Lawful deductions only: Employers may deduct statutory contributions/taxes, amounts due under written authorizations, or liquidated accountabilities (e.g., cash advances, unreturned company property) supported by policy/contract.
No penalty forfeiture: Employers cannot withhold the pro-rated 13th-month as a penalty unrelated to a liquidated, documented company claim.
Final pay reconciliation: Any offsetting must appear in a clear final pay statement, with supporting documents and employee acknowledgment where feasible.

Employer Compliance Checklist

☐ Identify if the employee is rank-and-file (statutory) or covered by policy/CBA (extends benefit).
☐ Compute basic salary actually earned from January 1 to separation date.
☐ Exclude non-basic earnings (OT/premiums/allowances/SSS benefits).
☐ Apply 1/12 factor to arrive at the pro-rated amount.
☐ Reconcile lawful deductions; prepare final pay statement.
☐ Release within 30 days of separation (or earlier per policy).
☐ Issue COE upon request (good practice to provide with final pay).

Employee Action Points

Ask for a final pay breakdown showing: (a) salaries to date, (b) unused leave conversion (if any), (c) pro-rated 13th-month, (d) deductions, and (e) net pay.
Check the base: Verify that only basic salary was used and that excluded items (allowances/OT) weren’t improperly removed from the base (they should never have been in the base).
Follow up timeline: If unpaid beyond 30 days without valid reason, request release in writing and, if unresolved, consider DOLE’s SEnA for quick conciliation, then money claims before the Labor Arbiter.

Worked Examples

Example 1 — Monthly-paid resigning mid-year

Basic monthly salary: ₱20,000
Employment: January 1 to April 15 (3.5 months of paid work)
Total basic salary earned: ₱20,000 × 3.5 = ₱70,000
13th-month: ₱70,000 ÷ 12 = ₱5,833.33

Example 2 — Daily-paid with unpaid absences

Daily rate: ₱900; Paid days Jan–Mar: 60, 66, 54 = 180 days
Total basic salary: 180 × ₱900 = ₱162,000
13th-month: ₱162,000 ÷ 12 = ₱13,500

Example 3 — With allowances and OT (excluded)

Monthly basic: ₱18,000; allowances: ₱2,000; average OT: ₱1,500
Worked Jan–Jun: 6 months
Base: ₱18,000 × 6 = ₱108,000 (ignore allowances/OT)
13th-month: ₱108,000 ÷ 12 = ₱9,000

Frequent Points of Friction (and How They’re Resolved)

“You didn’t finish the year; no 13th-month.” – Incorrect. The law requires pro-rated payment for services actually rendered.
“We’ll pay it in December with everyone else.” – For resigned staff, best practice is to pay with final pay. Delaying without basis risks a money-claims finding.
“We deducted your 13th-month to cover an unreturned item.” – Allowed only if there is a documented accountability under policy/contract, and the deduction reflects actual value (or agreed amount). Otherwise, it’s improper.
“Commissions are part of your basic salary base.” – Generally no, unless a CBA/policy or controlling jurisprudence treats a specific commission as part of basic wage. When in doubt, compute two scenarios and anchor to the more conservative lawful base.
“Your maternity period counted as salary.” – Only employer-paid salary counts. Amounts paid solely as SSS benefit do not form part of the base unless the employer chose to continue salary under policy/CBA.

Practical Q&A

Q: I resigned in March. Am I entitled? A: Yes, to a pro-rata 13th-month based on basic salary from Jan 1–your last day.

Q: I started in August and resigned in November. A: You still get a pro-rata amount computed on your basic salary earned Aug–Nov, divided by 12.

Q: Can my employer make me sign a waiver? A: You cannot validly waive a statutory minimum benefit you’ve already earned.

Q: I’m managerial. Do I get it after resignation? A: The statute’s minimum covers rank-and-file. If your company extends 13th-month to managerial staff by policy/CBA, you get the pro-rata amount under that policy.

Bottom Line

Upon resignation or any separation, a private-sector rank-and-file employee is entitled to, and should receive, a pro-rated 13th-month pay calculated from basic salary actually earned up to the separation date and released with final pay (typically within 30 days). Exclude non-basic earnings from the base, apply lawful deductions only, and document everything clearly. Where delays or improper computations occur, employees can use SEnA/DOLE and money-claims procedures to enforce payment.

This article is for general information and does not replace tailored legal advice. For case-specific issues, consult a Philippine labor lawyer or your local PAO/IBP/DOLE office.