Thirteenth Month Pay Managerial Employees Philippines


Thirteenth-Month Pay for Managerial Employees in the Philippines

A complete legal overview as of 16 July 2025

1. Statutory Framework

Instrument Key Provision Effect on Managerial Employees
Presidential Decree No. 851 (Dec 16 1975) Mandates payment of a thirteenth-month pay to rank-and-file employees. Originally limited to those earning ≤ ₱1,000/month; the income ceiling was later removed. Expressly excludes managerial employees from the mandatory grant (§2, PD 851; §3(c), Implementing Rules).
Labor Code, Art. 94 (now renumbered Art. 103) Defines “managerial employees” for purposes of hours-of-work, but PD 851 adopts the same concept: one who “has the power to lay down management policies and hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees.” Provides the functional test used to decide if an employee is managerial, and therefore outside the statutory 13th-month entitlement.
Department Order No. 6, series 1975 & DO #28-A, s. 1987 Issue detailed rules on coverage, computation, and exclusions—including the managerial employee carve-out. Confirms that the exclusion applies regardless of salary level; rank-and-file status is the controlling factor.
Labor Advisory No. 23-20 (Oct 8 2020) & succeeding annual advisories Reiterate the duty of all covered employers to pay by 24 December each year and clarify COVID-19-era adjustments. Advisory language never alters the basic exclusion but encourages employers to give equivalent benefits to promote goodwill.
BIR Revenue Regulations No. 8-2018 Up to ₱90,000 of 13th-month pay and other benefits is tax-exempt. Applies only if the employer voluntarily grants the benefit to managerial staff; otherwise, no tax issue arises.

2. Why Managerial Employees Are Excluded

  1. Legislative intent – PD 851 was an economic relief measure aimed at lower-income workers. Congress and DOLE have never amended the core rank-and-file limitation.
  2. Managerial prerogatives – Managers are presumed to have bargaining power and access to separate bonus schemes or profit-sharing.
  3. Avoiding double counting – Many firms already embed incentive plans for managers; a mandatory 13th-month would duplicate those programs.

Practical implication: There is no statutory right for managers to demand a 13th-month pay. Their only possible sources of entitlement are (a) company policy or practice, (b) CBA coverage where managerial ranks are included, or (c) individual employment contracts.


3. Company Practice & Contractual Grant

Philippine labor jurisprudence treats a long-consistent, deliberate employer practice as part of the employment contract (Art. 1700 Civil Code). If management has given 13th-month pay to managers uninterrupted for ≥ 3 years, it becomes a vested benefit that cannot be unilaterally withdrawn without violating the non-diminution rule (Art. 100 Labor Code).

Landmark cases

Case G.R. No. Ruling
Wesleyan University-Philippines v. Wesleyan University-Philippines Faculty & Staff Ass’n (2017) 208321 Sustained faculty claim to a “14th-month” benefit because of an established practice; clarified that the managerial exclusion in PD 851 does not bar enforcement of a voluntarily granted benefit.
Philippine National Oil Co. v. Court of Appeals (1989) 111718 Held that a “Christmas bonus” enjoyed by managers for 4 years could not be revoked.
University of Pangasinan v. Santos (1991) 88987 Distinguished between rank-and-file statutory 13th-month and contractual bonuses for managers.

4. Computation When Voluntarily Granted

Formula:

$$ \text{13th-Month Pay} = \frac{\text{Basic Salary Earned for the Calendar Year}}{12} $$

  • Basic salary excludes allowances and monetary value of non-cash benefits unless the employer’s policy specifies inclusion.
  • Partial-service managers (e.g., hired mid-year or resigned) receive a proportionate share.
  • Payment deadline mirrors PD 851-ranked deadlines unless the company sets an earlier date.

5. Tax Treatment

  1. ₱90,000 ceiling (RR 8-2018) – Managerial employees enjoy the same tax-exempt cap as rank-and-file, provided the benefit is truly a 13th-month or equivalent “Christmas bonus.”
  2. Amounts above ₱90,000 are subject to graduated income tax and withholding.
  3. The benefit is not considered “de minimis”; it must be reported in BIR Form 2316.

6. Interaction with Other Bonuses

Benefit Rank-and-file Managerial
Statutory 13th-month Mandatory Not mandatory
Performance bonus / Profit-sharing Discretionary Common; often substitutes for 13th-month
14th / 15th-month pay (corporate policy) Discretionary Discretionary

Note: If a firm labels an amount as “performance bonus” but computes it exactly like a 13th-month, the courts may treat it as a 13th-month and apply the non-diminution doctrine.


7. Enforcement & Remedies

  • A managerial employee denied an established 13th-month may file a money claim with the DOLE-NLRC (4-year prescriptive period, Art. 306).
  • Where entitlement rests on CBA terms, the dispute proceeds to grievance and voluntary arbitration.
  • Burden of proof is on the employee to show: (a) corporate policy/practice, or (b) contractual promise.

8. Best-Practice Checklist for Employers

  1. Document bonus policies separately for managerial vs. rank-and-file staff.
  2. Specify that grants are ex gratia and revocable if the intent is to avoid permanence.
  3. Communicate computation methodology and payment schedule in writing.
  4. Review consistent application—sporadic grants weaken a claim of practice; multi-year grants strengthen it.
  5. Withhold & report taxes properly where the benefit exceeds ₱90,000.
  6. Align any revocation or modification with Labor Code Art. 100 to avoid diminution claims.

9. Frequently Asked Questions

Question Short Answer
Can a manager insist on statutory 13th-month pay? Not under PD 851. Only rank-and-file are covered by law.
If a manager becomes rank-and-file (or vice-versa) within the year, what happens? Compute pro-rata based on months spent in each status.
Is the benefit part of “basic wage” for retirement pay? No; the Labor Code defines retirement pay as partly based on latest salary, which excludes bonuses.
Can an employer convert the 13th-month into a higher monthly salary to simplify payroll? For managers, yes—provided it is transparent and with employee consent; rank-and-file conversion is prohibited by PD 851 §4.
Are expatriate managerial employees in PEZA zones included? Only if their contract or practice grants it; PD 851 exclusion still applies.

10. Key Takeaways

  • Mandatory 13th-month pay applies only to rank-and-file; managerial employees rely on contract, policy, or practice.
  • Regularity establishes entitlement—three years of continuous grant can crystallize a benefit.
  • Employers remain free to design distinct reward structures for managers, but clarity in documentation and consistency in application are essential to avoid legal exposure.

This article is intended for general informational purposes and does not constitute legal advice. For specific situations, consult a Philippine labor-law specialist.

Disclaimer: This content is not legal advice and may involve AI assistance. Information may be inaccurate.