If you are at this stage in your business, your legal responsibility is to provide your employees with 13th month pay. In this article, we\u2019ll briefly discuss the legalities behind the it and then show tips and examples on how to compute the mandatory 13th-month pay in the Philippines. <\/p>\n\n\n\n
Also read: Take Note of These Tax Exemptions for MSMEs<\/a><\/strong><\/em><\/p>\n\n\n\n The 13th month pay is a benefit given to all Filipino employees. It\u2019s equivalent to one-twelfth (1\/12)<\/strong> of an employee\u2019s salary in one calendar year.<\/p>\n\n\n\n The Philippines is one of the countries that has made 13th month pay mandatory. It\u2019s additional annual compensation for employees on top of their monthly salaries, benefits and other performance bonuses.<\/p>\n\n\n Employees can file legal action if their employer fails to follow this mandate. Knowing how to compute 13th month pay<\/strong> is vital for any business owner with full-time employees.<\/p>\n\n\n\n The original 13th Month Pay Law was penned by labor leader and human rights advocate, Zoila de la Cruz, <\/strong>and signed by then president Ferdinand Marcos<\/strong> on December 16, 1975. <\/p>\n\n\n\n However, the law only granted the benefit to employees who received less than Ph1,000 monthly. It wasn\u2019t until August 13, 1986, after Pres. Corazon Aquino<\/strong> amended the law and made the 13th month pay mandatory for all employers. <\/p>\n\n\n\n While Filipinos often refer to 13th-month pay as a bonus, it\u2019s different from a Christmas bonus.<\/p>\n\n\n\n A Christmas bonus may generally be related to employee performance or tenure and isn\u2019t required by law. It can also be given based on a company’s financial performance for the year.<\/p>\n\n\n\n Meanwhile, as pointed out earlier, the 13th month pay is mandatory regardless of an employee’s or the company’s performance.<\/p>\n\n\n\n According to its definition, the 13th month pay is equivalent to one month\u2019s salary in a calendar year. As such, for employees whose monthly basic salary is the same all year is computed as: <\/p>\n\n\n\n 13th month pay = total annual salary \/ 12<\/em><\/strong><\/p>\n\n\n\n Following the definition, deductions on the basic salary because of unpaid absences will also factor into the calculation. Here\u2019s a sample calculation of 13th month pay with absences:<\/p>\n\n\n (13th month pay = (total annual salary – non-paid absences) \/ 12<\/strong>)<\/p>\n\n\n\n Total Annual Salary = P235,000 \/ 12<\/strong><\/p>\n\n\n\n 13th Month Pay <\/strong>= P19,583.33<\/strong><\/p>\n\n\n\n As long as an employee has worked one full month in the calendar year, he or she is entitled to receive 13th month pay for the number of months in the company (prorated calculation). Here\u2019s how to compute 13th month pay for resigned employee:<\/p>\n\n\n (13th month pay = total annual salary (minus non-paid absences, if any) \/ months worked)<\/strong><\/p>\n\n\n\n Salary for the Year = P140,000 \/ 8<\/p>\n\n\n\n 13th Month Pay = P17,500<\/strong><\/p>\n\n\n\n The law exempts the following employers from giving this mandatory benefit:<\/p>\n\n\n\n If you\u2019re just starting an online business<\/a> or opening a small shop, it helps to consult a certified public accountant who can help you register your business, set up your books and maybe even an accounting and bookkeeping software.<\/p>\n\n\n\n Once you have the essentials, you can study bookkeeping and financial management yourself or delegate it to a trusted individual. However, once your business grows, and you need to hire more full-time employees, it may become necessary to hire an accountant. <\/p>\n\n\n Evaluate your situation:<\/strong><\/p>\n\n\n\n As with calculating business taxes, determining the 13th month pay of every employee should be efficient and accurate. Apart from fulfilling legal obligations, paying their 13th month pay on time can lift your employees\u2019 morale and encourage them to give their best at work. <\/p>\n\n\n\n Employees are the lifeblood of a business; if you want your business to prosper, you must also meet your employees\u2019 expectations.<\/p>\n\n\n\n Investing your 13th-month pay is a wise financial decision that can help you grow your money over time. If you have an entrepreneurial spirit, there are several investment options available, depending on your financial goals, risk tolerance and investment horizon.<\/p>\n\n\n Here are five investments you can explore:<\/strong><\/p>\n\n\n\n Open a savings account. <\/strong>One of the safest options is to deposit your 13th-month pay in a high-yield savings account. Look for accounts with competitive interest rates and minimal fees.<\/p>\n\n\n\n Invest in Mutual funds Unit Investment Trust Funds (UITFs). <\/strong>You can start investing in Mutual funds and UITFs for as low as Ph1,000-5,000. This is a good option for those who want professional management of their investments.<\/p>\n\n\n\n Put it in a time deposit. <\/strong>Time deposits offer higher interest rates than regular savings accounts, but your money will be locked in for a specific period, usually ranging from a few months to several years.<\/p>\n\n\n\n Buy stocks.<\/strong> Consider investing in the Philippine Stock Exchange (PSE). You can open a stock trading account with a brokerage firm and start buying shares of publicly traded companies. Be aware, though, that investing in stocks carries a higher level of risk.<\/p>\n\n\n\n Start a small business.<\/strong> Of course, our best recommendation is to open your own business. If you have a business idea or want to start a small venture, consider using your 13th-month pay as seed capital.<\/p>\n\n\n\n Browse through our blog for more helpful articles about starting and growing your business<\/a>. <\/p>\n\n\n\n If you’re an MSME, take note of these benefits you can get:<\/strong> Your business is growing and hiring more staff. One of the first things you need to learn is how to compute for the mandatory 13th month pay. (This article was updated Oct. 13, 2023)<\/p>\n","protected":false},"author":5,"featured_media":13798,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_seopress_robots_primary_cat":"","_seopress_titles_title":"How to Compute 13th Month Pay in the Philippines","_seopress_titles_desc":"Hiring staff for your business means you need to know how to compute their 13th month pay. Here's a full guide.","_seopress_robots_index":"","footnotes":""},"categories":[201,69],"tags":[485,481,483,480,484,479,482],"class_list":["post-5754","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-beginner-smes","category-business-basics","tag-13th-month-pay-computation","tag-how-to-compute-13th-month-pay","tag-how-to-compute-13th-month-pay-for-resigned-employee","tag-how-to-compute-13th-month-pay-philippines","tag-how-to-compute-13th-month-pay-prorated","tag-how-to-compute-13th-month-pay-with-absences-13th-month-computation","tag-tax-calculator-philippines"],"_links":{"self":[{"href":"https:\/\/blog.ninjavan.co\/en-ph\/wp-json\/wp\/v2\/posts\/5754","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blog.ninjavan.co\/en-ph\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.ninjavan.co\/en-ph\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.ninjavan.co\/en-ph\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.ninjavan.co\/en-ph\/wp-json\/wp\/v2\/comments?post=5754"}],"version-history":[{"count":21,"href":"https:\/\/blog.ninjavan.co\/en-ph\/wp-json\/wp\/v2\/posts\/5754\/revisions"}],"predecessor-version":[{"id":14301,"href":"https:\/\/blog.ninjavan.co\/en-ph\/wp-json\/wp\/v2\/posts\/5754\/revisions\/14301"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blog.ninjavan.co\/en-ph\/wp-json\/wp\/v2\/media\/13798"}],"wp:attachment":[{"href":"https:\/\/blog.ninjavan.co\/en-ph\/wp-json\/wp\/v2\/media?parent=5754"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.ninjavan.co\/en-ph\/wp-json\/wp\/v2\/categories?post=5754"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.ninjavan.co\/en-ph\/wp-json\/wp\/v2\/tags?post=5754"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}The 13th Month Pay Law<\/strong><\/h2>\n\n\n\n
![\"\"](\"https:\/\/media.giphy.com\/media\/3o6gDWzmAzrpi5DQU8\/giphy.gif\")
is mandatory.<\/em><\/figcaption><\/figure>\n<\/div>\n\n\n13th month pay vs Christmas bonus<\/h2>\n\n\n\n
13th Month Pay Cheat Sheet<\/strong><\/h2>\n\n\n\n
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Who are eligible for 13th Month Pay?<\/h3>\n\n\n\n
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Who Are NOT Eligible for 13th Month Pay?<\/h3>\n\n\n\n
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How to Compute the 13th Month Pay<\/strong><\/h2>\n\n\n\n
Computing With Absences<\/strong><\/h3>\n\n\n\n
![\"Image\"](\"https:\/\/blog.ninjavan.co\/en-ph\/wp-content\/uploads\/sites\/2\/2023\/10\/image.png\")
<\/figure>\n<\/div>\n\n\nComputing for Resigned\/Terminated Employee<\/strong><\/h3>\n\n\n\n
![\"Image](\"https:\/\/blog.ninjavan.co\/en-ph\/wp-content\/uploads\/sites\/2\/2023\/10\/image-2.png\")
<\/figure>\n<\/div>\n\n\nWho Are Exempt from Paying the 13th Month Pay?<\/strong><\/h2>\n\n\n\n
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Do I Need to Hire an Accountant?<\/strong><\/h2>\n\n\n\n
![\"\"](\"https:\/\/media.giphy.com\/media\/3ornjKd18tFIZ8PUKQ\/giphy.gif\")
<\/figure>\n<\/div>\n\n\n\n
For employees: How to invest your 13th month pay wisely?<\/h2>\n\n\n\n
![\"13th](\"https:\/\/blog.ninjavan.co\/en-ph\/wp-content\/uploads\/sites\/2\/2022\/08\/13th-month-pay-investments.jpg\")
or starting your own business.<\/em><\/figcaption><\/figure>\n<\/div>\n\n\n
8 Government Programs for Micro-Businesses<\/a>
Govt. Benefits for Solo Parent Entrepreneurs<\/a>
Ninja Van Celebrates A Year of Innovation in Support of Filipino MSMEs<\/a><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"