13th Month Pay in the Philippines: How It's Computed (2026)

For most Filipino employees, 13th month pay is the most anticipated payout of the year — it lands just before Christmas and is, for many households, what makes the season possible. But there’s a lot of confusion about who’s entitled to it, how it’s calculated, and how much (if any) is taxed. This guide clears that up using the actual rules.

What 13th month pay is

13th month pay is a mandatory benefit under Presidential Decree No. 851, signed in 1975. It requires private-sector employers to pay covered employees an extra month’s worth of pay each year, on or before December 24.

It is not a bonus in the discretionary sense. A bonus is something an employer may give; 13th month pay is something the law requires. Employers can choose to give more (a 14th month, a performance bonus, gifts), but they cannot give less than the legally computed 13th month pay.

Who is entitled

The rule is broad. You are entitled to 13th month pay if:

• You are a rank-and-file employee (not managerial), and
• You have worked for the employer for at least one month during the calendar year.

A few clarifications that trip people up:

• It doesn’t matter how you’re paid — monthly, daily, piece-rate, or on commission (for the basic-pay component). What matters is that you earned basic salary during the year.
• Resigned or terminated employees still qualify for the portion they earned. If you leave in June, you’re owed a pro-rated 13th month based on what you earned from January to June.
• Managerial employees are technically excluded by the law, though many companies extend it to them as a matter of policy.
• Length of service doesn’t change the formula — a new hire who worked three months gets three months’ worth, computed the same way.

The formula

The core formula is refreshingly simple:

13th month pay = Total basic salary earned during the year ÷ 12

That’s it. You add up all the basic salary you actually earned from January 1 to December 31, then divide by 12.

The subtlety is in the phrase “basic salary earned.” It means the actual basic pay you received — so if you had unpaid absences or started partway through the year, your total is naturally lower, and your 13th month pay is lower to match. This is why it self-pro-rates: someone who worked the full year divides a full year’s salary by 12, while someone who worked half the year divides half a year’s salary by 12.

Run your own figure with the 13th month pay calculator — it adds up your monthly basic pay and applies the division for you.

What counts as “basic salary”

This is where mistakes happen, because not everything on your payslip is part of the computation. Basic salary is your core pay for work performed. The following are generally excluded from the 13th month computation:

• Overtime pay
• Holiday pay and premium pay
• Night-shift differential
• Cost-of-living allowance (COLA) and other allowances
• Cash conversion of unused leave credits
• Profit-sharing payments
• Other monetary benefits that are not part of basic pay

In short: take your basic monthly rate, count what you actually earned of it across the year, and ignore the extras. If your pay is purely a fixed monthly basic salary with no unpaid days, the shortcut is simply one month’s basic salary — because twelve equal months divided by twelve equals one month.

A worked example

Suppose your basic salary is ₱20,000 a month and you worked the entire year with no unpaid absences:

• Total basic salary earned = ₱20,000 × 12 = ₱240,000
• 13th month pay = ₱240,000 ÷ 12 = ₱20,000

Now suppose you started in April at the same ₱20,000:

• Months worked = April to December = 9 months
• Total basic salary earned = ₱20,000 × 9 = ₱180,000
• 13th month pay = ₱180,000 ÷ 12 = ₱15,000

And if you had, say, one month’s worth of unpaid leave during a full year, you’d subtract that from your total earned basic salary before dividing by 12. The calculator handles partial years and gaps for you.

How 13th month pay is taxed

Here’s the good news most employees want to hear: 13th month pay is tax-exempt up to a limit. Under the TRAIN law, 13th month pay and other benefits (such as a Christmas bonus or productivity incentives) are exempt from income tax up to a combined ₱90,000 per year.

How it works in practice:

• If your 13th month pay plus other benefits total ₱90,000 or less, the whole amount is tax-free.
• If they exceed ₱90,000, only the excess is added to your taxable income and taxed at your regular income-tax rate.

So an employee whose 13th month pay is ₱20,000, with no other large bonuses, pays no tax on it. An employee receiving a very large bonus on top of 13th month pay would only be taxed on the portion above ₱90,000. To see how any taxable excess affects your overall tax, use the income tax calculator.

When it must be paid

The deadline is on or before December 24 each year. Some employers split it into two releases — half mid-year and half in December — which is allowed as long as the full amount is paid by the deadline. If your employer pays a mid-year “13th month advance,” that amount counts toward the total; it isn’t a separate, additional benefit unless the company explicitly says so.

Common questions

Is 13th month pay the same as a Christmas bonus? No. 13th month pay is required by law and computed by formula. A Christmas bonus is discretionary. They can both appear in December, but only one is mandatory.

Do I get 13th month pay if I resigned mid-year? Yes. You’re entitled to the pro-rated amount based on the basic salary you earned before leaving, and it’s typically released with your final pay.

Does overtime increase my 13th month pay? No. Overtime is excluded from the basic-salary computation, even though it increases your take-home pay during the year.

I’m paid daily — do I still get it? Yes. Add up the basic wages you actually earned across the year and divide by 12, same as everyone else.

The bottom line

13th month pay is a legal right for rank-and-file employees, computed as your total basic salary for the year divided by twelve, paid by December 24, and tax-free up to ₱90,000 combined with other benefits. The formula is simple once you know that only basic salary counts and that the division by 12 automatically pro-rates partial years.

Check your own number with the 13th month pay calculator, and see how it fits into your overall pay using the take-home pay calculator.

This guide is general information based on Presidential Decree 851 and current tax rules, not legal or tax advice. For disputes or edge cases, consult DOLE or a qualified professional.