How to Correctly Compute Thirteenth (13th) Month Pay Labor Advisory Guidelines Per Labor Advisory 18, Series of 2021Atty Elvin
Thirteenth (13th) month pay is one of the benefits mandated to be granted to rank-and-file employees.
The legal basis for the grant is P.D. 851, as amended by Memorandum Order No. 28, Series of 1986. The usual error in implementing this is the default practice of giving the one month equivalent of the monthly salary.
Worse, deducting from the said salary the amount pertaining to the days of absences.
Hence, guidelines have been issued by the Department of Labor and Employment (DOLE) in a Labor Advisory to guide private employers. For the year 2021, the DOLE issued on 25 October 2021 Labor Advisory 18, Series of 2021 for this purpose.
As a background, the authority of the DOLE to issue the guidelines is pursuant to Article 5 of the Labor Code of the Philippines, as renumbered and in accordance with Presidential Decree No. 851 requiring employers in the private sector to pay their rank and-file employees a 13th Month Pay.
Rank-and-file employees in the private sector shall be entitled to 13th month pay regardless of their position, designation, or employment status, and irrespective of the method by which their wages are paid, provided that they have worked for at least one (1) month during the calendar year.
Amount of 13th Month Pay
The minimum 13th month pay required by law shall not be less than one-twelfth (1/12) of the total basic salary earned by an employee within a calendar year.
Total basic salary earned during the year = proportionate 13th month pay
This minimum amount shall be provided without prejudice to existing company practice and policy, employment contract or collective bargaining agreement, if any.
The reason it is “proportionate” is that it considers all other factors that may come into play in the computation. For instance, absences, unpaid days, etc.
Since the formula is based on the total basic salary earnings, it anticipates absences, unpaid days, among others. The employer does not have to deduct the monetary equivalent of absences from the purported monthly salary.
For example, based on the illustration of the Labor Advisory. If X is an employee in NCR, his basic daily wage is PhP537.00. Assuming he works Monday to Saturday, the factor used is 313 days in a year.
|April||Company shutdown||No Salary|
|May||Company shutdown||No Salary|
|June||5 days leave with pay||PhP14,006.75|
|July||Company shutdown||No Salary|
|August||Company shutdown||No Salary|
|September||10 days leave w/o pay||PhP8,636.75|
|November||1 day leave w/o pay||PhP13,469.75|
|TOTAL BASIC SALARY EARNED FOR THE YEAR||PhP106,147.00|
Thus, using the formula:
Proportionate 13th month pay = Total basic salary earned during the year
To reiterate, the practice of deducting the absences from the 13th month pay due will yield erroneous result. For instance, in the November example shown above, the correct 13th month pay if there is one day of absence in November is PhP8,845.58.
However, there are computations that consider the November as full 13th month pay credit or PhP14,006.75. Then the PhP537.00 pertaining to the one day of absence would be deducted from the computation.
In the above example, if November is PhP14,006.75 then the total should be PhP106,684.00 for the year, and the 13th month is PhP8,890.33. Erroneously deducting PhP537.00 from PhP8,890.33 will result in PhP8,353.33. Obviously, because of this wrong interpretation, it would result in a lower 13th month pay for the worker.
Time of Payment
The employer shall pay the 13th month pay on or before 24th of December.
No Exemption or Deferment
No request or application for exemption from payment of 13th month pay, or for deferment of the payment thereof shall be accepted and allowed.
Report of Compliance
Employers shall make a report of their compliance with the law to the nearest
Regional Office not later than January 15 of the following year. The report shall con form substantially with the following:
- Name of establishment
- Principal product of business
- Total employment
- Total number of workers benefitted
- Amount granted per employee
- Total amount of benefits granted
- Name, position and telephone number of person giving information