Sample Computation of 13th Month Pay for Year 2020

Sample computation of the 13^th month pay mandatory benefit is shown here to guide both the employer and employee especially that the date of payment under the law is getting closer.

Under P.D. 851, all employers are required to pay all their employees receiving a basic salary a 13th-month pay not later than December 24 of every year. Memorandum No. 28 modified Section 1 of P.D. 851 to the extent that all employees are hereby required to pay all their rank-and-file employees a 13th month pay.

Based on the Revised Guidelines on Implementation of the 13^th Month Pay Law, the covered employees (rank-and-file) are entitled to the benefit regardless of their 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 a calendar year.

The following employers are still not covered by P.D. No. 851:

1. The Government and any of its political subdivisions, including government-owned and controlled corporations, excepts those corporations operating essentially as private subsidiaries of the Government;
2. Employers already paying their employees a 13th month pay or more in a calendar year or its equivalent at the time of this issuance;
3. Employers of household helpers and persons in the personal service of another in relation to such workers; and
4. Employers of those who are paid on purely commission, boundary, or task basis, and those who are
   

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   paid a fixed amount for performing specific work, irrespective of the time consumed in the performance thereof, except where the workers are paid on piece-rate basis in which case the employer shall grant the required 13th month pay to such workers.

Workers paid on piece-rate basis refer to those who are paid a standard amount for every piece or unit of work produced that is more or less regularly replicated, without regard to the time spent in producing the same.

The term “its equivalent” includes Christmas bonus, mid-year bonus, cash bonuses and other payments amounting to not less than 1/12 of the basic salary but shall not include cash and stock dividends, cost of living allowances and all other allowances regularly enjoyed by the employee, as well as non-monetary benefits. Where an employer pays less than required 1/12th of the employees basic salary, the employer shall pay the difference.

The Labor Code distinguishes a rank-and-file employee from a managerial employee. It provides that a managerial employee is one who is vested with powers of prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall discharge, assign or discipline employees, or to effectively recommend such managerial actions. All employees not falling within this definition are considered rank-and-file employees.

The above distinction is used as guide for the purpose of determining who are rank-and-file employees entitled to the mandated 13th month pay. Now, the payment of the 13^th month pay is based on the employee’s basic salary.

The “basic salary” of an employee for the purpose of computing the 13th month pay shall include all remunerations or earning paid by this employer for services rendered but does not include allowances and monetary benefits which are not considered or integrated as part of the regular or basic salary, such as the cash equivalent of unused vacation and sick leave credits, overtime, premium, night differential and holiday pay, and cost-of-living allowances.

However, these salary-related benefits should be included as part of the basic salary in the computation of the 13th month pay if by individual or collective agreement, company practice or policy, the same are treated as part of the basic salary of the employees.

Formula for computing the 13^th month pay is:

Total basic salary earned during the year / 12 months

Sample Computation:

Using the NCR Minimum Wage of PhP537.00 per day, X who works from Monday to Saturday, shall have an equivalent monthly salary of PhP14,006.75 based on 313 factor, shall have the following 13^th month pay for the year 2020.

Year 2020

January               no absence                   PhP14,006.75

February              no absence                   PhP14,006.75

March                  1 day leave w/ pay       PhP14,006.75

April                   no absence                   PhP14,006.75

May                     5 days of

absence without pay     PhP11,321.75

June                   2 days of

Absence without pay     PhP12,932.75

July                     no absence                   PhP14,006.75

August                 2 days leave w/ pay      PhP14,006.75

September           no absence                   PhP14,006.75

October               on leave w/o pay          PhP       00.00

November            on leave w/o pay          PhP       00.00

December            no absence                   PhP14,006.75

TOTAL BASIC SALARY EARNED            PhP136,308.50

13^th Month Pay    = PhP136,308.50 / 12

= PhP11,359.05

As can be seen from the above illustration, if the approach is the basic salary earned during the calendar year, it will naturally remove the days when the employee did not earn income because he did not report to work.

It is erroneous to deduct the entire amount of days of absence considering that the 13^th month is just 1/12 of the basic salary earned.

See the explanation in Filipino / Tagalog in my youtube videos here: