If you own a company in the Philippines or plan to start one, it is important to be aware of the country’s law about holiday pay and the 13th Month Pay. What is the 13th Month Pay?
What Is Thirteenth Month Pay
In most companies, employers pay their employees every two weeks. Now, the thirteenth month pay is an additional pay given to an employee. It is a form of monetary benefit. Accountants compute this based on the number of months within a year that the employee has served the company. In a way, it is the same amount as the monthly basic salary. Thus, it is like one receives one extra month’s worth of salary as if there are 13 months in a year. (We shall discuss more on the computation details later.)
However, is this practice just a tradition or is it a requirement for all companies in the Philippines? In the Philippines, giving employees the thirteenth month pay is a required by the Philippine Law, based on Presidential Decree No. 821 (1975). This states that it is mandatory that employees pay their employees their thirteenth-month pay as an additional payment. There are guidelines on which employees are qualified for this pay.
Exception To The Rule
Should all companies pay the thirteenth month pay to employees? Yes. However, every rule has an exception. The following types of employers are exempted from paying the thirteenth month pay based on PD 851, namely:
- Government and any of its political subdivision, including government-owned and controlled corporations, except those corporations operating essentially as private subsidiaries of the Government;
- Employers already paying their employees 13th month pay or more in a calendar year or its equivalent at the time of this issuance;
- Persons in the personal service of another in relation to such workers; and
- Employers who are paid on purely commission, boundary, or task basis, and those who are paid a fixed amount for performing a 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 shall grant the required 13th month pay to such workers.
Employees Who Are Qualified
Now, are all employees entitled to receive the thirteenth month pay? It depends. An employee is qualified to receive this monetary benefit as long as they have already served the company for at least one month during the calendar year. This is regardless of rank or role.
How can you compute the thirteenth month pay? By concept, it is based on 1/12 of the total basic salary of an employee within the calendar year. Another way, you can also divide the basic monthly salary for the whole year by 12 months.
Christmas Bonus Vs 13th Month Pay
Most foreign employers ask about the Christmas Bonus. Is there a difference between the thirteenth month pay and the Christmas Bonus? Yes, the two are different. While the former is a mandatory pay required by the Philippine Law, the latter is an optional additional pay that is given voluntarily by the employer. It is up to the employers whether or not they want to give employees a Christmas Bonus.
Timing Is Everything
When do employees receive their thirteenth month pay? Usually, employers give this around mid of November or anytime before December 24th. Employers give this in advance, in anticipation for the employees’ Christmas shopping. Most people expect several expenses during the holiday season.
More Tips For Employers
Foreign employers should also take note of the Filipino culture and the Christmas customs and traditions here. Employees expect their employers to be generous since they are a figure of authority. The paternalistic culture in the Philippines causes this ideology.
Therefore, if you are a top executive or the company owner itself, remember to not only give the thirteenth month pay early. You should consider preparing also some Christmas baskets of grocery items for your employees.
Employees will appreciate any form of gifts if a frivolous gift package is beyond your budget.
In A Nutshell
The spirit of Christmas is very strong here in the Philippines. Around the world, the Philippines is known as the country with the longest Christmas celebration. It starts in September 1 and ends on the second week of January.
Since the Philippines is your new or temporary home, consider getting into the holiday spirit as well with the locals. This way, you can establish a harmonious relationship with everyone in this country. This is important for a successful expat life in the Philippines.
Perhaps being a foreigner here makes one feel lonely and homesick, but there is nothing in the world like Christmas in the Philippines. Foreigners and even overseas Filipino migrant workers have this sentiment.
Why is this the case? It is hard to explain why most foreigners and locals alike say that Christmas in the Philippines is the happiest experience in the world. I believe this is a case, experiencing Christmas here is the best way to understand it.
With that in mind, realize that when you give employees their thirteenth month pay, it is an act of generosity that rewards not only the recipient but also the giver. There is a reward of unspeakable joy of making others happy this season.