How to Compute 13th Month Pay With Absences

Understanding 13th Month Pay and Its Calculation with Absences

The 13th month pay is a mandatory benefit in the Philippines, providing employees with additional financial support, particularly during the holiday season. Mandated by Presidential Decree No. 851, this benefit serves as a component of employee compensation within the private sector. It aims to provide financial support for both the workforce and employers in the country.

Understanding 13th Month Pay Basics

The 13th month pay is equivalent to one-twelfth (1/12) of an employee’s total basic salary earned within a calendar year. This benefit is a statutory requirement for all rank-and-file employees in the private sector who have worked for at least one month during the calendar year, regardless of their employment status or the method by which their wages are paid. This broad coverage includes permanent, probationary, and contractual employees, extending to those paid daily, monthly, or on a piece-rate basis. Managerial employees, however, are not covered, though they may receive similar year-end bonuses.

Defining “basic salary” for 13th month pay computation is fundamental. It includes all remunerations or earnings paid by an employer for services rendered. However, certain payments are excluded from this definition. These exclusions encompass cost-of-living allowances (COLA), profit-sharing payments, the cash equivalent of unused vacation and sick leave, overtime pay, premium pay, night shift differential, and holiday pay. The Department of Labor and Employment (DOLE) provides guidelines that clarify these inclusions and exclusions, ensuring consistent application of the law.

Calculating 13th Month Pay with Absences

The fundamental formula for computing the 13th month pay involves dividing the total basic salary earned by an employee during the calendar year by twelve. This calculation directly reflects the employee’s actual earnings over the year. Any factor that alters the total basic salary earned will consequently impact the final 13th month pay amount. The manner in which absences are treated is important in this calculation.

Paid absences do not reduce the total basic salary earned, and therefore, they do not affect the 13th month pay. When an employee takes authorized paid leaves, such as paid sick leave, paid vacation leave, or maternity leave benefits, they continue to receive their basic salary for those days. For example, if an employee’s monthly basic salary is PHP 25,000 and they take five days of paid sick leave in a month, their basic salary for that month remains PHP 25,000. These paid days are considered part of the service rendered, and the earnings from them are fully included in the annual basic salary for 13th month pay computation.

Conversely, unpaid absences directly reduce the total basic salary earned by an employee. When an employee is on leave without pay, or has unauthorized absences, they do not receive their basic salary for those specific days. This absence from work without compensation leads to a proportional decrease in their total annual basic salary. For instance, if an employee with a daily basic salary of PHP 1,000 incurs 10 days of unpaid absences throughout the year, their total basic salary earned for the year will be reduced by PHP 10,000 (PHP 1,000 x 10 days). This reduction directly translates to a lower 13th month pay, as the calculation is based on the diminished total basic salary earned.

Other Factors Affecting 13th Month Pay

For employees who have not rendered a full year of service, such as new hires or those who resign or are terminated mid-year, the 13th month pay is computed on a pro-rata basis. This means the benefit is calculated based on the total basic salary earned during the actual period of employment within the calendar year. For example, if an employee with a monthly basic salary of PHP 20,000 works for eight months before resigning, their total basic salary earned would be PHP 160,000 (PHP 20,000 x 8 months). Their pro-rated 13th month pay would then be PHP 13,333.33 (PHP 160,000 / 12).

Tardiness and undertime also impact the 13th month pay, similar to unpaid absences. If an employee’s basic salary is reduced due to being late or leaving early, the total basic salary earned for the year diminishes. These deductions, which reflect unworked time, proportionally lower the base for the 13th month pay calculation. The 13th month pay must be paid by employers no later than December 24 of each year. Employers may also choose to pay half of the benefit before the opening of the regular school year, with the remaining half paid by the December deadline.