Key facts at a glance
The formula
1/12 basic pay
PD 851, basic salary earned in the year
Legal deadline
Dec 24
must be paid by, every year
Combined tax-free cap
₱90,000
shared with Christmas bonus & similar
13th month pay in the Philippines is a legal entitlement under Presidential Decree No. 851, equal to one-twelfth of the basic salary you actually earned during the calendar year, and it must reach every rank-and-file employee by December 24. On a ₱30,000 monthly basic salary earned across a full 12 months, that works out to ₱30,000, and because it sits under the ₱90,000 combined tax-exempt cap, it lands in your bank account tax-free.
It isn't a Christmas gift your employer can choose to skip, and it isn't the same thing as a discretionary year-end bonus. It's payroll law, and understanding exactly how it's computed, taxed, and prorated matters whether you're a first-year BPO agent in Cebu IT Park or a manager weighing an offer in BGC.
Compute your own 13th month pay and its tax against the ₱90,000 cap.
Open the 13th month calculatorThe legal basis: Presidential Decree No. 851
PD 851, issued in 1975 and still in force today, requires every private-sector employer in the Philippines to pay all rank-and-file employees a 13th month pay, provided they've worked at least one month during the calendar year. It applies regardless of the employee's position, the nature of employment (regular, probationary, or project-based), or how wages are computed, with one notable exception: employees paid purely on commission, without any fixed or guaranteed basic salary, fall outside the mandate.
The formula itself is simple: total basic salary actually earned within the calendar year, divided by 12. Only basic salary counts toward that base. Overtime pay, holiday premium, night shift differential, cost-of-living allowances, and other bonuses are excluded from the 13th month computation itself, even though some of those amounts may later matter for the separate ₱90,000 tax exemption question.
Employers must release the full amount on or before December 24 each year. Many companies, particularly larger BPO and shared services employers around Metro Manila, Makati, and Cebu, split the payout into a mid-year advance and a year-end balance, but the law only requires the full amount be settled by the December 24 deadline, however it's staged.
Three things employees consistently get wrong
“It's the same thing as a Christmas bonus.”
13th month pay is a separate, legally mandated benefit under PD 851. A Christmas bonus, gift, or productivity incentive is a distinct, optional payment some employers add on top. They only interact because both share the same ₱90,000 tax-exempt cap.
“My employer can decide not to give it if the company had a bad year.”
13th month pay is not discretionary and is not tied to company performance or profitability. Every rank-and-file employee who worked at least one month in the calendar year is legally entitled to it, regardless of how the business performed.
“I resigned in June, so I don't get anything.”
Employees who resign, are terminated, or are laid off before December still receive a prorated 13th month pay based on the basic salary they actually earned during the months they worked, paid out at final pay, not lost.
Three worked examples
Figures below are computed directly through the same engine behind the 13th month pay calculator, using the 1/12 formula, the ₱90,000 combined exemption, and BIR TRAIN graduated rates on any taxable excess.
| Scenario | 13th month | Taxable excess | Net received |
|---|---|---|---|
Entry-level, full year ₱30,000/mo basic, worked all 12 months | ₱30,000 | None (exempt) | ₱30,000 |
Senior hire + Christmas bonus ₱100,000/mo basic + ₱20,000 Christmas bonus | ₱100,000 | ₱30,000 | ₱93,750 |
Resigned mid-year ₱50,000/mo basic, worked only 6 months | ₱25,000 | None (exempt) | ₱25,000 |
The ₱90,000 cap is one shared bucket, not a per-bonus allowance
Under the TRAIN Law (RA 10963), the first ₱90,000 of 13th month pay combined with other benefits, Christmas bonus, productivity incentives, and similar bonuses received in the same calendar year, is exempt from income tax. It is one combined limit across all of those payments together, not a separate ₱90,000 allowance for each one.
In the senior-hire example above, a ₱100,000 13th month pay plus a ₱20,000 Christmas bonus add up to ₱120,000. The first ₱90,000 of that is exempt, but the remaining ₱30,000 gets added to that employee's other taxable compensation and taxed at their marginal BIR bracket, owing ₱7,500 in additional tax that year.
Want your full-year take-home, not just the bonus?
See your BIR TRAIN income tax, SSS, PhilHealth, and Pag-IBIG deductions on your regular salary, bracket by bracket.
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Frequently asked questions
Is 13th month pay mandatory in the Philippines?
Yes. Under Presidential Decree No. 851, every private-sector employer must pay 13th month pay to all rank-and-file employees who have worked for at least one month during the calendar year, regardless of the nature of their employment or how they're paid, as long as they're not paid purely on commission. It is not a bonus employers can choose to skip, and non-compliance is a labor standards violation the Department of Labor and Employment (DOLE) can enforce.
How is 13th month pay computed?
The formula is total basic salary actually earned within the calendar year, divided by 12. On ₱360,000 in annual basic salary, that's ₱30,000. Only basic salary counts toward the base, overtime pay, holiday premium, night differential, allowances, and other bonuses are excluded from the computation, even though some of those may be included when checking the separate ₱90,000 tax exemption.
When must 13th month pay be released?
By law, employers must pay 13th month pay to rank-and-file employees on or before December 24 each year. Many employers in Metro Manila, Cebu, and other hubs release it earlier, sometimes split into two payouts (a mid-year advance and a year-end balance), but the full amount must be settled by December 24 regardless of the payout schedule chosen.
Is 13th month pay taxable?
Only above a threshold. Under the TRAIN Law (RA 10963), the first ₱90,000 of 13th month pay combined with other benefits (Christmas bonus, productivity incentives, and similar bonuses) received in the same calendar year is tax-exempt. Anything above that combined ₱90,000 is added to your taxable compensation for the year and taxed at your marginal BIR bracket. In the entry-level example above, the full ₱30,000 13th month pay falls under the cap and is received tax-free.
Is the ₱90,000 exemption separate for 13th month pay and Christmas bonus?
No. It's one combined cap. If your 13th month pay and Christmas bonus together exceed ₱90,000 in the same year, only the first ₱90,000 of that combined total is exempt, and the excess is taxed. In the senior-hire example above, a ₱100,000 13th month pay plus a ₱20,000 Christmas bonus combine to ₱120,000, so ₱30,000 of that is taxable, owing ₱7,500 in tax at that employee's marginal rate.
What happens to 13th month pay if I resign or get terminated before December?
You still receive it, prorated to the basic salary you actually earned during the months you worked, and it's typically included in your final pay along with unused leave conversion and other amounts owed. An employee who resigns after earning ₱300,000 in basic salary over 6 months, for example, is owed ₱25,000, not the full-year amount they would have received had they stayed through December.
Do managerial employees get 13th month pay too?
PD 851 legally guarantees 13th month pay to rank-and-file employees. Managerial employees (those whose primary duty is managing the business or a department, and who can hire, discipline, or effectively recommend such actions on other employees) are not covered by the mandate, though many employers extend an equivalent 13th month or year-end bonus to managers as a matter of company policy rather than legal obligation.
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