How is 13th month pay computed?

Answer

The basic formula is the total basic salary earned during the calendar year divided by 12. "Basic salary" generally excludes allowances and monetary benefits that are not part of the regular wage, such as the cash equivalent of unused leave, overtime, holiday, and night-shift differential pay, unless these are treated as part of the basic salary by company practice or agreement.

For employees who worked only part of the year, the 13th month pay is prorated based on the months actually worked. Unauthorized absences that reduce earned basic salary correspondingly reduce the computation, since it is based on what was actually earned.

Sources & further reading

• Full report: 13th month pay & final pay

Cases on this topic

• Alliance of Government Workers v. Minister of Labor and Employment
• Bani Rural Bank v. De Guzman
• Boie-Takeda Chemicals, Inc. v. De la Serna
• Brokenshire Memorial Hospital v. NLRC
• Central Azucarera de Tarlac v. CAT Labor Union-NLU
• Dario Nacar v. Gallery Frames
• Davao Fruits Corporation v. Associated Labor Unions
• Dentech Manufacturing Corporation v. NLRC

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