In the Philippines, the 13th month pay is one of the most anticipated benefits employees receive every year. Required by law under Presidential Decree No. 851, this extra compensation helps workers cover holiday expenses and boosts morale. But for many, the details shown in the 13th month payslip can be confusing.
This guide explains how the 13th month payslip is calculated, what information it contains, and why it matters for both employees and employers.
What Is a 13th Month Payslip?
A 13th month payslip is the official document that details the computation and release of an employee’s 13th month pay. Just like a regular payslip, it provides transparency on how the benefit was calculated and ensures compliance with labor laws.
The payslip typically includes:
- Employee details (name, position, department)
- Coverage period (January–December of the current year)
- Total basic salary earned within the year
- Formula used in the computation
- Final 13th month pay amount
- Applicable tax deductions (if any)
How Is the 13th Month Pay Calculated?
The computation of 13th month pay in the Philippines is straightforward:
Formula:
Total Basic Salary Earned for the Year ÷ 12 = 13th Month Pay
Example:
If an employee earns ₱25,000 monthly and has worked the entire year, the 13th month pay will be:
₱25,000 × 12 ÷ 12 = ₱25,000
If the employee only worked part of the year, the computation is prorated based on the actual months worked.
Are There Deductions on the 13th Month Payslip?
Yes, but only under certain conditions:
- Tax-Free: If your 13th month pay plus other bonuses is less than or equal to ₱90,000, it is exempt from income tax.
- Taxable: Any amount beyond ₱90,000 is subject to withholding tax.
- No Government Contributions Deducted: SSS, PhilHealth, and Pag-IBIG deductions do not apply to the 13th month pay.
Why the 13th Month Payslip Matters
- Transparency for Employees: It shows exactly how the benefit was computed, preventing confusion and disputes.
- Compliance for Employers: Employers are legally required to release 13th month pay on or before December 24, and the payslip serves as proof of compliance.
- Financial Planning: Employees can use the payslip to track total compensation and plan year-end expenses or savings.
- Record Keeping: The payslip serves as an official record for tax filings, loan applications, or future reference.
Common Misconceptions About the 13th Month Payslip
- It’s the same as a Christmas bonus → Wrong. The 13th month pay is mandatory, while Christmas bonuses are discretionary.
- It includes allowances and overtime → Wrong. Only basic salary is included in the computation.
- All 13th month pays are taxable → Wrong. It’s only taxable if the total exceeds ₱90,000.
Conclusion
The 13th month payslip is an essential payroll document that promotes fairness and transparency in the workplace. By understanding how it’s calculated and why it matters, employees can ensure they are receiving their rightful benefit, while employers can remain compliant with Philippine labor laws.
At the end of the year, this payslip isn’t just about money—it’s a reflection of fair compensation and recognition of employee contributions.