13th-Month Pay and Salary Increases

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Category: HR, Labor and Office

Christmas time is fast approaching and the increased search and query on 13th month pay and Christmas bonus are expected. We had the chance to discuss thirteenth-month pay and Christmas bonus, including the following articles:

[See also 13th month pay: How is it Computed?: 13th month pay: Distinguished from Bonus; 13th Month Pay Basic Discussion: Part 1; 13th Month Pay Basic Discussion: Part 2 and 13th Month Pay Basic Discussion: Part 3]

We recently received a query on 13th-month pay, specifically the computation of 13th-month pay in case of a salary increase within the year. The question goes:

"i am working now in this company for 2 years now, my basic salary is P10, 000 and the company has increased my salary with P1, 000 just june of this year, my basic salary now is P11, 000. how much will I receive for my 13th month"

For this query, we need to consider that the minimum 13th-month pay is one month's worth of basic salary. In a simple world, the computation would also be simple -- the employer pays an extra one-month salary to the employee every year.

But we all know there's nothing simple when it comes to wages and salaries, and one "twist" is when there are salary changes within the year. Should the last salary serve as the basis in computing 13th-month pay? What if the salary increase took effect in December, isn't it unfair to the employer that the higher amount would serve as the basis?

For this scenario, we also need to consider that 13th-month pay is pro-rata: 13th-month pay is 1/12 of the total basic salary within the year. The implementing rules provide a minimum which "shall not be less than one-twelfth (1/12) of the total basic salary earned by an employee within a calendar year" (the pro-rata computation also applies in other scenarios, like when the employee started working in the middle of the year).

In other words, add all the basic salary for the 12 months, then divide it by 12. Voila! The one-month thirteenth-month pay.

(Note: Nothing here should be interpreted as legal advice. Consult your retained lawyer to verify the accuracy of the information contained herein and for legal advice. With thanks to Atty.Fred for this discussion.)