How to compute 13th month pay in the Philippines (and why it's not just your monthly salary)

Every November and December, Filipino employees start asking the same question: “how much is my 13th month pay?” The common shortcut — “it’s just one month’s salary” — is wrong often enough to matter. Here’s the actual DOLE formula, straight from Presidential Decree No. 851, with worked examples for the cases that trip people up.

The formula

Per Presidential Decree No. 851 and DOLE’s implementing rules:

13th month pay = Total basic salary earned during the calendar year ÷ 12

Notice this is a sum-then-divide formula, not “your current monthly salary.” If you got a raise partway through the year, worked overtime, or took unpaid leave, your 13th month pay reflects what you actually earned in basic salary — not what you’re earning right now.

What counts as “basic salary”

Only basic salary is included. Excluded:

Overtime pay
Night differential
Holiday premium pay
Cost-of-living allowance (COLA), rice allowance, transportation allowance
Other monetary benefits not integrated into basic pay

This is the single most common source of confusion: employees sometimes expect their 13th month pay to reflect their full take-home pay including allowances, and it doesn’t. DOLE’s guidance is explicit that 13th month pay is computed on basic salary alone.

Case 1: full year, no absences

If you worked the full calendar year at a constant basic monthly salary, the math is simple:

Monthly basic salary ₱20,000 × 12 months = ₱240,000 total basic salary earned ₱240,000 ÷ 12 = ₱20,000 13th month pay

In this case, 13th month pay does equal one month’s salary — but only because nothing varied during the year.

Case 2: partial year (new hire or resignation)

PD 851 covers any rank-and-file employee who worked at least one month during the calendar year, whether full-time, part-time, or probationary. If you didn’t work all 12 months, the formula still applies — you just sum the basic salary you actually earned:

Hired in July, monthly basic salary ₱18,000, worked 6 months (July–December) ₱18,000 × 6 = ₱108,000 total basic salary earned ₱108,000 ÷ 12 = ₱9,000 13th month pay

Note the divisor stays 12 — you don’t divide by the 6 months worked. This is the mistake that leads people to overestimate a partial-year 13th month pay by 2x.

The same applies if you resign or are terminated before year-end: you’re still entitled to a prorated 13th month pay based on the calendar year you actually worked, computed and paid out upon separation.

Case 3: unpaid leave or absences during the year

If you took unpaid leave, those days don’t count toward “basic salary earned,” which lowers your total even if you worked all 12 months of the year:

Monthly basic salary ₱20,000, worked all 12 months but took 10 unpaid leave days Basic salary reduced during the month(s) with unpaid leave; total basic salary earned for the year comes out to roughly ₱233,300 instead of ₱240,000 ₱233,300 ÷ 12 ≈ ₱19,442 13th month pay

The exact reduction depends on your company’s daily-rate deduction method, but the principle is the same: 13th month pay tracks what you actually earned, not your nominal monthly rate multiplied by 12.

Is 13th month pay taxed?

Under the TRAIN Law, 13th month pay is tax-exempt up to ₱90,000 per year, combined with other bonuses and benefits. Only the portion exceeding ₱90,000 is subject to withholding tax. For most rank-and-file employees earning a typical basic salary, the full 13th month pay falls below this threshold and is received tax-free.

If your total 13th month pay plus other benefits crosses ₱90,000 — common for employees with higher basic salaries or additional bonuses paid in the same category — only the excess above ₱90,000 gets taxed, not the whole amount.

Payment deadline

Employers are legally required to pay 13th month pay on or before December 24 of each year, per DOLE regulations.

Common mistakes

Using current salary instead of the sum actually earned. If you got a mid-year raise, your 13th month pay reflects the blended total, not your new (higher) rate times 12.
Including allowances and overtime in the calculation. Only basic salary counts.
Dividing by months worked instead of always dividing by 12 for partial-year employees — this overstates the payout.
Assuming the whole amount is taxable once it exceeds the ₱90,000 mark, rather than just the excess above ₱90,000.

Calculate your own

The 13th Month Pay Calculator Philippines applies this exact DOLE formula and flags whether your result falls within the ₱90,000 tax-exempt cap. If you’re also checking your government-mandated deductions, see the SSS Contribution Calculator and Pag-IBIG Contribution Calculator.

Summary

13th month pay = total basic salary earned during the calendar year ÷ 12 — always divide by 12, even for partial-year employment.
Only basic salary counts; allowances, overtime, and premiums are excluded.
Tax-exempt up to ₱90,000/year combined with other benefits; only the excess is taxed.
Must be paid by December 24 each year.
This is general guidance based on PD 851 and DOLE rules, not legal advice for a specific dispute — consult DOLE or a labor lawyer for individual cases.