December is coming and that means Christmas and the 13th-month pay for employees. As mandated by law in Presidential Decree No. 851 that all employers are required to pay their employees the 13th-month pay. The employer must issue the payment before December 24 of every year. An employer, however, may give to his employees one half (½) of the required 13th month pay before the opening of the regular school year and the other half on before the 24th of December of every year. The frequency of payment of this monetary benefit may be the subject of agreement between the employer and the recognized/collective bargaining agent of the employees.
It is wise to an employer to know how to compute the 13-month pay and also for the employees so that both parties will be satisfied to what amount will they give and will be receive. For employees, it is a need to know how to compute so that you will know if you are receiving the right amount.
Based from Section 2 of PD No. 851, which was issued by former president Ferdinand E. Marcos on December 16, 1975, stated that:
(b) "Basic salary" shall include all remunerations or earnings paid by an employer to an employee for services rendered but may not include cost-of-living allowances granted pursuant to Presidential Decree No. 525 or Letter of Instructions No. 174, profit-sharing payments, and all allowances and monetary benefits which are not considered or integrated as part of the regular or basic salary of the employee at the time of the promulgation of the Decree on December 16, 1975.
Here is a sample computation below, but first take note that the 13th-month pay of an employee is based on the basic salary and the length of service an employee rendered to the company.
Situation A : You rendered 12 months of service and a basic salary of 20,000 pesos per month.
Situation B : You rendered 9 months of service and a basic salary of 20,000 pesos per month.
Thirteenth month pay and other benefits amounting to P 30,000 and below are not subject to income tax.
Reference : www.lawphil.net
www.bir.gov.ph
www.bir.gov.ph
