How 13th month pay is calculated in the Philippines
Presidential Decree No. 851 requires Philippine employers to pay all rank-and-file employees a 13th month pay equal to one-twelfth of the total basic salary earned within the calendar year — a formula unchanged since it took effect in 1975. Employees who worked less than a full year still qualify, receiving a proportional amount based on the basic salary they actually earned.
Basic salary for this computation generally excludes allowances and monetary benefits not integrated into basic pay, such as overtime pay, premium pay, night shift differential, and cash equivalents of unused leave, though company policy or a collective bargaining agreement can define this differently. Under the TRAIN law, 13th month pay and other benefits are tax-exempt up to a combined ₱90,000 per year — amounts above that ceiling are subject to income tax, and this threshold can change by future legislation.
13th month pay = Total basic salary earned during the year ÷ 12
How do I calculate 13th month pay in the Philippines?
Divide the total basic salary you earned during the calendar year by 12 — this single formula from Presidential Decree 851 has applied unchanged since 1975. Example: a monthly basic salary of 25,000 earned for all 12 months gives a 13th month pay of (25,000 x 12) / 12 = 25,000; if you only worked 8 of those months, it becomes (25,000 x 8) / 12 = 16,666.67.
Steps to calculate 13th month pay
- Add up the basic salary you actually earned in each month you worked during the calendar year (January to December).
- If your basic monthly salary stayed the same all year, you can simplify this to monthly salary x months worked.
- Divide that total basic salary earned by 12, regardless of how many months you actually worked.
- Compare the result to the combined ₱90,000 annual tax-exempt ceiling for 13th month pay and other benefits.
- Any amount of 13th month pay plus other benefits above ₱90,000 in the same year is subject to income tax on the excess.
13th month pay formula (PD 851)
13th month pay = Total basic salary earned in the calendar year / 12
- Total basic salary earned = the sum of basic pay actually received for each month worked, generally excluding overtime, premium pay, night differential, and unused-leave cash conversions
- 12 = the fixed divisor used regardless of how many months were actually worked, which is what makes the payout proportional for partial-year employees
Example 13th month pay calculations
| Monthly basic salary | Months worked | 13th month pay |
|---|
| ₱25,000 | 12 | ₱25,000.00 |
| ₱18,000 | 6 | ₱9,000.00 |
| ₱30,000 | 10 | ₱25,000.00 |
| ₱15,000 | 3 | ₱3,750.00 |
| ₱50,000 | 12 | ₱50,000.00 |
Frequently asked questions
Do employees who resigned or were terminated mid-year still get 13th month pay?
Yes. PD 851 entitles any rank-and-file employee who has worked at least one month during the calendar year to a proportionate 13th month pay based on the basic salary actually earned, calculated up to their last day of employment, regardless of whether they resigned, were terminated, or the company closed.
What counts as basic salary for this computation?
Basic salary is the fixed monthly compensation for work performed, generally excluding overtime pay, premium pay for rest days and holidays, night shift differential, cost-of-living allowances, and cash equivalents of unused leave — though some employers voluntarily include additional items, which would need to be added manually to this calculator's basic salary input.
Is the ₱90,000 tax-exempt threshold only for 13th month pay?
No, it is a combined annual ceiling covering 13th month pay together with other benefits (such as productivity incentives and Christmas bonuses); if the total of all these benefits in a year exceeds ₱90,000, only the amount above the threshold is subject to income tax, not the entire benefit.
When must employers pay the 13th month pay?
Philippine law requires payment on or before December 24 each year; some employers choose to split it into two installments (for example, half in May or June and the remainder in December), which is allowed as long as the full amount is paid by the December deadline.
This calculator applies the PD 851 formula to the basic salary and months you enter; it does not verify whether specific allowances should be included in your company's definition of basic salary, and the ₱90,000 tax-exempt threshold reflects the TRAIN law ceiling that could change with future legislation — confirm current rules with your employer's payroll or the Bureau of Internal Revenue.