IN THE MIDDLE | career advancement

The Extra Month’s Pay in the Philippines

By Alyanna Silvestre
Published July 23, 2021

Each country has specific employment laws and payroll regulations, and in the Philippines, at every end of the year, most Filipino families get to celebrate the holidays in a more special way with the additional cash flow courtesy of their 13th-month pay. On top of that, some receive Christmas bonuses and, get this, a 14th-month pay. But how are these three different? In this article, we discuss what these additional compensations are and maybe trace back to why each was established in the first place.

13th Month Pay

The compensation commonly known as the 13th-month pay is a monetary benefit given to a rank-and-file employee or a domestic worker who has worked for at least one month in a company in addition to his or her annual salary regardless of the nature of their employment and irrespective of how they receive their wages. It is a mandatory benefit in the Philippines given at the end of a year.

The 13th-month pay is not unique to Filipinos as it is currently popular in several other countries with some variations on whether it is a requirement or a discretionary on the part of the employer. But did you know that this tradition originated in the Philippines? It was introduced to the Philippines in 1975 under Presidential Decree No. 851 to bridge the gap between legal minimum wage—which had not been updated at the time since 1970—and the higher cost of living. It was also aimed at allowing the working masses to celebrate the holidays.

Under the decree which was made effective December 16, 1975, all private employers were ordered to pay their employees receiving a basic pay of not more than P1,000 a month, regardless of the nature of their employment, a 13th month pay not later than December 24 of every year. At the time, the decree exempted from coverage the “household helpers and persons in the personal service of another in relation to such workers,” “those who are paid on purely commission, boundary, or task basis,” “those who are paid a fixed amount for performing a specific work,” and employees of government offices and government-owned and -controlled corporations, except those operating as private subsidiaries of the government.

On August 13, 1986, the salary ceiling of P1,000 was removed or rather increased, making all rank-and-file employees entitled to additional compensation regardless of their monthly salary and employment status. However, the privilege was still not extended to those not covered by the decree.

It wasn’t until two years later that the decree was somewhat “balanced.” In 1988, the Congress enacted R.A. 6686 which gave all officials and employees of the National Government who have rendered at least four months of service from January 1 to October 31 of each year and who remain in the government service as of October 31 of the same year a Christmas bonus equivalent to a month's worth of basic salary and an additional cash gift.

Meanwhile, since the passage of R.A. 10361 or the “Domestic Workers Act” or “Batas Kasambahay,” household helpers and the likes who have rendered at least one month of service are now entitled to a 13th-month pay.

Christmas Bonus

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As explained by the DOLE's Bureau of Working Conditions, a Christmas bonus is "an amount granted to an employee in excess of what the law requires as a reward or incentive.” Unlike 13th month pay, a bonus is optional and not mandatory "unless when it has been made part of the wage or made the subject of an express agreement."

14th Month Pay

A 2019 report about a bill filed by Sen. Vicente Sotto III for the then-upcoming 18th Congress recently resurfaced on social media. Said bill seeks to require the private sector to give 14th-month pay to their employees, regardless of employment status, which shall be paid not later than May 31 of every year in anticipation of school enrollment.

The proposition was first introduced by then-Assistant Minority Leader Sotto way back in 2013, but the said bill did not go very far even after a loftier version was refiled yet again by Sotto in 2016.

Going back, the solon's proposed bill was refiled in 2019, which received support from the working population but scrutiny from employers groups and businesspeople is still pending in the Senate and the House of Representatives.

As of today, some local companies are implementing the said practice voluntarily, including the Aboitiz Group, while government employees and personnel enjoy mid-year bonuses equivalent to one month's basic salary.

Why Give an Extra Month’s Pay?

In the Philippines, the holiday season is the perfect time to share love and blessings, so it is normal for Filipinos to hold family gatherings where almost everyone is invited, including extended family members and a few friends. Unfortunately, it is also common to see families struggling to make ends meet daily due to low income. That being said, an additional cash flow in the last month of the year is crucial for most Filipinos to either put food on the table for a simple celebration, cover the expenses of grand family gatherings and gift-giving, or save money.