A Guide on How to Compute 13th Month Pay in 2026

For many Filipino employees, 13th month pay is one of the most anticipated benefits of the year. It can help cover holiday expenses, savings, family needs, or other year-end costs.

For HR teams and employers, it is important to compute the benefit correctly and pay it on time.

Under Presidential Decree No. 851, covered rank-and-file employees in the private sector are entitled to 13th month pay. The minimum amount is generally equal to one-twelfth (1/12) of the employee's total basic salary earned during the calendar year.

What is 13th month pay?

Thirteenth-month pay is a mandatory monetary benefit for covered rank-and-file employees.

The basic formula is:

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

It is not equal to one and one-half months of annual salary. The statutory minimum is based on 1/12 of the total basic salary actually earned during the calendar year.

Who is entitled to 13th month pay?

In general, rank-and-file employees in the private sector are entitled to 13th month pay if they have worked for at least one month during the calendar year, regardless of:

• Employment status
• Method of wage payment
• Position or designation, as long as they are considered rank-and-file

A managerial employee is generally one who has authority to formulate or execute management policies or to hire, transfer, suspend, lay off, recall, discharge, assign, or discipline employees, or effectively recommend those actions.

Employees who do not fall under the managerial definition are generally considered rank-and-file for purposes of the 13th month pay requirement.

What is included in the 13th month pay computation?

The computation is based on the employee's basic salary actually earned during the calendar year.

Amounts treated as part of the employee's regular or basic salary are included.

Regular salary paid for days that remain part of the employee's basic salary may form part of the computation.

What is generally not included?

Unless a payment is considered or integrated as part of the employee's regular or basic salary by agreement, company policy, or established practice, the following are generally excluded:

• Overtime pay
• Premium pay
• Night shift differential
• Holiday pay
• Allowances that are not part of basic salary
• Cash equivalent of unused vacation or sick leave credits
• Profit-sharing payments
• Other bonuses or monetary benefits that are not part of regular basic salary
• Maternity leave benefits

Unpaid absences do not themselves become a separate deduction from 13th month pay. Instead, they reduce the basic salary actually earned, which lowers the amount used in the computation.

How to compute 13th month pay in 2026

Use this formula:

13th month pay = Total basic salary earned from January to December 2026 / 12

Example 1: Employee worked the full year

Suppose an employee earns a basic salary of ₱30,000 per month and receives the full basic salary for all 12 months.

Total basic salary earned:

₱30,000 × 12 = ₱360,000

13th month pay:

₱360,000 / 12 = ₱30,000

The employee's minimum 13th month pay is ₱30,000.

Example 2: Employee started during the year

Suppose an employee earns ₱30,000 per month and started work on April 1, 2026, then worked through December.

The employee earned nine months of basic salary:

₱30,000 × 9 = ₱270,000

13th month pay:

₱270,000 / 12 = ₱22,500

The employee's minimum 13th month pay is ₱22,500.

Example 3: Employee had unpaid absences

Suppose an employee's monthly basic salary is ₱30,000, but because of unpaid absences, the employee's total basic salary actually earned for 2026 is ₱350,000.

13th month pay:

₱350,000 / 12 = ₱29,166.67

The correct basis is the employee's actual basic salary earned, not simply the stated monthly salary multiplied by 12.

When should 13th month pay be released?

Covered employers must pay 13th month pay not later than December 24 of each year.

An employer may also pay:

• One-half before the opening of the regular school year; and
• The remaining half on or before December 24

Employers may provide a better payment schedule or a higher benefit under company policy, agreement, or established practice.

Are resigned or terminated employees entitled to 13th month pay?

Yes. A covered rank-and-file employee who resigns or whose employment ends during the year is generally entitled to a pro-rated 13th month pay based on the basic salary earned during that calendar year up to the employee's separation date.

Example

An employee earning ₱30,000 per month worked from January through June 2026 and then resigned.

Total basic salary earned:

₱30,000 × 6 = ₱180,000

Pro-rated 13th month pay:

₱180,000 / 12 = ₱15,000

DOLE has also reiterated that pro-rated 13th month pay forms part of an employee's final pay when applicable.

Is 13th month pay taxable?

Under current BIR rules, 13th month pay and other benefits up to a combined ceiling of ₱90,000 are generally exempt from income tax.

Any amount exceeding the applicable ₱90,000 ceiling may be taxable.

Because the ceiling applies to 13th month pay together with certain other benefits, payroll teams should look at the employee's total qualifying benefits when determining the taxable portion.

Is 14th month pay mandatory in 2026?

As of October 3, 2026, there is still no general law requiring all private-sector employers in the Philippines to provide a mandatory 14th month pay.

Proposals have been filed in Congress, including measures during the 20th Congress, but a proposed bill is not the same as an enacted law.

Employers may still provide additional bonuses or a 14th month benefit voluntarily through company policy, employment contracts, collective bargaining agreements, or established practice.

Frequently asked questions

1. Is 13th month pay the same as a Christmas bonus?

No. The statutory 13th month pay is a legally required benefit for covered employees. A Christmas bonus is generally separate unless an employer's arrangement legally qualifies as an equivalent benefit under applicable rules.

2. Are overtime and holiday pay included?

Generally, no. Overtime pay, premium pay, night shift differential, and holiday pay are normally excluded unless they are treated as part of the employee's basic salary by agreement, company policy, or established practice.

3. Are commissions included?

It depends on the nature of the commission and whether it forms part of the employee's regular or basic salary. Payroll teams should review the compensation structure, employment agreement, and applicable labor rules rather than automatically including or excluding every type of commission.

4. Are maternity leave benefits included?

No. DOLE guidance states that maternity leave benefits are not included in the computation of 13th month pay.

5. What happens if an employer does not pay the required 13th month pay?

Employees may raise the matter with the Department of Labor and Employment (DOLE). Employers are expected to comply with the statutory payment requirement and applicable reporting rules.

Quick 2026 formula

13th month pay = Total basic salary actually earned in 2026 / 12

The safest payroll approach is to calculate from the employee's actual basic salary earned during the year rather than estimating from monthly salary alone.

Legal references

• Presidential Decree No. 851
• Revised Guidelines on the Implementation of the 13th Month Pay Law
• DOLE guidance on the payment and computation of 13th month pay
• DOLE Labor Advisory No. 16, Series of 2025
• BIR rules on the ₱90,000 tax-exempt ceiling for 13th month pay and other benefits

Note: This article provides general payroll information and is not a substitute for legal, tax, or professional advice. Company-specific agreements, established practices, and later government issuances may affect the final computation.