13th Month Pay Cutoff for Filipino Employees Explained

In the Philippines, a significant number of employees receive their salary twice a month—during the 1st and 2nd periods. When it comes to computing the 13th month pay, it's essential to understand how the cutoff periods affect this crucial benefit.

How to Compute the 13th Month Pay

The 13th month pay is computed by taking the total actual basic salary earned by an employee throughout the year and dividing it by 12. This straightforward formula ensures that employees receive an amount equivalent to one month’s salary, which provides a substantial financial boost, particularly during the holiday season.

DOLE's Mandate on 13th Month Pay

The Department of Labor and Employment (DOLE) mandates that the 13th month pay must be disbursed to employees no later than December 24th each year. This requirement presents a unique challenge: it doesn't account for the complete basic salary of employees for the whole year if the cutoff period starts from January 1st and ends on December 1st period, as the salary for the second period of December hasn't been processed yet.

Adjusting the Cutoff Period

To address this issue, it's recommended that employers adjust the cutoff period to ensure the total basic salary for the entire year is considered. For example, instead of starting the cutoff from January 1st period, it should begin from the December 2nd period of the previous year to the December 1st period of the current year. This adjustment ensures that all salary periods within the year are accounted for when computing the 13th month pay.
Some companies take it a step further by adjusting the cutoff by two periods or more. For instance, they might set the cutoff from December 1st period of the previous year to November 2nd period of the current year. This approach ensures that there are no discrepancies in the computation and that employees receive their full entitled amount.

Benefits of Proper Cutoff Adjustments

• Accuracy: Ensures accurate computation of the 13th month pay, reflecting the actual earnings of employees.

• Compliance: Aligns with DOLE regulations, avoiding any legal or compliance issues.

• Employee Satisfaction: Boosts employee morale and satisfaction by ensuring they receive their full benefits timely and accurately.
  

Conclusion

Properly adjusting the cutoff period for the 13th month pay is crucial for employers in the Philippines. By starting the cutoff from the last period of the previous year, employers can ensure that the total basic salary for the entire year is considered, thereby providing accurate and compliant 13th month pay calculations. This not only complies with DOLE regulations but also enhances employee satisfaction and trust.

For more details, please watch this video: 13TH MONTH PAY CUTOFF2024 | MAGKANO DAPAT? | MGA DAPAT MONG MALAMAN