13th Month Pay Computation 2026 (Philippines): Formula, Examples and Deadline
13th month pay is total basic salary earned in the calendar year divided by 12, and it must reach rank-and-file employees on or before December 24. Here's the formula, worked examples for full-year, new and resigned staff, and the tax rule every small employer should know.
Wemu Team
Editorial
13th month pay = total basic salary earned during the calendar year ÷ 12. Every rank-and-file employee in the private sector who worked at least one month in the year is entitled to it, and it must be paid on or before December 24. Up to ₱90,000 of 13th month pay and other bonuses combined is exempt from income tax.
That's the whole rule in three sentences. The rest of this guide covers what counts as "basic salary", worked examples for the situations small businesses actually run into, and the paperwork DOLE expects afterwards. If you just want the number, use our free 13th month pay calculator.
Last updated: October 22, 2026
Based on Presidential Decree No. 851, DOLE's Revised Guidelines on the Implementation of the 13th Month Pay Law, DOLE Labor Advisory No. 16, Series of 2025, and Section 32(B)(7)(e) of the National Internal Revenue Code as amended by the TRAIN Law (RA 10963). DOLE usually issues a fresh advisory each November, so check dole.gov.ph for the 2026 version.
The 13th month pay formula
Presidential Decree No. 851 requires employers to pay rank-and-file employees a 13th month pay of not less than one-twelfth (1/12) of the total basic salary earned within the calendar year. In practice:
- 1Add up the basic salary the employee actually earned from January 1 (or their start date) to December 31 (or their last day).
- 2Subtract nothing extra: unpaid absences are already missing from what they earned, so they reduce the total on their own.
- 3Divide by 12. The result is the minimum 13th month pay. You can always pay more.
For someone on the same monthly salary all year with no unpaid days, this works out to exactly one month's salary. Everyone else gets a proportional amount.
What counts as basic salary (and what doesn't)
This is where most mistakes happen. DOLE's guidelines define basic salary as all remuneration for services rendered, but they exclude allowances and monetary benefits that aren't integrated into the regular salary. Labor Advisory No. 16-2025 lists the usual exclusions:
- Overtime pay
- Premium pay for rest days and special days
- Night shift differential
- Holiday pay
- Cost-of-living allowance (COLA)
- The cash conversion of unused leave credits
The exception: if an employment contract, collective agreement, company practice or policy treats any of these as part of basic salary, they go into the computation. Paid leave that an employee actually took is normally part of the salary they earned for the year. Unpaid leave and unpaid absences are not, because nothing was earned for those days.
| Pay item | Included in the 1/12 base? |
|---|---|
| Regular monthly or daily basic pay | Yes |
| Paid leave days taken | Generally yes (salary was paid for them) |
| Overtime, night differential, holiday and rest-day premiums | No, unless your policy integrates them |
| COLA and other allowances | No, unless integrated into basic pay |
| Cash conversion of unused leave | No |
| Commissions | Depends: included when they form part of a fixed or guaranteed wage arrangement |
Worked examples
1. Full year, same salary
Ana earns ₱18,000 a month and worked all of 2026 with no unpaid absences. Total basic salary: ₱18,000 × 12 = ₱216,000. 13th month pay: ₱216,000 ÷ 12 = ₱18,000.
2. Started mid-year
Ben joined on April 1 at ₱20,000 a month. He earns basic salary for April to December, nine months: ₱180,000. 13th month pay: ₱180,000 ÷ 12 = ₱15,000.
3. Unpaid absences
Carla earns ₱16,000 a month and worked the full year, but ₱2,400 was deducted from her basic pay for unpaid absences. Total basic salary earned: ₱192,000 − ₱2,400 = ₱189,600. 13th month pay: ₱189,600 ÷ 12 = ₱15,800.
4. Salary increase during the year
Dan earned ₱15,000 a month from January to June and ₱17,000 from July to December. Total: (₱15,000 × 6) + (₱17,000 × 6) = ₱192,000. 13th month pay: ₱192,000 ÷ 12 = ₱16,000. Always use what was actually earned, not the current rate times twelve.
5. Daily-paid staff
Ella is paid ₱700 a day and worked 280 paid days in the year. Total basic salary: ₱700 × 280 = ₱196,000. 13th month pay: ₱196,000 ÷ 12 = ₱16,333.33. Your payroll records of days actually paid are the source here, which is why accurate timesheets matter.
6. Resigned before December
Fe earned ₱18,000 a month and resigned effective August 31. She earned eight months of basic salary: ₱144,000. Her pro-rated 13th month pay is ₱144,000 ÷ 12 = ₱12,000. Resigned and terminated employees are covered if they worked at least one month in the year; the amount is normally released with their final pay.
Know exactly who worked what
Wemu keeps rosters, timesheets and sales in one place, so the hours behind every payslip are on record when December comes. Try Wemu free.
Try Wemu free →Who is covered
- Covered: all rank-and-file employees in the private sector, regardless of position, designation or employment status (regular, probationary, casual, contractual or seasonal), as long as they worked at least one month during the calendar year.
- Also covered: piece-rate workers (total earnings for the year ÷ 12), employees on a fixed or guaranteed wage plus commission, people with more than one employer (each employer pays its share), and employees who resigned or were terminated.
- Kasambahay: domestic workers who have served at least one month are entitled to 13th month pay under the Batas Kasambahay (RA 10361).
- Managerial employees are not covered by PD 851, although many employers pay them a 13th month or year-end bonus by policy or contract.
DOLE's 2025 advisory was blunt about exemptions: employers do not get to apply for one. Business being slow is not a reason to skip it.
The deadline: on or before December 24
The 13th month pay must reach employees no later than December 24. The guidelines allow you to split it, for example half before the opening of the school year and the balance by December 24, which some small employers use to spread the cash outflow. Whatever you choose, the full amount must be paid by the deadline.
After paying, employers submit a compliance report. For 2025, Labor Advisory No. 16-2025 required the report through the DOLE Online Compliance Portal (reports.dole.gov.ph) by January 15, 2026, including the number of workers who received it, the amount per employee and the total paid. Expect a similar requirement for 2026 and confirm it once DOLE releases this year's advisory.
Plan the cash in October, not December
For a small café with six staff on around ₱16,000 a month, the 13th month bill is close to one extra month of payroll landing in the same weeks as Christmas stock. Set it aside from November sales rather than finding it on December 23.
Is 13th month pay taxable?
Under Section 32(B)(7)(e) of the National Internal Revenue Code, as amended by the TRAIN Law (RA 10963), 13th month pay and other benefits are exempt from income tax up to a combined ₱90,000 a year. "Other benefits" include Christmas bonuses, productivity incentives, loyalty awards and similar payments, so the ceiling is shared, not ₱90,000 for each. Only the amount above ₱90,000 is added to taxable compensation.
Bills to raise the ceiling have been filed in Congress, but as of this update none has become law, so plan on ₱90,000. In practice the cap only matters for employees earning roughly ₱90,000 a month or more, or those receiving large extra bonuses.
Common mistakes small employers make
- Multiplying the current salary by twelve. Use what was actually earned, month by month.
- Including overtime and holiday pay by default. They're excluded unless your policy integrates them. Including them is generous, not wrong, but be consistent.
- Deducting absences twice. If unpaid days already reduced the salary paid, don't subtract them again from the 13th month.
- Forgetting people who left. Resigned staff who worked at least a month are owed a pro-rated amount.
- Assuming a Christmas bonus covers it. A bonus you already pay can be credited toward the 13th month only if it reaches at least the 1/12 amount; if it falls short, you owe the difference.
Use the calculator
Our free 13th month pay calculator takes the monthly basic salary, the months worked (or a start date) and any unpaid deductions, and shows the result with the formula worked out. It's an estimate for planning, not legal advice. For unusual arrangements, check DOLE's guidance or ask your accountant.
If you run a café, restaurant or shop, Wemu's restaurant and retail tools keep rosters, timesheets and daily sales together, so year-end pay and year-end tax prep start from the same records.
Run payroll prep from real records
Rosters, timesheets, sales and stock in one app on the phones and tablets you already have. Core is US$29/month and Growth is US$49/month per location. Try Wemu free.
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