13th Month Pay Philippines 2026: The Employer’s Guide, MiHCM

Every December, Philippine employers face the same statutory deadline. The 13th month pay must reach eligible employees on or before 24 December. The Department of Labor and Employment (DOLE) has been explicit: no requests for exemption or deferment will be allowed.

The rule is simple to state. Getting it right across a large, varied workforce takes more care.

Where the obligation comes from

The 13th month pay is required by Presidential Decree No. 851, issued in 1975. DOLE restates the rules each year in a labour advisory. The most recent, Labor Advisory No. 16, Series of 2025, was signed on 15 November 2025.

Who is entitled

All rank-and-file employees in the private sector who have worked at least one month during the calendar year are entitled, regardless of employment status or method of wage payment. Managerial employees are outside PD 851’s statutory coverage unless the employer grants an equivalent benefit by policy or agreement.

In practice, that includes:

• regular, probationary, contractual and casual employees;

• employees who resigned or were separated during the year, on a proportionate basis; and

• piece-rate workers, whose minimum benefit is computed under DOLE’s one-twelfth-of-total-basic-salary rule, applying the advisory’s treatment of piece-rate earnings.

How to calculate it

The minimum 13th month pay is one-twelfth of the total basic salary an employee earned within the calendar year.

Total basic salary earned in the year ÷ 12 = minimum 13th month pay

The word that matters is basic. Basic salary generally excludes overtime pay, night shift differential, holiday pay, cost-of-living allowances and the cash value of unused leave credits, unless company policy or a collective agreement treats them as part of basic salary.

Two consequences follow. First, 13th month pay is rarely the same as one month’s gross pay. Second, any change in basic salary during the year, from a promotion, a wage order or unpaid leave, changes the calculation.

Deadlines that matter

Obligation	Deadline
Pay 13th month pay	On or before 24 December
Submit compliance report to DOLE	No later than 15 January of the following year

Employers report compliance through the DOLE Online Compliance Portal (reports.dole.gov.ph). DOLE regional and field offices monitor compliance through inspections. Non-payment can lead to DOLE compliance action and employee money claims; other sanctions may apply under labour-standards enforcement rules.

How it is taxed

Under Republic Act No. 10963, the TRAIN Law, 13th month pay and other benefits are exempt from income tax up to a combined PHP 90,000 a year. Only the excess is taxable.

The PHP 90,000 ceiling applies in aggregate to 13th month pay and other benefits covered by section 32(B)(7)(e) of the National Internal Revenue Code, such as Christmas and productivity bonuses. De minimis benefits within their prescribed ceilings are treated separately; any excess should be handled under current BIR rules. Payroll must track the running total across the year, not just the December payment.

Several House proposals in 2026 seek to increase the PHP 90,000 ceiling, with proposals including PHP 120,000 and PHP 150,000. As of 21 October 2026, no enacted law has changed the PHP 90,000 statutory ceiling.

Common mistakes

• Calculating on gross pay instead of basic salary.

• Leaving out resigned or separated employees.

• Forgetting short-service employees who worked at least one month.

• Treating the PHP 90,000 ceiling as applying to each covered bonus separately.

• Missing the 15 January compliance report.

Where systems help

The 13th month pay is an annual calculation built on twelve months of data: basic salary changes, unpaid absences, separations and other bonuses. MiHCM Payroll for the Philippines computes 13th month pay as part of the payroll engine, alongside final pay and statutory deductions, and produces a dedicated 13th Month PaySheet report.

Frequently Asked Questions

Who is entitled to 13th month pay in the Philippines?

All rank-and-file employees in the private sector who have worked at least one month during the calendar year, regardless of employment status or method of wage payment. Managerial employees are outside PD 851’s statutory coverage unless the employer grants an equivalent benefit.

How is 13th month pay calculated?

The minimum is one-twelfth of the total basic salary the employee earned in the calendar year. Basic salary generally excludes overtime, night shift differential, holiday pay, cost-of-living allowances and unused leave conversions.

When must 13th month pay be paid?

On or before 24 December each year. DOLE does not allow exemptions or deferment.

Do employers need to report 13th month pay to DOLE?

Yes. Employers must submit a compliance report through the DOLE Online Compliance Portal (reports.dole.gov.ph) no later than 15 January of the following year.

Is 13th month pay taxable in the Philippines?

13th month pay and other benefits covered by section 32(B)(7)(e) of the National Internal Revenue Code are tax-exempt up to a combined PHP 90,000 a year under Republic Act No. 10963. Only the excess is taxable.