13th Month Pay 2026 for Employers: How to Compute It in 10 Real-World Cases
Mid-year hires, resigned staff, daily-paid workers, maternity leave, and wage hikes. How to compute 13th month pay in 10 real cases, plus the 2026 DOLE deadlines.
Every December, HR teams across the Philippines face the same question from employees: “How much is my 13th month?” For most staff, the answer is simple. For the new hire from July, the employee who resigned in September, the daily-paid crew whose rate changed with the wage order, or the team member who went on maternity leave, it is not.
That is why getting 13th month pay computation right in 2026 means more than knowing the formula. It means knowing which earnings count as basic salary, how to handle partial years and rate changes, and what DOLE expects before December 24 and after the year closes. This guide walks through the rules and 10 real payroll cases with peso computations.
What is 13th month pay in the Philippines?
13th month pay is a mandatory benefit under Presidential Decree No. 851. It is equal to at least one-twelfth (1/12) of the total basic salary an employee earned during the calendar year.
13th Month Pay = Total basic salary earned from January 1 to December 31 ÷ 12
To compute it:
Add up the basic salary the employee actually earned during the year, including paid leaves.
Subtract leave without pay, unpaid absences, and undertime.
Divide the total by 12.
The divisor is always 12, even for employees who worked only part of the year. Dividing by the number of months worked is the most common computation error. An employee who earned ₱108,000 in six months receives ₱9,000, not ₱18,000.
Need to check one employee quickly? Use the free 13th Month Pay Calculator.
Who is entitled to 13th month pay?
All rank-and-file employees in the private sector who worked at least one month during the calendar year are entitled to 13th month pay, regardless of position, employment status, or how their wages are paid. DOLE’s guidelines specifically include employees who are:
Probationary, contractual, or project-based
Paid by piece rate
Paid a fixed or guaranteed wage plus commission
Working for more than one employer
Resigned or terminated during the year
On maternity leave and receiving salary differential
Managerial employees are not covered by law. However, if your company has an established practice of granting them 13th month pay, that benefit generally cannot be withdrawn.
What counts as basic salary for 13th month pay?
Basic salary includes the pay an employee earns for services rendered. It does not include allowances and monetary benefits that are not part of the regular salary.
Include:
Basic pay for days and hours worked
Paid leaves used during the year
Salary increases and wage order adjustments, from their effective date
Allowances already integrated into basic salary
Exclude, unless company policy or a CBA treats them as basic salary:
Overtime pay
Holiday and rest-day premiums
Night shift differential
Cost of living allowance (COLA)
Cash conversion of unused leave credits
Bonuses, incentives, and productivity-based commissions
Our BPO Night Differential Pay Philippines: Complete Guide explains how night work and premiums are paid, and why they stay out of the 13th month base.
13th Month Pay Computation: 10 Real Payroll Cases
The formula stays the same in every case. What changes is how you arrive at “total basic salary earned.”
1. Full-year employee with a fixed monthly salary
An employee earns ₱25,000 a month and worked all of 2026 with no unpaid absences.
₱25,000 × 12 = ₱300,000
₱300,000 ÷ 12 = ₱25,000
2. 13th month pay for a mid-year hire
An employee was hired on July 1 at ₱18,000 a month.
₱18,000 × 6 months = ₱108,000
₱108,000 ÷ 12 = ₱9,000
3. 13th month pay for a resigned employee
An employee earning ₱22,000 a month resigned on September 30.
₱22,000 × 9 months = ₱198,000
₱198,000 ÷ 12 = ₱16,500
This amount should be included in the employee’s final pay. DOLE Labor Advisory No. 06-20 requires final pay to be released within 30 days of separation, so there is no need to wait until December. See how WORKSPHR handles final pay and clearance.
4. Salary increase in the middle of the year
An employee earned ₱20,000 from January to June and ₱24,000 from July to December.
(₱20,000 × 6) + (₱24,000 × 6) = ₱264,000
₱264,000 ÷ 12 = ₱22,000
Using the new rate for the whole year would overpay by ₱2,000. Each period must be computed at the rate actually paid.
5. Employee with leave without pay
An employee on a six-day workweek earns ₱18,000 a month and took five days of leave without pay.
Daily rate: ₱18,000 × 12 ÷ 313 = ₱690.10
Unpaid days: ₱690.10 × 5 = ₱3,450.48
Basic salary earned: ₱216,000 − ₱3,450.48 = ₱212,549.52
₱212,549.52 ÷ 12 = ₱17,712.46
Use the same daily-rate factor your payroll already applies (313, 261, or 365). Paid leaves do not reduce 13th month pay.
6. Daily-paid minimum wage worker after a wage order
A daily-paid worker in Pampanga worked 80 days at ₱570 before April 16, then 212 days at ₱600 after Wage Order RBIII-26 took effect.
(80 × ₱570) + (212 × ₱600) = ₱45,600 + ₱127,200 = ₱172,800
₱172,800 ÷ 12 = ₱14,400
This is where manual payroll often goes wrong. The new rate gets applied to the whole year, or the increase is missed entirely.
WORKSPHR computes 13th month pay from each employee’s actual salary history and attendance. Wage order increases, mid-year raises, leave without pay, and separation dates are already in the record, so HR does not have to rebuild the year in a spreadsheet for every employee. See 13th month pay automation →
7. 13th month pay for an employee on maternity leave
An employee earning ₱30,000 a month took 105 days of maternity leave. She earned ₱255,000 in basic salary for the months she worked, and the employer paid ₱35,000 in salary differential.
₱255,000 + ₱35,000 = ₱290,000
₱290,000 ÷ 12 = ₱24,166.67
The SSS maternity benefit is paid by SSS, not earned from the employer, so it is excluded. Most practitioners include the employer-paid salary differential; confirm your treatment with counsel or DOLE if unsure. The differential in this example is illustrative.
8. Employee with a fixed wage plus commissions
A sales employee earns a fixed ₱15,000 a month plus productivity-based commissions.
₱15,000 × 12 = ₱180,000
₱180,000 ÷ 12 = ₱15,000 (commissions excluded)
Supreme Court rulings treat commissions as part of basic salary only when they are an integral part of the agreed wage. Review your pay structure before excluding them.
9. Piece-rate worker
A worker paid per piece earned ₱186,000 in total during 2026.
₱186,000 ÷ 12 = ₱15,500
10. Employee with two employers
A part-time employee works for Employer A at ₱10,000 a month and Employer B at ₱8,000 a month, both for the full year.
Employer A pays: ₱120,000 ÷ 12 = ₱10,000
Employer B pays: ₱96,000 ÷ 12 = ₱8,000
Each employer computes 13th month pay only on the basic salary it paid.
When is the 13th month pay deadline in 2026?
Employers must release 13th month pay on or before December 24, 2026. DOLE does not accept requests for exemption or deferment. Some companies pay half in June and the balance in December, which is allowed as long as the full amount is released by the deadline.
Other dates HR should plan for:
Resigned or terminated employees: include pro-rated 13th month pay in final pay within 30 days of separation.
DOLE compliance report: file on or before January 15, 2027 through the DOLE Establishment Report System.
Year-end tax annualization: process in the December payroll, including 13th month pay in the ₱90,000 exemption computation.
The DOLE report must include the establishment’s name and address, principal business, total employment, number of workers who received the benefit, amount granted per employee, total amount granted, and the name, position, and phone number of the person reporting.
Is 13th month pay taxable?
Under the TRAIN Law, 13th month pay and other benefits, such as a Christmas bonus or productivity incentives, are tax-exempt up to a combined ₱90,000 per employee per year. Only the excess is taxable.
For example, an employee who receives ₱60,000 in 13th month pay and a ₱45,000 Christmas bonus has ₱105,000 in total benefits. The first ₱90,000 is exempt, and the remaining ₱15,000 is added to taxable income during annualization. Our BIR TRAIN Law Guide explains the current tax brackets and withholding.
Common 13th Month Pay Mistakes to Avoid
Dividing by months worked instead of 12. This doubles the amount for a six-month employee.
Including overtime, night differential, or holiday premiums when company policy does not treat them as basic salary.
Applying the current rate to the whole year after a raise or wage order.
Leaving resigned employees out, or holding their share until December instead of paying it with final pay.
Treating the Christmas bonus as 13th month pay. They are separate unless your policy clearly states the bonus is given in lieu of the 13th month.
Forgetting the ₱90,000 exemption cap, which leads to under-withholding during annualization.
Missing the January 15 DOLE report, which regional offices monitor through inspections.
Year-End 13th Month Pay Checklist for HR
Confirm the list of covered rank-and-file employees, including those who separated during the year
Pull total basic salary earned per employee, net of leave without pay
Apply raises and wage order increases by their effective dates
Exclude overtime, premiums, night differential, and COLA unless integrated by policy
Check that resigned employees received their share in final pay
Compute tax on any excess over ₱90,000 during annualization
Release 13th month pay on or before December 24, 2026
File the DOLE compliance report by January 15, 2027
A useful budgeting habit: accrue one-twelfth of basic pay every payroll. A company with 60 rank-and-file employees averaging ₱20,000 a month will owe about ₱1,200,000 in 13th month pay, and accruing it avoids a December cash squeeze.
WORKSPHR 13th Month Pay Processing
WORKSPHR computes 13th month pay from the same employee records, salary history, and attendance data that feed every payroll run. Mid-year hires, salary adjustments, wage order increases, leave without pay, and separations are already captured, so the 13th month computation reflects what each employee actually earned.
For resigned employees, pro-rated 13th month pay flows into final pay. At year-end, HR can review the computation before release and generate the reports needed for the DOLE submission and tax annualization. SSS, PhilHealth, Pag-IBIG, and BIR compliance are included on every plan, peso-priced from ₱79 per employee per month. See pricing.
If you are still comparing platforms, our Payroll System in the Philippines: What to Look for in 2026 guide covers what to test during a software demo.
Getting 13th Month Pay Right in 2026
The formula for 13th month pay computation never changes: total basic salary earned divided by 12. What makes year-end payroll difficult is everything around it. That includes partial years, rate changes, leave without pay, separations, the ₱90,000 tax cap, and the DOLE report that follows in January.
Start early, confirm what counts as basic salary under your policies, and check the cases that don’t fit a simple full-year computation. WORKSPHR brings the employee records, attendance, and payroll data behind those cases together in one platform built for Philippine businesses.
This guide is for general information and follows PD 851 and DOLE Labor Advisory No. 16, s. 2025. It is not legal advice. DOLE typically issues updated 13th month guidelines each November; check the latest advisory before year-end processing.