Know your employment rights | Part 3
Basic pay, Christmas bonus, and 13th-month pay
It’s the season for your most coveted, hard-earned Christmas bonus and 13th-month pay. Most people correlate one with the other but how are these terms different? Anatomy of your basic pay
Let us first analyze your basic pay as this is the focal point of our discussion on the 13th-month pay. The amount stipulated in your contract, as per your compensation, is your basic pay. It should be explicitly mentioned there the amount and frequency of receipt (like every 15th and 30th of each month, every month, or every 5th and 20th, etc.)
The basic pay does not include the deductions from SSS/ GSIS, PhilHealth, HDMF and/or Income Tax. Conversely, your overtime pay and any company initiated “add-ons”, like de
minimis and other forms of allowances (like rice and clothing allowance) are also not part of your basic pay.
The final amount that displays on the ATM screen every payday is also called your take home pay or net pay. Your net pay is the total amount of your basic pay plus all the additional allowances and minus all the deductions. Your basic pay plus all your allowances without the deductions is called your gross pay.
The 13th-month is computed based on your basic pay. However, for some companies who provide a Cost of Living Allowance (COLA), include it as well in the 13th-month computation. All you need to know about your 13th-month pay
Presidential Decree 851 implements the 13th-month pay in 1975. It was ratified in 1986, through Memorandum Order 28, removing the salary ceiling clause. The 13th-month pay is a legal obligation that employers must conform to. Who are entitled to the 13th-month pay? In verbatim, this is what the law states:
“All rank-and-file employees, regardless of their designation or employment status, and irrespective of the method by which their wages are paid, who have worked at least one month during the calendar year are entitled to 13th-month pay.” When can you expect it?
It is the company’s prerogative or agreement between the employer and employee/collective bargaining agent when to release the 13th-month pay. According to the law, it should be given on or before the 24th of December. Some companies give it as early as the first week of December. There are also others who give it on two occasions. This is within the clause of the law as it states that:
“An employer may give to his employees one-half of the required 13th-month pay before the opening of the regular school year and the other half on or before the 24th of December of every year.”
How much is your 13th-month pay?
It’s computed relative to your tenure. For example, you earn P18,000 basic pay per month. You started working for the company last June. Since it is six months from June to December, we now have all the variables needed to compute.
Divide your basic pay by 12 (the number of months in a year). Then multiply it by the number of months you have been with the company. In our example, that would be six. Therefore: 18,000 / 12 = 1,500 1,500 x 6 = 9,000 So your expected 13th-month pay is 9,000 pesos more or less because the extra days will also be computed accordingly if say, you got hired mid-June. You can, however, expect the full P18,000 as your 13th month pay the following year. Now, what if you were promoted and your salary increased? The same formula is used but this time, count the number of months you were receiving your usual pay and the number of months your pay increased. Example: You got promoted in August and your salary increased to P24,000. Therefore, from January to July (seven months), you will have: P18,000 /12 = P1,500 P1,500 x 7 = P10,500 From August to December would be five months which will have this formula: P24,000 / 12 = P2,000 P2,000 x 5 = P10,000 Adding the results will give you P20,500, which is the total of your 13th-month pay. But other considerations imposed by your company will still be considered. There will be some companies wherein absences can be deducted. Is there a tax on my 13th month?
Thanks to the new law regarding the 13th-month pay, annual bonuses of up to P82,000 pesos are exempt from income tax. So if your total 13th-month and bonuses do not reach the threshold, you can expect the whole sum. 13th-month pay vs Christmas bonus
Nope. They are not the same. Although most of the time, people use the term interchangeably. To simplify it, the 13th-month pay is a legal obligation. Your bonus on top of your 13th-month pay is an act of kindness and generosity from your employer.
There are only a few companies who would give Christmas bonuses. As mentioned and as the name itself implies, a bonus is not obligatory.
To further differentiate the two, the amount you receive on your 13th-month pay is computed based on the basic pay, while the amount of your bonus is your employer’s call. It is also possible, as practiced by other companies, the bonus is a form of profitsharing. A bonus can be computed based on your performance you displayed for the year. It is, therefore, best to consult your local HR.
It is nevertheless important to note that there are Supreme Court cases wherein a bonus can become demandable. Although a bonus is not a legal obligation, if it has become a long-standing practice or policy, the employer is obliged to give the bonus permanently or else it will be considered as reduction of benefits.
Before you get excited on how you will spend your work blessings this holiday season, it is important to know your rights as these are all fruits of your labor. To check the latest career opportunities online, visit www.bpocareerhub.com.