One formula, four kinds of employee, and the mistakes HR teams see every December.
ESTIMATE
Guide and estimates as of 3 November 2026, for information only — not legal or tax advice. Rules: PD 851 and its 1987 Revised Guidelines, DOLE Labor Advisory No. 16, Series of 2025 (issued late November 2025), the ₱90,000 exemption under RA 10963 (TRAIN). The 2026 DOLE advisory had not been published when this was written; the rules have been the same every year.
The formula is short: add up the basic salary you actually earned from 1 January to 31 December, then divide by 12. That's the legal minimum under PD 851. Everything else — pro-rating, absences, raises — is just about getting the “total basic salary” right.
The formula, in one line
13th month pay = total basic salary earned in the calendar year ÷ 12
DOLE's own advisory uses an employee whose basic salary for the year added up to ₱194,682.50. Divide by 12 and you get ₱16,223.54. Notice what's not in that formula: no “months of service” multiplier, no attendance condition, no reference to your salary rate. It's purely what you earned.
Step by step
Collect your payslips for the year (or the payroll register if you're in HR). You need the basic pay line for each cut-off.
Add the basic pay only. Leave out overtime, night differential, holiday and rest-day premiums, COLA and allowances. Include paid leave days, retroactive salary adjustments and maternity salary differential.
Subtract nothing else. SSS, PhilHealth, Pag-IBIG and tax deductions don't matter here — you use basic pay before deductions.
Divide by 12. Always 12, even if you worked three months.
Check the tax. If your 13th month plus other bonuses for the year are ₱90,000 or less, none of it is taxable.
Example 1 — monthly-paid employee
Ella is a bookkeeper in Cavite earning ₱24,000 a month. She's been with the company since 2023 and had no unpaid days in 2026. Basic salary earned: 12 × ₱24,000 = ₱288,000. 13th month pay: ₱24,000.
Example 2 — started mid-month
Nico joined the same firm on 16 May at ₱24,000. May's second cut-off paid him ₱12,000; then seven full months follow. Basic salary: ₱12,000 + 7 × ₱24,000 = ₱180,000. 13th month pay: ₱15,000.
Example 3 — daily-paid worker
Bong works at a hardware store in Batangas at ₱600 a day, six days a week. He was paid for 298 regular working days in 2026 (he was absent without pay for a few days and isn't counted for the unworked holidays, which are paid as holiday pay and excluded). Basic: 298 × ₱600 = ₱178,800. 13th month: ₱14,900. (₱600 is an example rate, not a specific regional minimum.)
Example 4 — piece-rate
Lorna sews bags for a Marikina manufacturer and is paid per piece. Piece-rate workers are covered. Her earnings for the year, excluding any overtime or holiday premiums, were ₱171,600. 13th month: ₱14,300.
Worked examples from this guide.
Work out your own 13th month pay
Enter your monthly basic salary, the months you worked and any unpaid absences — the calculator also shows how much falls under the ₱90,000 tax-free ceiling.
Someone who worked 4 months at ₱30,000 doesn't get ₱30,000. They get ₱120,000 ÷ 12 = ₱10,000.
2. Using gross pay
The December payslip's year-to-date gross includes overtime and premiums. Using it inflates the result — and then the employer's (correct) payment looks short.
3. Forgetting retroactive pay
A wage order or raise applied retroactively adds basic salary for earlier months. Payroll systems sometimes compute the 13th month before the differential is posted.
4. Treating it as conditional
“Only for employees with no tardiness” or “only if still employed on 24 December” — neither condition is allowed for the statutory 13th month. Resigned and terminated employees get their pro-rated share.
5. Mixing it with the Christmas bonus
If your company gives a “Christmas bonus” equal to at least the 13th month, it may count as compliance — but only if it really is at least one-twelfth of basic salary and is paid by the deadline. Read the payslip label and the amount.
Each month of basic salary earned adds one-twelfth.
FAQ
What is the formula for 13th month pay?
Total basic salary earned during the calendar year ÷ 12. For a full year with no unpaid absences, that equals one month of basic salary.
Do I divide by 12 even if I worked only 5 months?
Yes. You divide the basic salary earned in those 5 months by 12, not by 5. Five months at ₱24,000 gives ₱120,000 ÷ 12 = ₱10,000.
How do I compute 13th month pay for daily-paid workers?
Multiply the daily rate by the days actually paid as basic wage during the year (excluding overtime, holiday premiums and night differential), then divide by 12.
Is 13th month pay based on gross pay?
No. It is based on basic salary. Overtime, holiday and premium pay, night differential, COLA and the cash value of unused leave are excluded unless your contract or company practice includes them.
What example does DOLE use?
DOLE’s advisory shows an employee with ₱194,682.50 of basic salary for the year receiving ₱16,223.54 (₱194,682.50 ÷ 12).
Presidential Decree No. 851 (1975) and the Revised Guidelines on the Implementation of the 13th Month Pay Law (1987): one-twelfth of basic salary earned in the calendar year, rank-and-file employees, at least one month of service, pay on or before 24 December.
DOLE Labor Advisory No. 13, Series of 2024 and No. 16, Series of 2025 (reported by PNA/SunStar, 29 Nov 2025): no exemption or deferment, “basic salary” definition and exclusions, compliance report through the DOLE online portal by 15 January.
National Internal Revenue Code Sec. 32(B)(7)(e) as amended by RA 10963 (TRAIN): 13th month pay and other benefits exempt up to ₱90,000 a year; graduated income tax rates in force since 1 January 2023. House Bill 7661 (₱150,000 cap) was still pending in November 2026.
Employee contributions used for tax estimates: SSS 5% of the monthly salary credit (₱5,000–₱35,000), PhilHealth 2.5% (5% shared, ₱10,000–₱100,000), Pag-IBIG ₱200.