Know what is dueRecurring requirements and document requests are coordinated through a consistent monthly rhythm.
13th Month Pay 2026: Who Gets It, How to Compute It, and the December 24 Deadline
Home / BGB Insights / Business Guides
Business Guides · Payroll & HR
13th Month Pay 2026: Who Gets It, How to Compute It, and the December 24 Deadline
A plain-language guide for employers: who is covered, the simple 1/12 formula, what counts as basic salary, the ₱90,000 tax-exempt ceiling, and what to fix in your payroll before December.
Quick answer
Under Presidential Decree No. 851, private employers must give their rank-and-file employees a 13th month pay of at least one-twelfth (1/12) of the total basic salary earned during the calendar year, paid on or before December 24. In 2026, December 24 falls on a Thursday. Rank-and-file employees who worked at least one month in the year are covered regardless of position, employment status, or how they are paid, including employees who resigned or were terminated (pro-rated). DOLE’s latest advisory (Labor Advisory No. 16, Series of 2025) states that no request for exemption or deferment of the payment will be accepted. Separately, DOLE’s 1987 Revised Guidelines have long excluded a few categories from coverage: government employers (except government-owned or -controlled corporations operating essentially as private subsidiaries), employers of household helpers (kasambahay) and persons in personal service, and employers of workers paid purely by commission, boundary, or task without a fixed wage (piece-rate workers are covered). For income tax, 13th month pay and other benefits such as Christmas bonuses are tax-exempt up to a combined ₱90,000 a year under the TRAIN Law. Only the excess is taxable.
13th month pay is one of the biggest payroll items of the year, and it lands in the same month as holiday pay, year-end bonuses, and the final payroll of the year. Employers who compute it early avoid cash crunches and payslip disputes. This guide follows the order you’ll actually go through.
Basic terms, in plain language
- 13th month pay: a required yearly benefit equal to at least 1/12 of what an employee earned as basic salary from January to December.
- Rank-and-file employee: an employee who is not a managerial employee. These are the employees PD 851 requires you to pay.
- Managerial employee: someone with authority to set management policy, or to hire, fire, discipline, or transfer employees, or to effectively recommend those actions. They are not covered by PD 851, but many companies still give it by policy or contract.
- Basic salary: pay for services rendered, not counting most allowances and premiums such as overtime, night differential, holiday pay, and COLA, unless your company treats them as part of basic pay.
- Pro-rated: computed only for the months the employee actually worked in the year.
- Tax-exempt ceiling: the maximum amount of 13th month pay and other benefits an employee can receive in a year without paying income tax on it.
Step 1. Know who is entitled
DOLE’s guidelines (Labor Advisory No. 16, Series of 2025, the latest as of this writing) say 13th month pay goes to rank-and-file employees in the private sector regardless of position, designation, or employment status, and no matter how their wages are paid, as long as they worked at least one month during the year. That includes:
- Regular, probationary, project, and fixed-term employees. Employment status doesn’t matter.
- Employees paid by piece rate. Paid by output instead of time, they are still entitled.
- Employees paid a fixed or guaranteed wage plus commission. Entitled, computed on both the fixed wage and the commission (see Step 2).
- Employees with more than one employer. They are entitled to 13th month pay from each private employer they worked for.
- Employees who resigned or were terminated during the year. They get a proportionate amount (1/12 of basic salary earned in the months worked), which they may demand upon separation. It is usually released with their final pay.
- Employees on maternity leave who received salary differential.
- Private school teachers, including faculty members of universities and colleges, who rendered at least one month of service in the year, regardless of how many months they taught.
Managerial employees are not covered by PD 851, but many companies still give them 13th month pay by policy or contract.
Who is outside the law’s coverage
Under DOLE’s 1987 Revised Guidelines, the following employers are not covered: the government and its political subdivisions (except government-owned or -controlled corporations operating essentially as private subsidiaries); employers of household helpers (kasambahay) and persons in the employer’s personal service; and employers of workers paid purely on commission, boundary, or task basis, or a fixed amount for a specific job regardless of time spent, except piece-rate workers, who are covered. Kasambahay have their own 13th month pay right under the Batas Kasambahay (RA 10361). If you are not sure whether an exclusion applies to your workers, get advice before deciding not to pay.
Employers that already give a 13th month pay or its equivalent (for example, a year-end bonus at least equal to 1/12 of annual basic salary) are treated as compliant under PD 851. Just make sure it really is at least the legal minimum.
Step 2. Compute it with the 1/12 formula
The formula is the same for everyone:
The formula
13th month pay = Total basic salary actually earned during the calendar year ÷ 12
Always divide by 12, even if the employee worked only part of the year. The word earned matters: the base is what was actually paid as basic salary, not a full-year theoretical rate.
- Unpaid absences and leave without pay lower the total (and therefore the 13th month pay).
- Tardiness or undertime lowers the total only when the employer lawfully deducted the corresponding basic salary. If there was a grace period, make-up time, or no salary deduction, they do not reduce the base.
- Paid leave (including paid vacation or sick leave) does not lower the total.
- Do not deduct absences or tardiness a second time from the finished 13th month amount — they are already reflected in the “basic salary earned” figure.
| Example | Basic salary earned in 2026 | 13th month pay |
|---|---|---|
| Full year at ₱20,000 a month, no unpaid absences | ₱240,000 | ₱240,000 ÷ 12 = ₱20,000 |
| Same ₱20,000/month, but ₱4,800 deducted for unpaid absences/tardiness | ₱235,200 | ₱235,200 ÷ 12 = ₱19,600 |
| Hired July 1 at ₱18,000 a month | ₱108,000 (6 months) | ₱108,000 ÷ 12 = ₱9,000 |
| Resigned September 30, ₱25,000 a month | ₱225,000 (9 months) | ₱225,000 ÷ 12 = ₱18,750 |
Piece-rate and commission workers
Piece-rate: 13th month pay = total earnings from production or output during the year ÷ 12. Example: ₱204,000 earned from output in 2026 ÷ 12 = ₱17,000.
Fixed or guaranteed wage plus commission: 13th month pay = (total fixed wage + total commission earned during the year) ÷ 12, as stated in DOLE Labor Advisory No. 16-2025 and the 1987 Revised Guidelines. Example: ₱180,000 fixed wage + ₱60,000 commission = ₱240,000 ÷ 12 = ₱20,000. Don’t leave out the commissions for this group.
Sample figures for illustration only. Use each employee’s actual payroll records.
Step 3. Get “basic salary” right
This is where most errors happen. DOLE’s guidelines say basic salary includes all pay for services rendered, but does not include allowances and benefits that are not part of the regular basic salary, such as:
| Usually excluded | Included only if… |
|---|---|
| Overtime pay | Your employment contract, collective bargaining agreement, company practice, or policy treats it as part of basic salary. |
| Premium pay and holiday pay | |
| Night shift differential | |
| Cost of living allowance (COLA) | |
| Cash conversion of unused vacation and sick leave | |
| Other allowances not integrated into basic pay |
For employees paid a fixed or guaranteed wage plus commission, include the commissions as DOLE’s advisory directs (Step 2). The 13th month pay itself is not added to the regular wage when computing overtime, premium pay, or SSS and other contributions.
Use gross basic salary, before SSS, PhilHealth, Pag-IBIG, and withholding tax deductions. If you are unsure whether an allowance has become part of basic pay through company practice, check before you finalize the computation.
Step 4. Pay on or before December 24
- Deadline. The full amount must be paid on or before December 24 each year (PD 851). For 2026, that is Thursday, December 24.
- Paying in two parts is allowed. DOLE’s Revised Guidelines (1987) let employers pay half earlier in the year, for example before the school year opens, and the rest by December 24, as long as the full amount is paid on time.
- No exemption or deferment. DOLE Labor Advisory No. 16-2025 states that no request for exemption or deferment of the payment will be accepted.
- Release with final pay for separated employees. Employees who left during the year get their proportionate 13th month pay, which they may demand upon separation and which is usually included in their final pay.
Step 5. File your DOLE compliance report
After paying, employers report compliance online through the DOLE Establishment Report System at reports.dole.gov.ph. For the 2025 payment cycle, Labor Advisory No. 16-2025 set the deadline at not later than January 15, 2026. DOLE usually issues a new advisory each November, so confirm the reporting deadline for 2026 13th month pay once the next advisory is out. DOLE monitors compliance through its labor inspection program. The report covers basics such as your establishment name and address, total employment, number of workers who received it, amount per employee, and total amount granted.
Step 6. Apply the ₱90,000 tax-exempt ceiling
Under Sec. 32(B)(7)(e) of the Tax Code, as amended by the TRAIN Law (RA 10963), 13th month pay and other benefits are excluded from an employee’s taxable income up to ₱90,000 a year. That single ceiling covers all of these combined:
- 13th month pay under PD 851
- Similar benefits for employees not covered by PD 851, such as managerial employees
- Other benefits such as productivity incentives and Christmas bonuses
Anything above ₱90,000 becomes taxable compensation and must be included when you compute the employee’s withholding tax for the year. Example: ₱60,000 13th month pay plus a ₱45,000 Christmas bonus is ₱105,000, so ₱15,000 is taxable.
Need help with payroll or 13th month?
For monthly payroll support or 13th month pay computation only, contact us. BGB will scope the engagement with you.
Step 7. Prepare your books and cash early
- Accrue it monthly. Set aside 1/12 of each month’s basic payroll as a 13th month pay expense and liability in your books, so December doesn’t hit your cash or your profit all at once.
- Reconcile by employee. Check each employee’s January–December basic pay actually earned (after unpaid absences, leave without pay, and any salary deductions for tardiness or undertime), plus any mid-year salary changes.
- Plan your December cash. 13th month pay, holiday pay, and the last regular payroll often fall within the same few weeks.
- Keep the support on file. Payroll registers, payslips, and proof of payment back up your DOLE report and your year-end tax filings.
Common mistakes to avoid
- Dividing by the number of months worked instead of by 12.
- Using the theoretical full-year basic salary instead of what was actually earned after unpaid absences, leave without pay, and salary deductions for tardiness/undertime — or deducting those attendance items again from the finished 13th month amount.
- Leaving out employees who resigned, were terminated, or are on probation.
- Leaving out the commissions of employees paid a fixed wage plus commission, or skipping piece-rate workers.
- Including overtime, holiday pay, or allowances that aren’t part of basic pay, or leaving out ones that company practice already treats as basic pay.
- Treating each bonus separately for tax instead of applying one combined ₱90,000 ceiling.
- Paying after December 24, or forgetting the DOLE compliance report.
When to get help
Talk to a CPA if your payroll records are incomplete, if you have employees with mid-year salary changes or many unpaid absences, if you give several year-end bonuses that may push employees past ₱90,000, if you are unsure which allowances count as basic pay, or if you have separated employees whose final pay is still open.
How BGB helps with Payroll & Bookkeeping
BGB computes 13th month pay per employee from your payroll records, applies the ₱90,000 ceiling with your other bonuses, reflects it in your year-end withholding and books, and helps you prepare your DOLE compliance report.
Frequently Asked Questions
When is the deadline for 13th month pay in 2026?
On or before December 24, 2026, which is a Thursday. PD 851 sets December 24 as the yearly deadline, and DOLE’s latest advisory states that no request for exemption or deferment will be accepted.
How do I compute 13th month pay?
Add up the basic salary the employee actually earned during the calendar year, then divide by 12. Always divide by 12, even for employees who worked only part of the year. Unpaid absences and leave without pay lower the total; tardiness or undertime lowers it only when basic salary was deducted; paid leave does not. Don’t deduct attendance a second time from the finished 13th month amount.
Do resigned or terminated employees get 13th month pay?
Yes. As long as they worked at least one month during the year, they get a pro-rated amount, usually included in their final pay.
Do piece-rate, commission, and multiple-employer workers get 13th month pay?
Yes, if they are rank-and-file and worked at least one month in the year. Piece-rate workers get 1/12 of their total output earnings for the year. Employees paid a fixed or guaranteed wage plus commission get 1/12 of their total fixed wage and commission for the year. Employees with more than one employer get 13th month pay from each private employer. Workers paid purely on commission, boundary, or task basis with no fixed wage fall under a coverage exclusion in DOLE’s 1987 Revised Guidelines.
Are managers entitled to 13th month pay?
PD 851 covers rank-and-file employees, so managerial employees are not legally required to receive it. Many companies still give it by policy or contract, and it shares the same ₱90,000 tax-exempt ceiling.
Is 13th month pay taxable?
Only the part above ₱90,000. Under the Tax Code as amended by the TRAIN Law, 13th month pay plus other benefits like Christmas bonuses and productivity incentives are tax-exempt up to a combined ₱90,000 a year.
Can I pay 13th month pay in installments?
Yes. DOLE’s Revised Guidelines allow paying part of it earlier in the year, for example half before the school year opens, as long as the full amount is paid by December 24.
Official sources & references
- Presidential Decree No. 851 (1975), 13th Month Pay Law, and its Implementing Rules: payment not later than December 24; 13th month pay defined as 1/12 of basic salary within a calendar year; employers already paying 13th month pay or its equivalent are not covered. Text: lawphil.net
- DOLE Labor Advisory No. 16, Series of 2025, Guidelines on the Payment of the Thirteenth-Month Pay: coverage of rank-and-file employees who worked at least one month (including piece-rate, fixed wage plus commission, multiple employers, resigned or terminated, and maternity leave with salary differential), 1/12 minimum, items excluded from basic salary, computation for piece-rate and fixed wage plus commission, no exemption or deferment, and compliance report through the DOLE Establishment Report System. This was the advisory for the 2025 payment cycle. Its rules apply each year until DOLE issues the next one. DOLE Bureau of Working Conditions PDF · Report system: reports.dole.gov.ph
- Revised Guidelines on the Implementation of the 13th Month Pay Law (DOLE, November 16, 1987): removal of the salary ceiling, rank-and-file coverage, exclusion of managerial employees, employers not covered (government, household helpers, purely commission/boundary/task basis except piece-rate), items excluded from basic salary, special cases (piece-rate, commission, multiple employers, private school teachers, resigned or terminated employees), and payment of one-half before the opening of the school year with the balance by December 24. Text: chanrobles.com
- Republic Act No. 10963 (TRAIN Law), Sec. 9, amending Sec. 32(B)(7)(e) of the Tax Code: 13th month pay and other benefits, including productivity incentives and Christmas bonuses, excluded from gross income up to a combined ₱90,000. Text: lawphil.net
- Bureau of Internal Revenue, Revenue Regulations No. 11-2018 implementing the TRAIN Law income tax and withholding provisions: bir.gov.ph
- Republic Act No. 10361 (Batas Kasambahay): separate 13th month pay right of domestic workers. Text: lawphil.net
- Department of Labor and Employment: watch for the 2026 13th month pay advisory, usually issued in November. dole.gov.ph
Verification note: PD 851 and RA 10963 were checked against their texts on lawphil.net, and the 1987 Revised Guidelines against chanrobles.com. Labor Advisory No. 16-2025 content was aligned to DOLE’s official advisory language as published by the Bureau of Working Conditions (checked through a professional firm’s republication of the advisory text when the PDF could not be opened).
This article is general information only, based on PD 851, DOLE’s guidelines and latest advisory, and the Tax Code as of the date below. It is not legal advice and is not a substitute for advice on an employer’s or employee’s specific facts. Before relying on it, employers and employees should check the latest DOLE advisory on 13th month pay (usually issued each November) and apply it to their own situation, or consult DOLE or a qualified professional.
Last updated: October 29, 2026 (checked against PD 851 and its Implementing Rules, DOLE Labor Advisory No. 16-2025, the 1987 Revised Guidelines on the Implementation of the 13th Month Pay Law, and RA 10963 Sec. 9)
Connect with BGB
Your Growth. Our Stewardship.
Tell us about your business and what you need to get done. BGB will review your situation and propose a clear, scope-based engagement—with integrity, stewardship, and partnership.
