The 13th month’s pay is an additional compensation offered to a company’s employee above their twelve months remuneration. The extra remuneration is paid entirely at the year-end in some countries, while others follow a double payment or quarterly payment scheme. The 13th month’s pay is neither a bonus nor a commission. Instead, it is an extra month’s salary.
The 13th month pay, also popular as the 13th month bonus or simply 13th salary was introduced in the Philippines in 1975. Today it has gained widespread popularity, and knowing what it is will help you remain compliant with the domestic laws. It will also ease out your foreign employee hiring process.
In this piece, you will find more on the thirteenth month pay to better understand where and when it is applicable.
What Does 13th Month Salary Mean?
The 13th month pay is an additional salary payment made to employees during a financial year. It is often equal to one month’s salary and may be referred to as an end-of-year bonus or 13th salary.
The History of 13th-Month Pay
The Philippines introduced mandatory 13th month pay through Presidential Decree No. 851 in December 1975. It was not the first country to legislate an additional annual salary payment: Brazil introduced its statutory Christmas salary in 1962.
The Philippine requirement initially covered employees earning no more than ₱1,000 a month. Memorandum Order No. 28 of 1986 removed the salary ceiling for rank-and-file employees. It did not extend the requirement to every private-sector employee category. Government employees receive bonuses under separate public-sector rules.
The idea of a 13th month pay has its roots in Filipino tradition. The Philippines is a Christianity-dominated nation, and their most important festival is Christmas. But, for breadwinners, the festival’s expenses could be burdensome. Thus the 13th month pay was a sigh of relief and allowed the families to gather together and enjoy the festivities.
Different countries developed their own additional annual payment systems, with some providing payments commonly described as 14th-month pay. Today this regulation is mandatory for some countries while customary for others. A country’s government and companies decide if and when this extra remuneration should be paid.
Is it Required or Expected to Pay a 13th Month Salary?
Whether 13th month pay is required depends on the country’s employment laws. In some countries, employers are legally required to provide it, while in others, it is customary or depends on the terms of the employment contract.
For example, 13th month pay is mandatory in countries such as the Philippines, Greece, and Argentina. Employers operating in these countries must follow the applicable rules on eligibility, calculation, and payment timing.
In countries where 13th month pay is customary, such as China, Japan, and Singapore, it may not be required by law. However, employers may offer it as part of their compensation practices or include it in employment contracts. The applicable terms can therefore depend on local practice and the employment agreement.
The distinction matters when managing payroll across countries. Before including 13th month pay in an employee’s compensation, employers should check the local legal requirements and the terms of the employment contract.
Who is Eligible for 13th Month Pay?
Eligibility depends on the country, the worker’s employment status, and the applicable law, collective agreement, or employment contract. Philippine eligibility rules should not be applied as a global standard.
In the Philippines, private-sector rank-and-file employees who have worked for at least one month during the calendar year are generally entitled to 13th month pay. Eligible employees who resign or whose employment ends during the year receive a prorated amount based on basic salary earned. Eligible workers with multiple employers can receive the benefit from each employer.
For more details, see our guide to 13th month pay in the Philippines.
Exemption from 13th month pay
Exemptions vary by country. In the Philippines, managerial employees are generally outside the statutory private-sector requirement, although contracts or company policies may provide an entitlement. Government employees have separate bonus arrangements.
Part-time work or having multiple employers does not automatically exclude an employee. Genuine independent contractors generally fall outside employee entitlements, but status depends on the actual working relationship and applicable law, rather than payment method alone.
Which Countries Require 13 Month Pay?
Several countries require employers to provide a statutory additional annual payment. The benefit may be called 13th month pay, an annual bonus, an aguinaldo, a Christmas bonus, or another local term. The amount, eligibility rules, calculation, and payment deadline vary by country.
13th Month Pay in Asian Countries
| Country | Statutory requirement? | Benefit and typical timing |
|---|---|---|
| Philippines | Yes | Paid by December 24 each year. |
| India | No general 13th-month salary | Statutory annual bonus for eligible employees; timing follows applicable rules. |
| Indonesia | No general 13th-month salary | THR, or religious holiday allowance, is paid before the applicable religious holiday. |
| Singapore | No general 13th-month salary | Usually paid at year-end if provided. |
| Malaysia | No general statutory 13th-month pay | Usually paid as a contractual or discretionary year-end bonus. |
| Japan | No | Bonuses are commonly paid in summer and winter. |
| China | No general statutory 13th-month pay | Additional annual payment may be made at year-end or around Chinese New Year. |
| Taiwan | No general statutory 13th-month pay | Year-end or Lunar New Year bonus is commonly paid around Lunar New Year. |
| Vietnam | No general statutory 13th-month pay | Usually paid at year-end or before Tet when offered. |
13th Month Pay in Latin American Countries
| Country | Statutory requirement? | Benefit and typical timing |
|---|---|---|
| Argentina | Yes | SAC, or aguinaldo, is paid by June 30 and December 18. |
| Bolivia | Yes | Aguinaldo de Navidad is paid at year-end. |
| Brazil | Yes | 13th salary is paid in two installments, generally by November 30 and December 20. |
| Colombia | Yes | Prima de servicios is paid in June and December. |
| Costa Rica | Yes | Aguinaldo is generally paid during the first 20 days of December. |
| Dominican Republic | Yes | Salario de Navidad is generally paid by December 20. |
| Ecuador | Yes | Décima tercera remuneración is paid monthly or as an accumulated payment by December 24. |
| El Salvador | Yes | Aguinaldo is paid within the statutory payment period. |
| Guatemala | Yes | Aguinaldo is paid annually; Bono 14 is paid in July. |
| Honduras | Yes | Décimo tercer mes, or aguinaldo, is generally paid in December. |
| Mexico | Yes | Aguinaldo is paid by December 20, with a minimum of 15 days’ salary. |
| Nicaragua | Yes | Décimo tercer mes, or aguinaldo, is paid annually. |
| Panama | Yes | Décimo tercer mes is paid in three installments during the year. |
| Paraguay | Yes | Aguinaldo is generally calculated as 1/12 of qualifying annual remuneration. |
| Peru | Yes | Gratificaciones are generally paid in July and December. |
| Uruguay | Yes | Aguinaldo is generally paid in two installments. |
13th Month Pay in European Countries
| Country | Statutory requirement? | Benefit and typical timing |
|---|---|---|
| Greece | Yes | Private-sector employees receive a statutory Christmas bonus equal to one month’s salary for salaried employees. |
| Portugal | Yes | Employees receive a Christmas allowance and a vacation allowance, with annual remuneration paid in 14 installments. |
| Spain | Yes | Employees are generally entitled to two extraordinary salary payments each year, one around Christmas and another at a time established by agreement. |
| Austria | Yes, subject to applicable collective agreement or employment terms | Employees commonly receive special payments such as a vacation bonus and Christmas bonus. |
| Belgium | Yes, depending on the applicable sector and employment rules | Employees may receive a year-end bonus or 13th-month payment under sectoral collective agreements or applicable employment rules. |
| Croatia | No general statutory 13th-month salary | Additional payments like Christmas or holiday bonuses may apply under collective agreements, employment contracts, or employer practice. |
| France | No general statutory 13th-month salary | A 13th-month payment may apply under a collective agreement, employment contract, or established company practice. |
| Germany | No general statutory 13th-month salary | Christmas bonuses and other additional annual payments can arise from collective agreements, employment contracts, or established practice. |
| Italy | Yes | Employees generally receive a statutory tredicesima payment, usually paid in December. |
| Netherlands | No general statutory 13th-month salary | A 13th-month salary or year-end bonus may apply under an employment contract or collective labor agreement. |
| Switzerland | No general statutory 13th-month salary | A 13th-month salary may be provided under the employment contract or collective agreement. |
13th Month Pay in African Countries
| Country | Statutory requirement? | Benefit and typical timing |
|---|---|---|
| Angola | Yes | Vacation and Christmas bonuses apply under employment rules. |
| Nigeria | No general statutory 13th-month salary | Usually paid as a year-end or Christmas bonus when offered. |
| South Africa | No general statutory 13th-month salary | Usually paid as a year-end bonus when offered. |
How to Compute 13th Month Pay?
The most common way to calculate 13th month pay is to divide the employee’s total basic salary earned during the year by 12.
Formula:
13th month pay = Total basic salary earned during the year ÷ 12
For example, if an employee earns $60,000 in basic salary during the year:
$60,000 ÷ 12 = $5,000
An employee who worked for only part of the year will generally receive a prorated amount based on the salary earned during that period.
The exact calculation can vary by country. For example, the Philippines calculates 13th month pay based on one-twelfth of total basic salary earned during the calendar year. Brazil also has specific rules for calculating and paying the 13th salary, including different treatment for employees who worked only part of the year.
Employers should check the local rules before calculating 13th month pay, as the salary components included and payment requirements can differ by country.
Is 13th Month Pay Taxable?
Yes, the thirteenth month pay is taxable for most countries that offer this extra remuneration. The calculation of tax, however, varies across countries. There is a threshold for taxation in some countries, while for some other nations, the entire amount is taxable. For instance, the Philippines provides a combined ₱90,000 annual tax exemption for 13th month pay and other qualifying benefits. The qualifying amount above that combined ceiling is taxable.
Some other countries, like Austria, have an entirely different tax rate for the 13th month pay. In Austria, qualifying special payments may receive preferential taxation within statutory limits. A 6% rate applies to part of the eligible amount, but exemptions, higher bands, and limits mean it is not a universal rate. When paying your employees, you must be aware of this local tax regulation to avoid penalties. According to Multiplier’s Global hiring gap report, 53% of companies cite international tax compliance as their absolute most significant payroll challenge.
Is 13 Month Pay a Bonus?
Thirteenth month pay has been adopted in many countries, but usually, it’s not considered as merely a bonus.
The difference lies in the fact that employee bonuses are related to their performances, while thirteenth month pay is nothing like that. It is either customary for the company to pay irrespective of the performance or is made mandatory by law.
When Is 13 Month Pay Given?
Now that you are aware of the thirteenth month pay, the countries it is applicable in, and its eligibility, you should also know when to give it to your employees. This date is determined by the country of operation and is tied to the country’s customs, traditions, and regulations.
In the Philippines, employers must pay 13th month pay no later than December 24. In Greece, eligible private-sector employees receive separate Christmas and Easter bonuses and a vacation allowance. For salaried employees meeting the full qualifying periods, the Christmas bonus equals one month’s salary and the Easter bonus equals half a month’s salary; the vacation allowance is capped at half a month’s salary. These are separate entitlements, not instalments of a single 13th-month payment.
Saudi Arabia has no general statutory 13th-month salary requirement. Any additional annual payment should be assessed against the employment contract and applicable employer policy.
If the time is not mentioned by law, then it should be mentioned in the employment contract. For instance, an additional annual payment in Singapore or China may be paid at year-end or around Lunar New Year, according to the applicable employment terms and employer practice.
The time of payment varies according to countries because this pay is mainly dedicated to affording the festivities, enjoying the traditions, holidays with the loved ones. Before you begin hiring in a foreign country, knowing about these traditions and regional nuances is crucial for your business adaptability in a foreign area.
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Conclusion
It is best to be familiar with the concept of 13th month pay if you have an overseas business. Employee satisfaction in a company is the key to running a business smoothly, and what better way to ensure that other than properly compensating them? The thirteenth month pay is one such way to reward your employees, especially during their festivities. You must familiarize yourself with the local traditions and customs, countries where this pay is applicable, along with the implementation process of the thirteenth month pay.
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Frequently Asked Questions
What is 13th month pay?
13th month pay is an additional salary payment, typically equal to one month’s base pay, that employers in many countries are legally required or customarily expected to provide once a year. The rules vary by country, including who is eligible, how the payment is calculated, and when it must be paid.
How is 13th month pay calculated?
The most common formula is to divide the employee’s total basic salary earned during the year by 12. Employees who worked for only part of the year generally receive a prorated amount. However, the calculation can vary by country, so employers should check the applicable local rules before processing the payment.
Is 13th month pay mandatory?
13th month pay is mandatory in some countries and customary or contract-based in others. Employers must follow the local employment laws where the employee works. The rules may also differ in terms of eligibility, calculation, payment deadlines, and which salary components are included.
Is 13th month pay taxable?
In most countries, 13th month pay is taxable as ordinary income. Some jurisdictions exempt all or part of the payment up to a statutory threshold. Employers should check the current tax rules in the employee’s country before calculating payroll deductions.
Is 13th month pay the same as a bonus?
No. 13th month pay is a statutory or contractual payment in countries where it is required or agreed upon. A discretionary bonus is generally an additional payment an employer chooses to provide based on factors such as performance, company results, or individual targets. The two may also be treated differently for payroll and tax purposes.
