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Global Work Glossary

Lost in a maze of global employment jargon? Find your way out with our handy collection of work and HR terminology

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13th month pay

What is 13th month pay?

13th-month pay is a bonus that is paid to employees, typically at the end of the year. While the purpose of this varies between cultures, the general idea behind it is to recognize and reward employees for their hard work throughout the year while boosting morale and motivation.

13-month pay is common practice in countries such as the Philippines, Spain, and Mexico, in some countries being mandatory while in others it is discretionary. The bonus payment can take various forms, such as a percentage of an employee’s annual salary, a fixed amount, or a calculation based on performance metrics.

To hire talent internationally, you therefore need a good knowledge of 13th-month pay regulations. For this reason, it’s important to use HR software such as Multiplier which notifies you of important dates for a globally operating team.

When and how you pay 13th-month pay is also tied to local traditions and customs, but typically you’ll divide the total basic salary by 12 to get your 13-month pay calculation. In other countries, calculations can be a bit more complicated. For example, Argentina’s 13th-month pay Aguinaldo is paid in two installments. You can also use software such as Multiplier to automatically calculate and pay these sums.

The 13th-month pay is usually taxed, but in some countries, it’s not. This again highlights the need for businesses to stay informed about the unique regulations in each country they operate in, ensuring compliance and understanding the impact of such payments on financial reporting.

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