When jumping into hiring contractors from the Philippines, you will come across the concept of "13th month pay." This term may sound unfamiliar, but it's an important aspect of the compensation system in the Philippines.
What is 13th Month Pay?
In the Philippines, 13th month pay is a mandatory benefit provided to employees. It is an additional payment equivalent to one month's salary, typically paid out at the end of the year. It is not required for contractors, but can create a compelling value proposition for attracting great talent.
How is 13th Month Pay Calculated?
The calculation of 13th month pay is relatively straightforward. The formula is as follows:13th Month Pay = (Total Basic Annual Salary) ÷ 12
For example, if an employee's annual basic salary is ₱600,000, their 13th month pay would be:13th Month Pay = ₱600,000 ÷ 12 = ₱50,000
This means that the employee would receive an additional ₱50,000 on top of their regular December salary.
Prorated 13th Month Pay
If an employee starts working in the middle of the year, their 13th month pay is prorated based on the number of months worked. The formula for prorated 13th month pay is:Prorated 13th Month Pay = (Total Basic Salary for the Months Worked) ÷ 12
For instance, if an employee starts working on July 1st with an annual basic salary of ₱600,000, and assuming they work until the end of the year, their prorated 13th month pay would be:Prorated 13th Month Pay = (₱600,000 ÷ 12) × 6 = ₱300,000 ÷ 12 = ₱25,000In this case, the employee would receive ₱25,000 as their prorated 13th month pay.
Math is hard - just use the calculator we made for you above to quickly calculate the expected amounts.
