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What is 13th or 14th Month Pay and How do I Calculate it?

13th and 14th month pay is the payment of an additional month’s salary, a form of compensation, in the financial year. It is a common employment standard around the globe, though how it works depends on the employment law of a country. If your company is employing globally, you will need to understand the ins and outs of this practice.

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13th and 14th month pay is the payment of an additional month’s salary, a form of compensation, in the financial year. It is a common employment standard around the globe, though how it works depends on the employment law of a country. If your company is employing globally, you will need to understand the ins and outs of this practice. 


Many of your employees will be working in places where 13th month - or even 14th month - pay is the norm. Being aware of how 13th month pay works is essential to ensuring your company remains compliant while employing remotely. Here we break down everything you need to know about 13th and 14th month pay. 


What is 13th or 14th month pay? 


Thirteenth month pay is a form of compensation in addition to an employee’s annual (12 month) salary. It is also known as 13th month salary or 13th salary, and in some countries, a 14th month salary is also common. It was legally introduced in the Philippines in 1975, where it is still enshrined in employment law. Since the 1970s, 13th month pay has become widely popular across all continents. 


In countries like Austria, it is also referred to literally as “holiday or Christmas money” (Urlaubs- und Weihnachtsgeld). But this does not mean it is treated as a bonus or commission. Neither is it the same as holiday pay - i.e. the pay employees are entitled to when taking holiday leave. The bottom line is that each country will have their own definition. 


Sound knowledge of 13th month pay regulations affecting your remote employees is essential for your company to remain compliant.


Is 13th month pay mandatory?


In some countries, like the Philippines, 13th month pay is a legal obligation. But in many other places, it is customary. Where it is customary, it will be agreed upon in the employment contract or through industry or collective agreements. Not paying a mandatory 13th month pay can lead to legal action and penalties for non-compliance. Likewise, not paying customary 13 month pay can affect employee retention in that country.


The tables below detail some of the key markets where you will run into 13th month pay and whether this is mandatory:


Europe & North America




Asia



South & Central America



When is it paid?


As the country tables suggest, when 13th and 14th month pay is paid out it is tied to national regulations. The exact time is often stipulated in employment contracts or collective agreements, if not in law. 


But the timing is also tied to cultural norms. The emergence of 13th month pay in the Philippines is linked to its predominantly Christian roots, so legally it has to be paid out before the 24th of December - just in time for Christmas.


This is the case in several other countries. In Greece, 14th month pay is mandatory. One half is paid out in full for Christmas, the other is divided and paid out at Easter and in the summer. Likewise, in Saudi Arabia, mandatory 13th month salary is paid on Eid-Ul-Fitr. In China and Singapore, 13th month pay tends to be paid out for Chinese New Year.


When employing new remote talent, being aware of these cultural and regional nuances can do wonders for your employee retention. It also signals adaptability to local business practices to local authorities.



Who is entitled to 13th month pay?


Where it is mandatory, an employment relationship alone can include entitlement to 13th month pay. In the Philippines, all employees are entitled to 13th month pay, provided they have worked for at least one month within the calendar year.


But some forms of employment may be exempted, such as managers, public sector staff, or personal service employees. This will be specified by local authorities. Employees receiving bonuses of equivalent value do not necessarily receive 13th month pay either. Contractors and people on zero-hour contracts will also not typically receive a 13th month pay.


How is 13th month pay calculated?


In some countries, 13th month pay is calculated as an additional salary. This is the case in the Philippines. The formula used in the Philippines is: total basic salary / 12 = 13th month pay. So it is equivalent to one month’s salary of that year. The total basic salary does not include any bonuses or other monetary benefits received that year.


In other countries, 13th month pay is calculated as part of the annual salary. The following formula is applied: annual base salary / 13 = 13th month pay. This is the case in Italy or Brazil.


There are other more unique forms of calculating 13th month pay. In India, it is calculated as a bonus in the form of a percentage of the annual salary. 


Argentina has a well-known take on 13th month pay, locally called aguinaldo. Employees are paid 13th month pay in two installments - once in June and again in December. The amount paid each time is equivalent to 50% of the highest monthly salary paid in the months prior to receiving aguinaldo. Here the formula is: (monthly salary / 12) x months worked = 13th month pay.


Argentina’s formula adjusts the 13th month pay to the number of months an employee actually worked. This is also the case in the Philippines.


Is 13th month pay taxed?


The 13th month pay tends to be taxed. How this is done varies country to country. In the Philippines, any payments over P90,000 will be subject to taxes. In countries like Austria, the 13th and 14th month pay is taxed but at a significantly lower rate (6%) compared to the normal taxation rate.


You will need to be aware of these differences when employing remotely, as not paying the right taxes can lead to non-compliance and the accompanying legal fines and penalties. 


Easy and compliant payroll with Omnipresent


Omnipresent offers a payroll solution that makes calculating and paying 13th and 14th month pay easy for you. As part of our administrative service for remote employment, we include a comprehensive payroll service. This means we:


  • calculate & pay your staff’s salary, benefits, & taxes for you
  • help you tailor benefits packages for your team
  • pay all your staff with one invoice
  • ensure your company is 100% compliant


You can access all your records on the OmniPlatform, Omnipresent’s digital tool to manage all your remote staff’s admin in one place. We have adapted the payroll process to remote businesses, so you can employ remotely with peace of mind.


Omnipresent offers a holistic solution to businesses looking to employ remotely. Get in touch for a free consultation so we can help you find the best path for your business.





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