Christmas Bonus vs. 13th Month Pay

With the Christmas season (together with the requisite countdowns, shopping lists and family reunions) fast approaching, one thing is slowly creeping into the consciousness of the great host of salaried employees in the country – the Christmas Bonus. Indeed, many a gift is being thought of and many a budget is being drawn-up in anticipation of this gratuity, a reward if you will, for another year’s worth of blood, sweat and tears. But what exactly comprises this year-end gratuity? Who are entitled to receive a Christmas bonus? Can one correctly call the 13th-month pay a Christmas bonus?

The term bonus is defined as:

. . . an amount granted and paid to an employee for his industry and loyalty which contributed to the success of the employer’s business and made possible the realization of profits. It is an act of generosity granted by an enlightened employer to spur the employee to greater efforts for the success of the business and realization of bigger profits. The granting of a bonus is a management prerogative, something given in addition to what is ordinarily received by or strictly due the recipient. Thus, a bonus is not a demandable and enforceable obligation, except when it is made part of the wage, salary or compensation of the employee.

Generally speaking, therefore, a bonus is a gift or reward given voluntarily by an employer outside of an employee’s regular compensation for his or her industry and/or contribution to making the employer’s enterprise successful or profitable.

This is to be distinguished from the 13th-month pay which is required by law (Presidential Decree No. 851, as amended, and its Implementing Rules). All rank and file employees, regardless of status, who have worked for at least one (1) month are entitled to receive 13th month pay. Prior to 1986, only those who receive a monthly salary of at least PhP1,000 are entitled to receive 13th month pay, but this cap was removed under Memorandum Order No. 28 issued by former President Corazon Aquino.

The 13th month pay is essentially a form of monetary assistance equivalent to the monthly basic compensation received by an employee, computed pro-rata according to the number of months within a year that an employee has rendered service to an employer, (basic monthly pay/12 x number of months actually worked).

Again, in general terms, we may distinguish the term christmas bonus from 13th month pay thus:

* 13th month pay is mandatory and shall be received by all employees who have worked at least one month within a calendar year; a bonus, being an act of liberality or a gift from the employer cannot be demanded unless certain conditions apply.

*The law provides for what shall comprise the 13th month pay; a bonus depends fully on the generosity (or the absence of such) of the employer.

*An employer may provide conditions as to who shall be entitled to various classes of bonuses; not so with the 13th month pay.

*The 13th month pay shall be paid on or before December 24; the release of Christmas bonuses and/or other forms of bonuses may be released at any time upon the discretion of the employer/management.

There are however instances when a bonus, even though clearly an act of generosity on the part of the employer, may become demandable. In instances where the granting of a bonus have already become a long-standing practice or policy, the employer can no longer withdraw and to do so is tantamount to a diminution of benefits. This is prohibited under the Labor Code.

So, before you splurge on Christmas shopping in anticipation of the Christmas bonus, think again.

Sources: Supreme Court (Producers Bank of the Philippines vs. NLRC, G.R. No. 100701, 28 March 2001), Department of Labor and Employment (DOLE).

18 Comments Added

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  1. oochiebabe December 15, 2007 |

    so the 13th month pay is really MANDATORY? what will happen if the employer doesnt comply?

  2. Pingback: Christmas Bonus vs. 13th Month Pay | Bum No More

  3. kaloybogr November 26, 2008 |

    Hi,

    regarding 13th month pay, is it taxable?
    if so, how many percent?

    thanks!

  4. bmoney November 29, 2008 |

    I work for a BPO company here in Quezon City, last Nov. 28 we recieved our salary along with our 13th month pay plus a performance appriasal bonus. Most of the employees in our company were shocked to find out that our 13th month pay was taxed. For the first time i experienced being taxed on my 13th month pay. It was added with the performance appraisal bonus, the sum of both amounts exceeded the P30,000 threshold set by our govenment for tax excemption. My question, is the 13th month pay considered as a bonus or a benefit? Isn’t it supposed to be computed separately from the bonus because it is a government mandated benefit? Hoping you can shed some light with this matter

  5. calladdict2006 November 29, 2008 |

    to bmoney…

    I think we work from the same company, my site is in Alabang.

    I was also surprised to find out that our 13th month is taxed. This is the first time in my 5 years in the company that the 13th month pay is taxed. What I know is that the 1st 30,000 is tax exempt.

  6. Welcome123 December 1, 2008 |

    Kaloybogr, bmoney and calladdict2006, I think guys we’re working for the same company. Everybody seemed to have their 13th Month Pay taxed. They revised my online payslip and credited me P1K+ more. It seems that there is something fishy going on with the new system.

    Ignorantia juris non excusat

  7. ice December 1, 2008 |

    Hi,

    I am also with the BPO industry in Cebu and the same thing has happened. Are they using ADP for your payroll guys?

  8. fungfung42 December 2, 2008 |

    etelecare global solutions ba pinaguusapan niyo???mga bugok nga finance officer dun..

  9. boy scout December 3, 2008 |

    To clear all your queries, here is the answer to your question if the 13th month pay is taxable or not:

    The first P30,000 on your 13th month pay is tax free, as stated by BIR revenue regulations. This P30,000 does not include the sum of all “de minimis” benefits given by the company to the employees.

    Thus being said, your 13th month will only be taxable if you are receiving a 13th month pay exceeding P30,000 and the tax will only apply after deducting the first P30,000 on your 13th month pay.

  10. im.asking December 15, 2008 |

    m working for 5 yeras as a pharmacist in a private owned establishment in the province. eversince i haven’t received a 13th month pay.

    ang employer ko ba is obliged to pay me my 13th month since dalawa lang kami na employed sa kanila, isang manager and ako na pharmacist? nasa law din ba yan?

    and also wala din akong benefits from them..no SSS, no PHILHEALTH…dapat din ba nila ibigay yan sa akin? may bracket ba dapat para maibigay sa akin ang mga benefits na dapat lang na meron ako as employee.

    please help me find answers to my questions.

    thank you.

    email me : sovereign_lady07@yahoo.com

  11. iya November 20, 2009 |

    I work for a BPO company at present but is planning to submit my resignation by November 30 effective December 31. Is there a possibility that i would get my 13th month pay before the mandated release which is December 24? I just cannot wait for the release of the 13th month pay before i will forward my resignation simply because I need to be in my new company by January 1, 2010.

    appreciate feedback so i would know what option/s to take.

    Thanks and regards.

  12. jeffs83 November 23, 2009 |

    Hey Iya,

    I have the exact situation that you are into right now. I’ve been trying to study the labor code and check if the employer should NOT WITHHOLD the release of the 13th month pay, along with the last pay check – since it is mandated by law to release the 13th month pay before Dec 24.

    I have a friend who resigned prior to the release of the 13th month pay, but as per their company’s HR, the 13th month pay will still be released to her, except her last pay.

    Now the question is, is this the same for all companies? Best way to find out is to check with our HR. Pero nakaka hiya eh. haha!

    Is there anyone who can clear this out for us.

    Thanks!

  13. Pingback: FAQ on 13th Month Pay at Philippine e-Legal Forum

  14. Atty.Fred November 24, 2009 |

    Folks, please see the additional discussion here:

    http://jlp-law.com/blog/faq-on-13th-month-pay/

  15. juliosisimo November 24, 2009 |

    I worked in an international NGO. I resigned effective Oct 30, 2009 w/c was accepted by my boss. On Oct 30, they didn’t release my pay for oct 15-30. I am not anymore interested in it but I am for my pro-rata 13th month pay. When I inquired about it, my former boss replied in a traceable mail informing me that she is willing to release 50% of my 13th month but the other half will only be released upon submission of handover documents and a report which I volunteered to do before my resignation, but since I have submmitted my resignation, I was not able to do. Is it right for my boss to withhold half for my 13th month on the said ground?

  16. jeffs83 November 24, 2009 |

    To Juliosismo

    The answer to your question is: No

    Your 13th month pay shouldn’t be withheld for any reason. This pay is mandated by law to be released before Dec 24. This release date is mandated by the labor code and this shouldn’t be tampered by any company policy.

    13th month pay is non-inclusive to the regular wage.

    Your boss is obviously bluffing in order to reap the requirements he is demanding from you.

    Your HR should now abt the labor code and you could report this to them.

    If your HR would insist on the withholding until the requested clearance of your boss, you should report this to proper authorities.

  17. docomoITstupid December 16, 2009 |

    Please can anyone help answer this

    Company made our 13 month pay included on the mid pay this December which is always a taxable payslip but the 13 month was included in the tax which is not suppose to be. Company stated that threshold was the reason for this since we had a performance bonus last year but was given by February this year which they did not deduct any tax. I think this should not be the case as 13 month is not subject to tax or inclusive of regular pay tax withholding.

  18. karrflow December 9, 2010 |

    i work in a distribution utility particularly an electric power distributor and i’ve been working there for 11mos.(3mos contractual, 4mos probationary & 4mos regular).. there has already been a resolution passed regarding our x’mas bonus stating that “All regular employees shall receive 110% of their regular salary.” Would this also be computed pro-rata according to the number of months that i have been a regular employee, i.e (basic monthly pay*110% /12 *4)? Could someone share his own interpretation or reaction on this computation coz i believe that i am entitled if not the full amount but at least the 11mos. that i have actually worked for the organization.

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