Some of us have probably heard of the ever-famous “13th-month pay” in the past. However, I’m guessing some of us just went with it without really delving into its specifics!
If you’re guilty of just accepting this bonus on your payroll as it is, don’t worry—we’ve been there too. Luckily, I’m here to lay down all the facts for you! Without further ado, here’s everything you need to know about the 13th-month pay.
What is a 13th-month pay?
Friday the 13th and all things 13 are considered bad luck in some cultures. However, for us Pinoys, the 13th-month pay is nothing but swerte! The 13th-month pay is an employment benefit required by the law to be given to all non-managerial workers. Managers may also receive this benefit but it is not mandatory.
Is the 13th-month pay mandatory?
Short answer: yes! Your 13th-month pay is mandated by Presidential Decree 851 or the 13th Month Pay Law. Employers are required to grant employees, who have worked for at least one month with the company, their 13th-month pay on or before the 24th of December every year. The 13th-month pay is 1/12 of the basic salary within one calendar year. Below is a quick way to compute:
13th Month Pay = (Basic Monthly Salary x Number of Months Worked) / 12
However, there are employers exempt from paying this benefit - such as government, government-owned and controlled corporations, and employers paying purely based on commission or task basis.
How different is it from a Christmas bonus?
13th month pay and Christmas bonus are two terms that we commonly use interchangeably. But these two are different from each other! The key distinction between them is simple: the 13th-month pay is mandated by law, while the Christmas bonus is not. Decisions on whether to give Christmas bonuses, their amounts, and when they get paid, are all at the discretion of the employer.
What is the history of the 13th-month pay?
The idea of 13th-month pay stems from—you guessed it—Christmas! As a predominantly Christian country, Christmas is a significant celebration for our culture. However, the noche buena or the midnight meal tradition was a significant extra expense, especially for breadwinners. With that, the 13th-month pay helped families afford to gather and share their noche buena together.
The 13th Month Pay Law was formally institutionalized in December 1975. The Congress was unable to update the low minimum wage rates since 1970. With that, this Presidential Decree was established to compensate for the low salaries of employees. Because of the 13th Month Pay Law, even minimum wage earners had the chance to pay bills and celebrate the holidays.
Some companies also opt to grant a 14th—and even a 15th—month pay as well. Moreover, the 13th-month pay is not exclusive to the Philippines, as other countries have also adopted similar regulations.
What do Filipinos spend their 13th-month pay on?
Aside from buying gifts and celebrating noche buena, Pinoys use their 13th-month salary to pay off their loans. Many will treat their 13th-month pay as a fallback plan by taking out loans throughout the year, complacent that the 13th-month pay can save their finances at the end of the year.
However, we must remember to refrain from counting chickens before the eggs hatch. In these uncertain times, the best practice is to spend the 13th-month pay wisely. With that, here are a few ideas to make wiser decisions regarding your 13th-month pay!
A few tips on how to spend your 13th-month pay
After setting aside money for your Christmas celebration here are a few tips to maximize and stretch your 13th-month pay.
Purchase essential items that will boost your income.
In recent times, many of us are working and studying from home, which means we might not have access to the equipment that the office or school normally provides.
You may consider using your 13th-month pay to upgrade to a higher-end gadget to help you become more efficient at work or buy devices for the students in the house! If you are reliant on a fast internet connection, the 13th-month pay can be used to upgrade your router at home. You can make the most of your money by purchasing things you are bound to use for the rest of your WFH career and can benefit the entire household.
Enrol in a course to gain new skills
You may have always wanted to learn new skills for personal development. How about using your 13th month pay to fund that digital marketing, creative writing, cooking, or design course that you have always wanted. These newly acquired skills can help you widen your network or even promote your career.
Set aside as emergency funds.
Let’s face it: the COVID-19 pandemic situation in the country is far from over. It is not going away anytime soon. Any one in the family can lose employment or can get sick. This December 2021, it may be best to set aside a portion of your 13th-month pay for emergency expenses. It is not uncommon for Filipinos to be a hospital bill away from financial instability—it pays to be ready in times of need.
Start investing
There are numerous misconceptions among Filipinos about investing in stocks or funds. Most may think it’s too complicated or that this venture is only for the wealthy. Research and study the options available. Depending on the type of investments and the provider, one can start their investment journey for as low as Php 1,000. There are now resources on the internet for you to consult regarding investing. What matters with investing, is you start early and you research and understand the risks.
The Takeaway
13th month pay comes only once a year. And it is a good opportunity to use them for something that pays you back. Remember to spend it wisely by considering our suggestions listed above!