Each of us, for sure, at least once heard a term such as the 13th month pay. And what it is, how its accrual takes place and is the employer obligated to pay it, we will try to sort out in this article.
What is the thirteenth month pay?
The thirteenth month pay is an annual payment to the employee. It is formed from the final amount of the enterprise’s income for the year and, as a rule, is paid as an encouragement for New Year’s holidays. More often you can hear another name for such payments – premiums for the year. But among people, the original wording is more popular, since the 13th month pay is usually equal to the average monthly wage. However, the amount of the 13th salary each employer establishes himself. So, how to compute 13th month pay prorated? It is almost impossible to determine in advance the amount intended for the employees’ encouragement. When the year turned out to be profitable, then it is possible to increase employee premiums. If the activity of the organization was unprofitable, then it is difficult to expect to receive additional payments. However, as it was mentioned above, usually the 13th salary is either the same as the average monthly salary, or is equal to some percentage of the salary.
Norms of legislation
It is necessary to know that officially, legally, payment of the thirteenth month pay is not regulated. Such payment depends entirely on the wishes of the employer. Therefore, the size and procedure of paying the 13 salary should be indicated in the internal documents of the organization, for example, in the Collective Agreement, etc.
The process of distributing the 13th month pay in Philippines takes place in the following order:
- The financial service provides the manager with a report on the availability of “free” cash in the institution at the end of the year.
- Based on the information received, the head of organization takes a decision on money application. For example, on awarding his subordinates. Based on the money amount, he decides to pay the money either to everyone (except for persons who may not be awarded as a punishment for their bad work) or to individual employees who have made the largest contribution to the activities of the company this year.
- Further, together with the head of the financial service, they decide which method of calculation will be the most appropriate in the conditions of a particular financial situation.
- An order is issued by the institution, which lists the employees to be rewarded, and indicates the specific amount of remuneration. The document is certified by the manager.
- Then the accounting department transfers the money amounts established by the order to the bank cards of employees or carries out personal cash issuance. Payments are recorded in accounting documents as a bonus or financial assistance.
Who can get the 13th month pay?
The thirteenth month pay is a pleasant surprise before the New Year’s holidays, but how to get 13th month pay and who deserves to get it? The order of such kind of payment is not set by the Labor Legislation, therefore in each organization it is different, regulated by local documents: the provision on bonuses, a collective agreement, and sometimes individual labor contracts. Guided by these documents, the employer can issue an order either for premiums to all employees or for encouraging individuals who have shown the best work within a year. There can be also cases provided by the Local regulations on bonuses when employees may be partially or completely deprived of the premium. Such cases may occur because of:
- violation of labor discipline;
- the admission of cases of irresponsible attitude to work duties;
- presence of an effective disciplinary penalty;
- other cases provided for by local documents.
If an employee believes that he is deprived of the premium by the end of the year undeservedly, he can try to appeal the decision of the authorities in court.
How the 13th month pay can be calculated?
Now, when we know what is 13th month pay in Philippines, let’s try to sort out how it is calculated. To calculate the size of such payment, you need firstly to determine how it will go through the documents of the company. This monetary encouragement can be paid as: a bonus to the whole staff by the end of the year, encouraging individual employees for their special contribution to the company’s profit during the year, awarding selected specialists for high qualification.
There are several options for calculating the 13th month pay. You can:
- set a fixed amount – if, for example, only some specialists are awarded;
- establish a certain percentage or a calculated coefficient of the annual salary. In this case, employees who have worked for an incomplete calendar year will receive a premium in full;
- establish the position by which the calculation is based on the average earnings for the year.
Each employee of the organization should be acquainted with the documents according to which bonuses are paid to employees. From these documents, you can find out what is 13th month pay and familiarize with all the payment features as well as with the reasons why they can be reduced.
Beside sorting out what is 13th month pay in the Philippines, note, that in some companies, the employer in addition to the thirteenth month pay, also can give a fourteenth salary. As a rule, if the thirteenth salary is paid to the entire staff in the majority of cases, then the fourteenth month pay is given for the successful achievement of some special indicators for the year, for the high qualification of employees, etc.