Employers exempt from paying 13th-month pay

Published by rudy Date posted on December 20, 2010

Dear PAO,

I have been working for seven years in a company in Marikina. Ever since I have worked here, our company has religiously paid our 13th-month pay. However, there has been a rumor around the office that we won’t be receiving it this year because, allegedly, our company has sustained losses. Can they do that? Moreover, for the past years, our company has been giving our 13th-month pay one-time only during the 15th of December and not twice a year.


Dear Terence,

Thirteenth-month pay is an additional income received by the employees by virtue of Presidential Decree 851. The minimum 13th-month pay required by law shall not be less than 1/12 of the total basic salary earned by an employee within a calendar year. For the year 1987, the computation of the 13th-month pay shall include the cost of living allowances integrated into the basic salary of a covered employee pursuant to Executive Order 178 (Revised Guidelines in the Implementation of the 13th Month Pay Law, November 16, 1987)

The giving of the 13th-month pay is one of the numerous ways of the government to show its concern for the plight of the working masses so they may properly celebrate Christmas and New Year.
Nevertheless, there are certain employers who are exempted from giving out 13th-month pay. Among these are distressed employers, such as (1) those which are currently incurring substantial losses or (2) in the case of nonprofit institutions and organizations, where their income, whether from any source, has consistently declined by more than 40 percent of their normal income for the last two years (Section 2, Rules and Regulations Implementing Presidential Decree 851)

If your employer has incurred financial losses such that they may be considered as distressed employer as aforementioned, they may be exempted from giving 13th-month pay to its employees. However, your employer cannot just declare to its employees that they will not be giving 13th-month pay because of the losses they suffered. Due process must be observed if your employer is claiming that its finances have fallen into distress. To qualify for exemption, they must get prior authorization from the Secretary of Labor by filing a petition for exemption with the nearest regional office having jurisdiction over them not later than January 15 of the year when they are seeking for exemption.

As to your second concern, please note that the law on 13th-month pay only requires that it be given
not later than December 24 of every year. They only have an option to pay one-half of it before the opening of the regular school year and the other half on or before the 24th of December of every year but they are not obligated to do so. Consequently, your employer is allowed to give your 13th-month pay every 15th of December.

Finally, we wish to remind you that this opinion is solely based on your narration of facts and our appreciation of the same. The opinion may vary if other facts are added or elaborated.
We hope that we were able to address your concern. –PERSIDA ACOSTA, Manila Times

Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to dearpao@manilatimes.net This e-mail address is being protected from spambots. You need JavaScript enabled to view it or via text message (key in: Times dearpao <YOUR QUESTIONS> and send to 2299).

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