13th month pay given to rank-and-file employees

Dear PAO,

I am a manager in a company and I just want to clarify if it is true that any managerial positions are not entitled to a 13th month pay under PD 851? What are the legal bases on this? However, in my previous job which I was also a manager for 4 years I was receiving my 13th month pay every year. Please enlighten me on the matter.

B. Pepino

Dear B. Pepino,

The pertinent law which is the subject of your query is Presidential Decree (P.D.) No. 851 (13th-Month Pay Law) as amended by Memorandum Order No. 28.

P.D. No. 851 provides as follows:
“Section 1. All employers are hereby required to pay all their employees receiving a basic salary of not more than P1, 000 a month, regardless of the nature of their employment, a 13th-month pay not later than December 24 of every year.

”Sec. 2. Employers already paying their employees a 13th-month pay or its equivalent are not covered by this Decree.”

In the Rules and Regulations Implementing P.D. No. 851 it was provided that “all employees of covered employers shall be entitled to benefit provided under the Decree who are receiving not more than P1, 000 a month, regardless of their position, designation or employment status, and irrespective of the method by which their wages are paid, provided that they have worked for at least one month during the calendar year.”

From the foregoing provisions it is clear that P.D. No. 851 covers those employees (regardless of their employment status) who are only receiving a salary of not more than P1,000.00. On August 13, 1986, then President Corazon C. Aquino issued Memorandum Order No. 28, wherein P.D. No. 851 was modified to the extent that all employers are required to pay all their rank and file employees a 13th-month pay not later than December 24 of the year. With the removal of the salary ceiling, all rank and file employees are now entitled to a 13th-month pay regardless of the amount of basic salary that they receive in a month if their employers are not otherwise exempted from the application of P.D. No. 851.

Clearly, Memorandum Order No. 28 removed the salary ceiling of covered employees but specifically classified the said employees as rank-and-file employees. Managerial employees are not considered as rank and file employees. A managerial employee is defined under the law as one who is vested with powers or prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign, or discipline employees or to effectively recommend such managerial actions. All other employees not falling within the definition are considered rank-and-file employees (Article 212, Labor Code).

However, if you have been given a 13th-month pay by your employer during your stay with another company even if you were occupying a managerial position whose functions are those that had been defined by the law as managerial functions, there is nothing under the law that prohibits your employer to give you said benefits for such entitlement may have risen from his liberality or it may have been the practice in the said company to give all its employees a 13th-month pay even to managerial employees. You cannot however impose the same liberality with your present employer.

We hope that we were able to address your query. We need to remind you however that our opinion is based on the facts you have narrated and as we understood them. Our opinion may vary if facts are added or elaborated. –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.