Who are entitled to 13th-month pay?

DEAR PAO

Dear PAO,
What are the reasons why supervisory and managerial employees are not entitled to a 13th-month pay, and what are the legal bases aside from those that are written in the Labor Code?

JSA Dear JSA,
The relevant law which is applicable to your query is Presidential Decree (PD) 851 which is otherwise known as the 13th- Month Pay Law, and its implementing rules, thus:

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.

Sec. 4. Rules and Regulations Implementing PD 851.

“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, supervisory as well as managerial employees were not excluded therefrom because the language of the law is clear that the 13th-month pay law is applicable to ALL employees regardless of the nature and status of their employment. The only exception is that if said employees are already receiving 13th-month pay or any of its equivalent.

The qualification is that the said employee should have worked for at least one month during the calendar year and is not already receiving 13th-month pay or its equivalent. The term “its equivalent” includes Christmas bonus, mid-year bonus, profit-sharing payments and other cash bonuses amounting to not less than 1/12th of the basic salary but shall not include cash and stock dividends, cost of living allowances and all other allowances regularly enjoyed by the employee, as well as non-monetary benefits. Where an employer pays less than 1/12th of the employees’ basic salary, the employer shall pay the difference (Section 3, PD 851).

The law is explicit that the same shall apply to all employers except the following, to wit:

a) Distressed employers, such as (1) those which are currently incurring substantial losses or (2) in the case of non-profit institutions and organizations, where their income, whether from donations, contributions, grants and other earnings from any source, has consistently declined by more than forty (40%) percent of their normal income for the last two (2) years x x;

(b) The Government and any of its political subdivisions, including government-owned and controlled corporations, except those corporations operating essentially as private subsidiaries of the Government;

(c) Employers already paying their employees 13-month pay or more in a calendar year or its equivalent at the time of this issuance;

(d) Employers of household helpers and persons in the personal service of another in relation to such workers; and

(e) Employers of those who are paid on purely commission, boundary, or task basis, and those who are paid a fixed amount for performing a specific work, irrespective of the time consumed in the performance thereof, except where the workers are paid on piece-rate basis in which case the employer shall be covered by this issuance insofar as such workers are concerned (Section 3, Rules and Regulations Implementing PD 851).

You must have mistaken yourself of the provisions of Title I, Book III of the Labor Code relative to the hours of work, night shift differentials and overtime pay wherein managerial employees are not entitled to the normal hours of work as well as overtime pay because of the nature of their functions. The reason for this is obvious, the primary duties of a managerial employee is the management of the establishment in which they are employed or a department and to other officers or members of the managerial staff. Thus, the Labor Code provides:

“Art. 82. Coverage.-The provision of this title shall apply to employees in all establishments and undertakings whether for profit or not, but not to government employees, managerial employees, field personnel, members of the family of the employer who are dependent on him for support, domestic helpers, persons in the service of another and workers who are paid by results as determined by the Secretary of Labor.”

There is no provision in the Labor Code or any other law which exclude managerial as well as supervisory employees from the benefit of the 13th-month pay.

We hope that we were able to address your query.

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