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Summary: 13th-month pay is additional pay given to employees at the end of the calendar year. Its purpose is to provide employees with more support during the holiday season.
13th-month pay
13th-month pay is additional pay given to employees at the end of the calendar year. Its purpose is to provide employees with more support during the holiday season. It is a mandatory employee benefit in some countries, such as the Philippines.
In some places, 13th-month pay is limited to rank-and-file employees; in others, all employees are entitled to it. The specifics of this benefit, including eligibility and calculation, can vary significantly based on local labor laws and company policies.
Where is 13th-month pay a mandatory employee benefit?
Asia
- Philippines: In the Philippines, 13th-month pay is mandatory for all rank-and-file employees.
- Indonesia: Known as “Tunjangan Hari Raya” (THR), 13th-month pay is mandatory.
- Taiwan: A year-end bonus is customary in Taiwan but not legally required.
South America
- Brazil: Known in Brazil as the “13th salary,” this benefit is mandatory for all employees
- Argentina: 13th-month pay is mandatory in Argentina and paid in two installments throughout the year in June and December.
- Ecuador: 13th-month pay is mandatory in Ecuador and paid at the end of the year.
Europe
- Italy: 13th-month pay is mandatory in Italy and known as the “Tredicesima mensilità” (13th month pay).
- Portugal: 13th-month pay is mandatory in Portugal and known as as the “Subsídio de Natal” (Christmas subsidy).
- Greece:Known as the “13th salary,” 13th-month pay is mandatory in Greece and paid at the end of the year.
Africa
13th-month pay is less common. However, in some African countries, there is some form of year-end bonus.
North America and Oceania
In these regions, 13th-month pay isn’t typically mandatory.
How is it calculated?
This varies from region to region and may be subject to caps and limits. With that said, there’s a general formula:
First, determine the total basic salary earned by the worker during a calendar year (not including extra payments, such as overtime, bonuses, etc.) Then, divide it by 12 to calculate the 13th-month pay.
13th-month pay = total basic salary in one year/12
Which employees are eligible for 13th-month pay?
For countries where the 13th-month pay is mandatory, here are some guidelines to help determine which employees are eligible for the benefit.
- Rank and file employees: In some countries, like Peru and the Philippines, all employees are entitled to 13th-month pay regardless of employment status.
- Employment duration: Employees who have worked a minimum period during a calendar year (often one month) are usually eligible for 13th-month pay.
- Exclusions: Some employees, such as executive-level employees, may be excluded from this benefit.
Is 13th-month pay taxable?
In most countries offering 13th-month pay, this benefit is subject to taxes, but the rates vary from region to region. In the Philippines, the 13th-month pay is exempt from taxes up to PHP 90,000. Any amount beyond that is taxable. But in Italy, the 13th-month pay, known as “Tredicesima mensilità” or simply “Tredicesima,” is subject to income tax and Social Security contributions. In some other countries, such as Austria, the 13th-month pay is taxed at a special rate. It’s important for both employers and employees to understand the local tax implications to ensure compliance and proper financial planning.
Andrew (Drew) joined the Remote People team in 2020 and is currently Director, Regulatory Affairs. For the past 13 years, he has been a trusted advisor to C-Suite executives and government ministers on international compliance and regulatory issues. Drew holds a law degree from the University of Otago, a PhD from the University of Sydney, and is an enrolled Barrister and Solicitor of the High Court of New Zealand.
