Add up the total basic salary you actually earned during the calendar year, then divide by 12. That's your 13th month pay under Presidential Decree No. 851. A full year at ₱20,000/month basic gives ₱240,000 ÷ 12 = ₱20,000. It's tax-free as long as your bonuses stay under the combined ₱90,000 ceiling — and it must be paid on or before December 24.
13th month pay is one of the few pay items in the Philippines with a formula simple enough to do on a napkin: total basic salary earned ÷ 12. It is a mandatory benefit for every rank-and-file employee under Presidential Decree No. 851, and employers must release it on or before December 24 each year. What trips people up isn't the division — it's knowing which pesos count as "basic salary," how a partial year is handled, and when the benefit starts getting taxed.
This guide walks through the formula, what to include and exclude, how proration works automatically, and the ₱90,000 tax rule — then shows the exact arithmetic for several situations. If you want to see how the benefit lands in your overall net pay for the year, the Take-Home Pay Calculator puts it alongside your SSS, PhilHealth, Pag-IBIG, and tax.
The formula
There is only one formula, and it doesn't change with your tenure or salary:
Notice the phrase actually earned. You don't multiply your current monthly rate by 12 and divide by 12 — you add up what you were really paid in basic salary across the year and divide that sum by 12. For someone who worked the whole year at a steady rate, the two give the same answer. For everyone else, "actually earned" is what makes the number fair.
What counts as "basic salary"
Only your basic pay feeds the computation. Several common pay items are deliberately left out because they are not part of basic salary:
- Overtime pay
- Holiday pay and premium pay
- Night-shift differential
- Allowances (transportation, meal, and similar)
- Cash value of unused leave
- Other monetary benefits not integrated into basic pay
On the other side, unpaid absences reduce the figure — because the computation is based on basic pay you actually earned, days you weren't paid for simply don't enter the total.
How proration works
There is no separate "prorated formula" to memorize. Because you divide the total basic actually earned by 12, a partial year prorates itself. An employee who worked only part of the year, or who had unpaid stretches, earned less total basic — so dividing by 12 naturally produces a smaller 13th month pay.
Worked examples (2026)
Here's the arithmetic across four common situations. The last column shows the taxable portion — the amount, if any, that spills over the ₱90,000 exemption.
| Scenario | Total basic earned | 13th month pay | Taxable portion |
|---|---|---|---|
| Full year at ₱20,000/mo | 240,000 | 20,000 | 0 (exempt) |
| 7 months at ₱18,000/mo | 126,000 | 10,500 | 0 (exempt) |
| 11 paid months at ₱25,000/mo | 275,000 | 22,916.67 | 0 (exempt) |
| Full year at ₱100,000/mo | 1,200,000 | 100,000 | 10,000 |
The "11 paid months" row assumes one month of unpaid leave, so only 11 months of basic salary were actually earned. Taxable portion is any amount above the ₱90,000 combined bonus ceiling.
Take the first row in detail. An employee earning ₱20,000/month basic who worked the whole year has a total basic of ₱20,000 × 12 = ₱240,000. Their 13th month pay is ₱240,000 ÷ 12 = ₱20,000. Because ₱20,000 is well under the ₱90,000 ceiling, it is fully tax-exempt — the whole amount lands in their pocket.
Is 13th month pay taxable?
For most employees, no. Your 13th month pay plus other bonuses are tax-exempt up to a combined ₱90,000 per year. Only the amount above ₱90,000 is added to your taxable income and taxed. That ceiling is generous enough that the vast majority of rank-and-file workers receive their 13th month pay completely tax-free.
The ₱90,000 is a combined cap. It covers your 13th month pay together with other bonuses like a Christmas bonus or productivity incentives. If all of them added together stay under ₱90,000, nothing is taxed; if they exceed it, only the excess is taxable.
Don't want to do this by hand?
Enter your monthly basic and the months you actually worked, and get your exact 13th month pay — plus the taxable portion, if any — instantly.
Open the 13th Month Pay Calculator →13th month pay is not a Christmas bonus
These get mixed up constantly, so it's worth being clear: 13th month pay is legally required under PD 851, computed by formula, and due on or before December 24. A Christmas bonus — and any so-called "14th month" pay — is entirely voluntary and separate, given at the employer's discretion. One is a right; the other is a gift.
They can, however, interact at tax time: since the ₱90,000 exemption is a combined ceiling, a large voluntary Christmas bonus can push your total bonuses over the line and make part of the combined amount taxable.
Who is entitled
13th month pay is mandatory for rank-and-file employees in the private sector, regardless of position, designation, or how they are paid, as long as they worked at least one month during the calendar year. Because the formula is based on basic salary actually earned, even someone who worked just part of the year is entitled to a prorated amount.