13th month pay edge cases: mid-year hires, terminated employees, and partial years
The basic 13th month formula is easy. The hard part is everything else, the August hire, the resigned manager, the agent who took five months of unpaid leave, the project-based welder who finished in October. Here is how to compute every one, with peso-real examples.
The legal basis (and why edge cases matter)
13th month pay in the Philippines is mandated by Presidential Decree 851, signed by President Marcos in December 1975 and never repealed. Its rule is short: every rank-and-file employee who has worked at least one month during the calendar year is entitled to 13th month pay, and the deadline is on or before December 24 each year.
The implementing regulations and the long-standing DOLE position is that the amount equals one-twelfth of the total basic salaryearned during the calendar year. The phrase that quietly does all the work in that sentence is "earned during the calendar year", because that is what makes pro-rata required for anyone who did not work the full twelve months.
For separated employees, the controlling reference today is DOLE Labor Advisory No. 06, Series of 2020 (which restated and clarified earlier issuances): an employee who resigns or is separated from service before the time of payment of 13th month pay is still entitled to the proportional 13th month pay corresponding to the months actually worked, and it must be paid as part of final pay within thirty days from separation.
Get this wrong and you get DOLE money claims, NLRC cases, and angry separation-letter threads on Facebook. Get it right, and your last paycheck is a quietly impressive last impression. The next sections walk through every realistic shape this can take.
The core pro-rata formula
Every edge case in this article reduces to one of two equivalent formulas. Pick whichever your payroll team prefers. They give the same answer.
The first version is the safest in practice because it works regardless of mid-year salary increases or unpaid days. Just sum what the employee actually earned in basic salary from January 1 to December 31, then divide by twelve.
What counts as "basic salary"? Per PD 851 and decades of DOLE rulings, basic salary excludes overtime pay, holiday pay premiums, night differential, hazard pay, allowances (COLA, transportation, meal allowances unless integrated into the wage), profit sharing, and unused leave conversions. It includes the regular monthly salary and any earned commissions that are guaranteed and form part of the regular wage. When in doubt, exclude.
Mid-year hires (the August problem)
For employees hired any time after January 1, the rule is simple: pay them 13th month pay proportional to the number of months they actually drew a basic salary during the calendar year. As long as they have at least one month of service in the calendar year, they qualify.
Example 1 — Maria, Account Manager, hired August 1
Maria was hired by an SME in Makati on August 1, 2026 with a monthly basic salary of PHP 56,000. From August 1 through December 31 she earned a total basic salary of PHP 280,000 (5 months × 56,000). She had no unpaid absences.
Equivalent computation: (PHP 56,000 ÷ 12) × 5 months = PHP 23,333.33. Same answer.
Example 2 — Jericho, Operations Lead, hired June 17
Jericho started on June 17 at a monthly basic of PHP 42,500. June was a partial month, so he was paid for ten working days in June (PHP 19,318.18 for that period), then a full salary every month from July through December.
Notice why the "total earned ÷ 12" version is cleaner here. You do not need to fight about whether June counts as half a month or a third; you just feed in what was actually paid.
Example 3 — Aubrey, Junior Designer, hired November 4
Aubrey joined a Cebu-based studio on November 4 at PHP 25,000 per month. By December 31 she had earned approximately PHP 47,727 in basic salary (just under two full months). PD 851 requires only one full month of service in the calendar year for entitlement, so she qualifies.
Some employers split this across the December cutoff to align with cash flow. That is fine, as long as the full pro-rata amount is in the employee's pocket on or before December 24.
Terminated and resigned employees
This is where most disputes happen. The rule under DOLE Labor Advisory 06-2020 and consistent jurisprudence is unambiguous: any employee separated before December 24, regardless of reason, is entitled to pro-rata 13th month pay covering the months they actually worked in the calendar year. This is true whether they resigned, were terminated for just cause, were terminated for authorized cause (redundancy, retrenchment, closure), retired, or died in service.
"Just cause termination" does not eliminate the entitlement. PD 851 is a statutory benefit tied to having worked, not to having behaved well. The only employees who can be excluded are those who worked less than one month during the calendar year, and even that exclusion is rare in practice because most separations happen after multiple months of service.
Pay it as part of final pay. Per Labor Advisory 06-2020, final pay must be released within thirty (30) days from separation, unless a more favorable company policy or CBA provides otherwise.
Example 4 — Carlos, resigned September 30
Carlos earned PHP 65,000 per month and resigned effective September 30, 2026. From January through September he earned the full nine months of basic salary, totalling PHP 585,000.
Released as part of final pay within 30 days of September 30, so on or before October 30, 2026, together with last salary, unused service incentive leave conversion, and any tax refund.
Example 5 — Liza, retrenched April 15 due to closure
Liza, a customer service supervisor, was retrenched on April 15 because her employer's Cavite branch closed. She earned PHP 38,000 per month. Her 2026 basic salary breakdown: January, February, March = PHP 114,000, plus April 1–15 = PHP 19,000.
This is in addition to separation pay (one month per year of service for closure under Article 298 of the Labor Code), unused leave conversion, and any retirement benefit.
WORKSPHR auto-handles every case in this article. When you mark an employee as separated, the platform automatically computes their pro-rata 13th month, adds it to the final pay packet, generates a BIR Form 2316, and stamps a release deadline thirty days out. No formula lookup needed.
Employees on extended or unpaid leave
This is the trickiest case. The principle: 13th month pay is computed only on basic salary actually earned. Periods of unpaid leave reduce the base. Periods of fully paid leave (like maternity leave with full SSS reimbursement plus salary differential) generally count toward the base since they are still considered earned salary.
Maternity leave (RA 11210)
Under the 105-Day Expanded Maternity Leave Law, the SSS pays the maternity benefit and the employer is required to pay the salary differential (the difference between the regular monthly salary and the SSS daily benefit). Maternity leave is paid leave, so the months covered count fully toward 13th month base. An employee who took the full 105 days does not have her 13th month reduced.
Sick leave or vacation leave with pay
Paid leaves count fully. They are basic salary earned, just delivered while not at the desk.
Unpaid leave (LWOP)
Periods on leave-without-pay reduce the basic salary actually earned, and therefore reduce 13th month proportionally. There is no separate "deduction" calculation, the salary just was not paid for those days, so it never enters the total.
Example 6 — Andrea, took 4 months unpaid study leave
Andrea earns PHP 45,000 per month and took unpaid leave from May 1 through August 31 to finish a graduate program. She drew salary for January, February, March, April, September, October, November, and December, eight full months.
Note that she still qualifies because she worked more than one month, just not the full year. The four months of LWOP simply do not show up in the numerator.
Contractuals, project-based, fixed-term, and probationary
13th month pay covers all rank-and-file employees, regardless of employment status. PD 851 explicitly applies to probationary, regular, casual, contractual, project-based, seasonal, and fixed-term employees, as long as they have one month of basic salary earned in the calendar year.
Probationary employees
Treated identically to regular employees. Pro-rata based on months of basic salary earned.
Project-based employees
If the project ends mid-year (say, a construction project completes in October), the employee is entitled to pro-rata 13th month covering the months on the project. This is paid either at project completion (with final pay) or by December 24 if still on the books.
Fixed-term employees
A six-month fixed-term contract running January through June still triggers PD 851. Pay six months' worth of 13th month at the end of the contract, as part of final pay.
Casual and seasonal employees
If they earn at least one month's worth of basic salary across the calendar year, they qualify. Total their actual basic salary, divide by twelve.
Multi-employer and rehired-same-year cases
An employee who worked for Employer A from January through May and then Employer B from June through December is entitled to pro-rata 13th month from each employer based on what was earned with that employer. There is no aggregation between employers, both pay the proportional amount based on the basic salary they themselves paid.
Example 7 — Patrick, switched employers mid-year
Patrick worked for Company A from January 1 to May 31 at PHP 50,000/month (5 months, PHP 250,000 earned). He then joined Company B on June 15 at PHP 58,000/month and stayed through December 31 (about 6.5 months, roughly PHP 377,000 earned).
Both employers compute independently. Patrick receives both. There is no obligation for one to know about the other.
Rehired by the same employer
If an employee resigned in March, was paid pro-rata 13th month as part of final pay, and was rehired by the same company in September, the second stint is computed separately based on the basic salary earned during the second engagement. Do not "credit back" the first 13th month already paid; that one is closed.
Suspended employees and disciplinary cases
If an employee is suspended without pay (preventive or disciplinary), the unpaid period simply does not count toward the basic salary earned. They still qualify for 13th month based on the months they were actually paid, as long as it totals at least one month over the calendar year.
If an employee is on preventive suspension and is later exonerated, the salary for the suspension period is paid retroactively. That retroactive salary then enters the 13th month base.
An employee terminated for serious misconduct or just cause is still entitled to pro-rata 13th month for the months actually worked, even if separation pay is not due. PD 851 is independent of the cause of separation.
Edge-case cheat sheet
| Case | Entitled? | Base computation | Pay by |
|---|---|---|---|
| Hired anytime in year (1+ month) | Yes | Pro-rata on basic salary earned | Dec 24 |
| Resigned mid-year | Yes | Months actually worked | 30 days from separation |
| Terminated for just cause | Yes | Months actually worked | 30 days from separation |
| Retrenched / closure | Yes | Months actually worked | 30 days from separation |
| Maternity leave | Yes (full) | Counts fully toward base | Dec 24 |
| Unpaid leave (LWOP) | Yes | Excludes LWOP months | Dec 24 |
| Probationary | Yes | Pro-rata on basic salary | Dec 24 or final pay |
| Project-based | Yes | Months on project | Final pay or Dec 24 |
| Fixed-term | Yes | Months under contract | End of contract |
| Suspended without pay | Yes | Excludes suspension period | Dec 24 |
| Rehired same year | Yes (per stint) | Each stint computed separately | Per applicable deadline |
| Worked < 1 month total | No | Not entitled under PD 851 | N/A |
Practical guidance for HR teams
Three habits make 13th month season painless. First, pull a year-to-date basic salary report from your payroll system in early November, not December 23. This gives you time to spot anomalies, retroactive adjustments that did not flow through, missing salary differentials for maternity leave, contractual conversions to regular employee, before payout day. Second, document your computation per employee. A simple spreadsheet column showing the months counted, the basic salary base, and the divided-by-twelve result protects you in audits. Third, separate 13th month from "Christmas bonus" in payroll runs and BIR reporting. They have different tax treatments, the 13th month component is exempt up to PHP 90,000 under RA 10963 (TRAIN Law), and excess plus other bonuses gets withheld.
For a deeper walkthrough including the BIR tax-exempt threshold and how to compute the taxable portion when the total exceeds 90,000 pesos, see our 13th Month Pay Calculator page. For broader DOLE rules around final pay, leaves, and inspection prep, see our DOLE compliance guide.
Quick answers
Do managers get 13th month?
PD 851 strictly covers rank-and-file. Managerial employees (those primarily exercising managerial functions) are not legally entitled. In practice almost every Filipino employer pays managers a 13th month or equivalent year-end bonus as policy, and many CBAs make it contractual. Check your company handbook.
Can we pay it in installments?
Yes. Common practice is to release half in May or June ("mid-year bonus") and the remainder by December 24. As long as the full pro-rata amount is settled by the December deadline, DOLE accepts it.
What is the tax treatment?
Under TRAIN Law (RA 10963), the first PHP 90,000 of combined 13th month pay and "other benefits" (Christmas bonus, productivity incentive, etc.) is tax-exempt. Anything above 90,000 is added to gross compensation income for the year and taxed at the regular bracketed rate. WORKSPHR auto-applies this threshold per employee and reflects it on BIR Form 2316.
Is the deadline really December 24?
Yes. PD 851 specifies "on or before December 24". Paying on December 26 because banks were closed is a violation, and DOLE has fined companies for it. Schedule your payroll cutoff with a buffer.