MANILA – Employers in the Philippines are walking a legal tightrope if they fail to pay their workers’ 13th month salary, the Department of Labor and Employment (DOLE) has warned. This statutory benefit is not merely a festive handout but a non-negotiable legal entitlement under Philippine labour laws.

With a hard deadline of 24 December, businesses are reminded that this financial lifeline for employees must be delivered in time to help them weather the holiday season’s expenses. Failure to comply warrants penalties.

The 13th month pay as a lifeline – not a luxury

Unlike discretionary Christmas bonuses or other year-end incentives, the 13th month pay is provided for under Article 5 of the Labor Code. It is a taxable benefit equal to a month’s salary, ensuring that employees have financial support during the most expensive time of the year.

This provision applies to all rank-and-file employees in the private sector, regardless of their position, designation, or employment status.

As DOLE clarified in its advisory, even those paid on a piece-rate basis, employees on maternity leave, or workers with multiple employers are entitled to receive this benefit. Those who resigned or were terminated are also included – they are eligible for a pro-rata share based on the time they rendered service.

Circumstances have to be exceptionally dire, such as the closure of the business, for this obligation to be excused, according to DOLE Secretary Bienvenido Laguesma, who reiterated that any requests for exemption or postponement will be declined.

Businesses must also submit a compliance report to DOLE no later than 15 January 2025.

Also Read: How to navigate the complex rules around holiday pay in the Philippines

Easing the holiday pinch

The 13th month pay often aids employees who are juggling the financial demands of the festive season.

Laguesma urged employers to consider the effects of inflation and release the benefit earlier, giving workers breathing room to budget for their celebrations.

“We ask for the understanding and consideration of our employers to give the 13th month pay of their employees a little bit earlier so that they can budget what they need to buy,” Laguesma said.

Also Read: Philippine government workers brace for austere holidays

What happens if an employer refuses to pay?

The 13th month pay is not just a good-to-have; it’s a must-have. Employers who fail to meet their obligations may find themselves facing repercussions that could impact their business. These include:

Administrative sanctions: Fines, penalties, and orders for immediate payment.

Civil liability: Beyond settling the unpaid amounts, employers may face interest and damages.

Criminal charges: Wilful noncompliance or fraudulent actions could lead to imprisonment or substantial fines.

Business disruptions: Suspension or cancellation of business permits may follow.

For employees whose 13th month pay is withheld, DOLE offers recourse through complaints and investigations. Should matters remain unresolved, cases can be escalated to small claims court for the recovery of unpaid amounts and damages. Employers cannot, under any guise, withhold this benefit – even pending clearance.

Calculating the benefit

The payout, a simple mathematical formula, reflects fairness at its core. For those employed throughout the year, the amount equals an entire month’s salary. New hires, too, are entitled to their share, based on the months worked.

To be clear, the 13th month pay isn’t a bonus; it’s a legally mandated right against financial strain.

As the holidays approach, employees can count on this windfall to add some sparkle to their celebrations. For employers, compliance isn’t optional – it’s the cost of doing business in a country that values its workforce.

To shirk this duty is to risk more than just penalties – it’s to risk the very trust that underpins any successful enterprise.