Why the 13th Month Pay is Not the Same as the Christmas Bonus

Ever since we were kids, we have heavily associated the month of December with the idea of receiving gifts. As we got older and braved the working world, that notion still remains, and that is where the confusion between using the term “13th Month Pay” and “Christmas Bonuses” interchangeably is rooted from.

For some time now, many are using the term “Christmas bonus” to refer to their 13th Month Pay or the other way around. Though it seems harmless, mistaking one for the other could actually lead to legal punities.

Below lists what makes the two different from each other:

13 Month Pay & Christmas Bonus, The Key Differences

First of all, the 13th Month Pay is not the same as the Christmas Bonus. The only shared similarities that they have is that they are both monetary and given out by employers.

To start things off, the main difference between 13th Month Pay and Christmas bonus (also referred to as company bonus) is that one of the employees are entitled to, while the other is a given out of generosity.

The 13th Month pay is a taxable state-mandated monetary benefit that rank-and-file or non- managerial employees receive after at least one month of tenure with an employer. The 13th Month Pay is made official and mandatory by PD 851, a decree that was passed by the former and late President Ferdinand E. Marcos signed in 1976.

The decree states that employers are required to provide their employees a 13th Month Pay before the 24th of December of every year, after meeting certain requirements.

For Christmas bonuses, on the other hand, are non-taxable fringe benefits that employers may or may not give to employees. It is also optional, a contrast to the statutory 13th Month Pay. Furthermore, employers may opt to give it out before, during, or after December 24.

As a side note, company bonuses soon came to be known as Christmas bonuses because they are typically handed out in December, though they could even be given throughout the year.

Christmas Bonus and 13th Month Pay Computation

Christmas Bonus does not have a standardized way they are computed, mainly because they are voluntarily given out and the amount is not regulated. However, each company has their own way.

For some companies, it is as simple as providing the same amount as the basic pay of the employee and labeling them as “14 Month Pay.” In other companies, the bonuses are based on the company’s performance for the year.

The calculations for the 13th Month Pay is more standardized. It is computed using a formula similar to the one below:

(Basic Pay x Number of months of working with the company in the current year) / 12 Months = 13 Month Pay

Here’s a sample computation:

Basic Pay: P10,000

Length of Stay with the Company: 10 Months

(P10,000 X 10 ) = 100,000

100,000 divided by 12 months =  P8,333.33

13th Month Pay = P8,333.33

The Purpose of 13th Month Pay & Christmas Bonus

When former Philippine President Ferdinand E. Marcos Sr. signed and passed PD 851, his intentions were clear. His purpose was to protect the Filipinos from the worldwide inflation and to help Filipinos celebrate Christmas and New Year’s Eve properly.

For Christmas bonuses, the reason behind them varies. They may be handed out as a token of appreciation, motivation tool, or even out of a whim. The real reason depends on the employer.

Drawing the line between Christmas bonus and 13th Month Pay is crucial to distinguish which is which. Though using them interchangeably in casual conversations may not matter much, but when it comes to legal matters, labels are important, especially when an employee is fighting for what he or she worked so hard for.

Calculating for 13 Month Pay may be simple with the given formula. The entire process could become tedious and time-consuming, but it doesn’t have to be… Afterall, it’s JustPayroll.

Let our certified staff handle your payroll processes so you could spend less time at the office and more time looking for Christmas gifts for your loved ones. 

Discover how easy payroll can be by choosing us, simply give us a call at +63 (02) 808-4707 or fill out the form below to get in touch with our payroll customer care.

About the JustPayroll.ph Writer - Rayan Ramos

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JustPayroll Team