The 13th month pay in the Philippines is one reason why every employee eagerly anticipates the coming of December. The last month of the year brings with it not only the joyous yuletide season but also a lot of bonuses.

Aside from company incentives, employers are required by law to shell out funds for their employees’ 13th month pay. The outsourcing industry in the Philippines is not exempted from this mandate.  The only entities not required under this law are the government, employers of household helps and persons who hire people based on a commission-, boundary-, or task-basis.  

This is mandatory under the provisions of Presidential Decree No. 851. Under such decree, all employers are required to dole out a 13th month pay to all their employees receiving basic monthly salaries, regardless of the nature of their employment and not later than the 24th of December annually.  This covers all employers ranging from small- and medium-scale entrepreneurs to top-earning business processing outsourcing providers. Covered employees who do not receive their 13th month pay have the option of directing their complaints to the Department of Labor and Employment or to the National Labor Relations Commission.

To be entitled this bonus, which is equivalent to at least one month of an employee’s wage, the said employee must have rendered work for that company for at least a month during that calendar year.   This payout is calculated based on the employee’s basic monthly pay divided by 12 and multiplied by the number of months the employee has worked for the company within the calendar year.

Outsourcing companies engaged in the provision of information and communications technology or information technology services are awarded incentives by the Philippine government. To qualify for these incentives, a foreign corporation may establish a local office or a wholly-owned unit in the Philippines. By doing so, these outsourcing companies become governed by the Philippine labor laws, which in turn requires employers to give rank-and-file employees a 13th month pay. So, now we know why our friends working for the biggest BPOs are happiest every December.