On 19 October 2020, the Department of Labor and Employment (“DOLE”) issued Labor Advisory No. 28, Series of 2020 (“Labor Advisory No. 28”), which provides the Guidelines on the Payment of 13th Month Pay.

Under Presidential Decree No. 851 or the 13th Month Pay Law and its Implementing Rules and Regulations (“IRR”), every employer is required to pay a 13th month pay to their rank-and-file employees regardless of position, designation, employment status, and irrespective of the method by which their wages are paid. The only qualification to be entitled to a 13th month pay is that the employee must have worked for at least one (1) month during the calendar year.

Relevantly, under the existing rules and regulations, the following employers are not covered by the 13th Month Pay Law:

  1. The Government and any of its political subdivisions, including government-owned and controlled corporations, except those corporations operating essentially as private subsidiaries of the Government;
  2. Employers already paying their employees 13-month pay or more in a calendar year or its equivalent (i.e. Christmas bonus, mid-year bonus, profit-sharing payment, and other cash bonus);
  3. Employers of those who are paid on a purely commission, boundary, or task basis, and those who are paid a fixed amount for performing a specific work, irrespective of the time consumed in the performance thereof, except where the workers are paid on a piece-rate basis.

As to item 3 above, workers are paid on a piece-rate basis shall refer to those who are paid a standard amount for every piece or unit of work produced that is more or less regularly replicated, without regard to the time spent in producing the same.

Previously, household helpers and persons in the personal service of another are not required to be given a 13thmonth pay. Nevertheless, Republic Act No. 10361 requires domestic workers or Kasambahay to be given a 13th month pay. Under the law, a domestic worker or “Kasambahay” refers to any person engaged in domestic work within an employment relationship such as, but not limited to, the following: general house help, nursemaid or “yaya”, cook, gardener, or laundry person, but shall exclude any person who performs domestic work only occasionally or sporadically and not on an occupational basis.

Unless a more favorable term under an existing company practice and policy, employment contract or collective bargaining agreement, the minimum 13th month pay shall not be less than one-twelfth (1/12) of the total basic salary earned by an employee with a calendar year. Under Labor Advisory No. 28, the DOLE provided the following illustration:

𝑇𝑜𝑡𝑎𝑙 𝑏𝑎𝑠𝑖𝑐 𝑠𝑎𝑙𝑎𝑟𝑦 𝑒𝑎𝑟𝑛𝑒𝑑 𝑑𝑢𝑟𝑖𝑛𝑔 𝑡ℎ𝑒 𝑦𝑒𝑎𝑟/12 𝑚𝑜𝑛𝑡ℎ𝑠 = 𝑃𝑟𝑜𝑝𝑜𝑟𝑡𝑖𝑜𝑛𝑎𝑡𝑒 13𝑡ℎ 𝑚𝑜𝑛𝑡ℎ 𝑝𝑎𝑦

With the COVD-19 pandemic, business establishments have incurred losses. Hence, these businesses are exploring the possibility of being exempted from paying their employees a 13th month pay. Notably, the IRR of the 13th Month Pay Law provides that distressed employers are also not required to pay 13th Month Pay upon the prior authorization of the Secretary of Labor. Distressed employers are defined as those which are currently incurring substantial losses or in the case of non-profit institutions and organizations, where their income, whether from donations, contributions, grants and other earnings from any source, has consistently declined by more than forty (40%) percent of their normal income for the last two (2) years.

To address these concerns, DOLE came out with Labor Advisory No. 28, which makes it mandatory for employers to pay 13th month pay. Labor Advisory No. 28 provides that the request or application for the exemption or deferment in the payment of the 13th month pay are not allowed. This means despite incurring substantial losses, employers are required to pay their rank-and-file employees a 13th month pay.

Under Labor Advisory No. 28, the DOLE has also required employers to make a report of their compliance to the nearest Regional Office not later than 15 January of the following year i.e 15 January 2021. The report shall conform substantially with the following:

  1. Name of establishment;
  2. Address;
  3. Principal product of business;
  4. Total employment;
  5. Total number of workers benefitted;
  6. Among granted per employee;
  7. Total amount of benefits granted; and
  8. Name, position and telephone number of persons giving information.