13th-month pay is an additional salary payment that many countries mandate for employees, typically provided at the end of the year. It is a legal requirement in several nations, ensuring that workers receive an extra month’s salary, often to help with holiday expenses or year-end financial needs.
For businesses, understanding 13th-month pay is crucial to maintaining compliance with local labor laws, managing payroll budgets, and ensuring fair compensation for employees.
How Does 13th Month Pay Work?
13th-month pay is separate from bonuses and is usually calculated based on an employee’s base salary rather than performance. In most countries, it is equivalent to one month’s pay, though some regions adjust the amount based on service length or salary structure.
Some countries require the 13th-month pay to be distributed in December, while others allow it to be split into multiple payments throughout the year. The exact rules depend on the country’s labor laws.
Which Countries Have 13th Month Pay?
Several countries mandate or practice 13th-month pay, but the rules and calculation methods differ. Below is an overview of some key locations.
1. Philippines
In the Philippines, 13th-month pay is mandatory under Presidential Decree No. 851.
It is equivalent to one month’s salary or prorated for employees who have worked for less than a year.
The payment for 13th-month must be made no later than December 24, and all employees who have worked at least one month during the calendar year are eligible.
2. Indonesia
Indonesia follows a similar approach, but its 13th-month pay is known as Tunjangan Hari Raya (THR) or Religious Holiday Allowance. It is also mandatory and applies to all employees who have worked at least one month.
Those who have completed a full year of service receive a full month’s salary, while those with shorter employment durations receive a prorated amount.
The payment must be made at least seven days before the employee’s major religious holiday, such as Eid for Muslims or Christmas for Christians.
3. Brazil
In Brazil, the 13th-month pay is called Gratificação de Natal (Christmas Bonus) and is required by Federal Law No. 4,090/1962.
It must be paid in two installments, with 50% due by November 30 and the remaining 50% by December 20. This payment applies to all formal employees, including domestic workers.
4. Italy
Italy also mandates 13th-month pay, known as Tredicesima. All full-time employees in both the public and private sectors are entitled to receive an extra month’s salary, which is typically paid in December.
5. Mexico
In Mexico, the Federal Labor Law (Article 87) requires employers to provide Aguinaldo, which is a minimum of 15 days’ salary. However, many employers choose to offer a full month’s salary as an added benefit. The payment must be made no later than December 20.
6. Spain
Spain goes a step further by offering two additional monthly salaries, known as Paga Extra. One is paid in summer, and the other in December.
In some cases, collective agreements allow these payments to be distributed throughout the year rather than given in two lump sums.
7. Portugal
Portugal has a legally mandated 13th-month pay, referred to as Subsídio de Natal (Christmas Allowance). It is equal to one full month’s salary and is paid in December.
This applies to all employees, including those on fixed-term contracts.
8. Agnetina
Argentina follows a slightly different model, offering Aguinaldo or Sueldo Anual Complementario (SAC). Instead of paying an extra month’s salary at the end of the year, Argentina splits the payment into two equal parts—one in June and another in December.
9. Germany
In Germany, the concept of 13th-month pay exists, but it is not legally required. Known as Weihnachtsgeld (Christmas Money), it is a common practice in many industries and is typically negotiated in collective agreements. Some employers pay a full month’s salary as a Christmas bonus, while others offer half a month’s salary or a discretionary amount.
10. Greece
Greece has one of the most generous 13th-month pay structures. Employers are required by law to provide a full extra month’s salary as a Christmas Bonus. Additionally, employees also receive additional bonuses for Easter and summer holidays, effectively giving them a 14-month pay structure.
How to Calculate 13th-Month Pay
The calculation for 13th-month pay varies by country, but it is generally based on an employee’s base salary and length of service during the year.
In the Philippines, 13th-month pay is calculated as:
Total Basic Salary Earned During the Year ÷ 12 = 13th-Month Pay
For example, if an employee earns ₱30,000 per month and has worked the entire year, their 13th-month pay would be:
(₱30,000 × 12) ÷ 12 = ₱30,000
If an employee has worked for only six months, the calculation would be:
(₱30,000 × 6) ÷ 12 = ₱15,000
The amount is prorated based on the actual months worked.
Employer Responsibilities and Compliance
Employers must ensure compliance with 13th-month pay laws in each country where they operate. Here are key steps to take:
- Verify local laws to determine whether 13th-month pay is mandatory or customary
- Calculate the payment accurately based on local labor regulations
- Meet payment deadlines to avoid legal penalties
- Include 13th-month pay in payroll planning to manage costs effectively
For businesses operating in multiple countries, working with a payroll provider or Employer of Record (EOR) can help ensure accurate calculations and compliance with local labor laws.
For instance, if a US company hires employees in the Philippines, they can use an Employer of Record in the Philippines to manage legal employment and payroll responsibilities. The EOR will take full responsibility of ensuring local tax compliance including labor laws and payroll related concerns.
