Understanding the 13th Month Pay in the Philippines
PHILIPPINES – Here is the origin of the 13th month pay for Filipino employees to help cover various holiday expenses.
Every year, as the Christmas season approaches, Filipino employees eagerly await their 13th-month pay. The additional monetary benefit hugely helps cover holiday expenses such as gifts, celebrations, bills, and other needs that pile up during this festive season.
The idea of an annual bonus originated in Europe, where companies provided it as an employee benefit. In the Philippines, the 13th-month pay became mandatory in 1975 through Presidential Decree No. 851 under then-President Ferdinand Marcos Sr.
Aside from this, some companies also provide a Christmas bonus as a token of appreciation for their employees.
While the 13th-month pay is required by law, equivalent to one month’s salary and due before December 24, the Christmas bonus is optional. Employers voluntarily provide it as a gesture of gratitude, and the amount varies.
Financial experts share practical tips on how employees can use their 13th-month pay wisely:
Pay Off Debts
Many Filipinos prioritize settling debts, including loans or credit card balances. This is particularly important if the debts have interest to avoid further financial strain.
Build an Emergency Fund
Setting aside money for unexpected situations like accidents or job loss ensures financial security. Ideally, the fund should cover three to six months of living expenses.
Secure Insurance
For breadwinners, life and health insurance are crucial. Insurance ensures that family members are protected financially in case of unforeseen events or medical emergencies.
Save and Invest
If there’s extra money, saving and investing can grow financial stability. Building wealth ensures long-term benefits beyond immediate holiday spending.
Start a Small Business
Using the pay as capital for small business such as food sales or online selling can generate additional income.