What is the 13th month bonus and do you have to pay it if you hire accounting staff in the Philippines?
It’s a good question, and it can get a little complicated.
In this blog post, I’m going to unravel the complexities surrounding the 13th month bonus and whether it applies when hiring accounting staff in the Philippines.
Don't fret; we'll simplify it all for you.
The 13th month bonus is an end-of-the-year bonus mandated by Philippine law for all employees and contractors.
It's not a discretionary payment but a cultural norm.
Why the name?
Well, it's straightforward — it equals one month's pay.
Essentially, it's a way to ensure everyone receives a Christmas bonus, though it's not discretionary or optional.
Whether you hire employees or contractors in the Philippines, they'll expect this bonus.
There are two paths you can take when hiring someone, as an employee through an Employer of Record service, or as a contractor.
Be sure to read our piece “Should I Hire My Offshore Accountants As Employees Or Contractors?” for more on this.
While I'm not here to offer legal advice, it's crucial to understand that both routes exist.
If you opt for the employee route, the 13th month bonus is automatically handled by the Employer of Record.
You’re probably wondering … but what if you hire someone as a contractor?
Even if it's not legally required for you to pay your contractors as 13th month cheque, you should consider it.
It's a vital part of Filipino culture.
Failing to provide this bonus could make your team feel undervalued in the long run, hindering your efforts to build a strong company culture.
In my view, whether they're employees or contractors is irrelevant; you should pay it anyway.
Now, here's a critical point: because the 13th month bonus is regulated and not a discretionary gift from the company, it's not the place for additional bonuses or tokens of appreciation.
If you want to show gratitude or provide an extra bonus, that would be separate — some companies call it a 14th month bonus.
Now, let's address some common questions:
Yes, it's prorated based on the number of months an employee has been with your company.
You should disburse it in December, ideally before Christmas.
The law stipulates that it must be paid on or before December 24th.
Of course, you can give bonuses at other times during the year unrelated to the 13th month bonus.
Basically, the 13th month pay cheque s is a regulated payment you should provide, regardless of whether you're legally obligated.
Failing to do so may lead to your team to feeling undervalued.
At TeamUp we help accountants and bookkeepers hire directly.
We recruit the best talent in the Philippines for a flat fee.
There are no ongoing fees because it's your team and if you need help with payroll or compliance, we can connect you with an Employer of Record who can handle all of that for you.
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If you have any questions please feel free to reach out we're always happy to help.
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