What Is 13th Month Pay & How to Calculate It

Thirteenth- and fourteenth-month pay is the payment of an additional month’s salary. It is a common employment standard around the globe, though how it works depends on the laws in a given country. If your company is employing globally, you will need to understand the ins and outs of this practice because it can impact your compliance and retention in global markets.

In this guide, we’ll help you understand:

What 13th month pay is (and how it relates to other compensation)
Which countries have mandatory or customary 13th month pay
Who is eligible for 13th month pay and when it is due
How 13th month pay is calculated (including specific equations)
How to overcome common challenges with 13th month pay

We’ll also tell you how Omnipresent can take away the stress of applying 13th month pay through our compliant and hassle-free global payroll solution.

What is 13th Month Pay?

In various countries across the globe, employees receive 13th month pay, which is a form of compensation given to workers in addition to their annual salaries. Often—but not always—this equates to one month’s salary. It’s also often distributed around the end of the calendar year.

The Philippines was one of the first countries to legally introduce 13th month pay in 1975, and it’s still enshrined in the local employment law there. Nowadays, 13th month pay is widely popular across all continents. Employers tapping into global talent pools need to be aware of whether or not it exists in a target country, who needs to be paid, how much, and when.

What is 14th Month Pay?

In some countries, a 14th month salary is also common. Fourteenth month pay is the exact same thing as 13th month pay conceptually, except it is yet another extra month of pay.

The amount paid, as well as the timing, tax implications, and exact definitions of 13th or 14th month pay differ widely from country to country. As a rule of thumb, 14 month pay only comes into play in certain countries that already have 13th month pay in place. And, in such countries, the 13th and 14th months are often paid out at different times throughout the year.

Another thing to keep in mind is that, in many cases, a 14th month payment will be customary when a 13th month is mandatory. That is, companies will have to pay the 13th month and then may elect to pay an additional 14th month as an added benefit or to meet worker expectations.

Is 13th or 14th Month Pay Just a Bonus?

Thirteenth month pay isn’t just a bonus; it’s more complicated than that. In some countries like Austria, it’s referred to as ‘holiday’ or ‘Christmas money’ (Urlaubs- und Weihnachtsgeld). But this doesn’t mean it’s treated as a bonus or commission for tax purposes. It’s also not the same as traditional holiday pay, which employees are entitled to when taking holiday leave.

The bottom line is that each country has its own definition of 13th month pay.

To hire talent internationally, you’ll need sound knowledge of 13th month pay regulations. In fact, this is essential for your company to remain compliant. Due to the complexities and variations of 13th month pay across different countries, you may want to work with a global Employer of Record (EOR) like Omnipresent who can provide compliant payroll services for you.

Is 13th Month Pay Mandatory?

In some countries, like the Philippines, 13th month pay is a legal obligation. But in many other places, it’s ‘customary.’ This means it might be expected but not strictly mandated by any applicable law. Below you’ll find a list of the countries that have 13th and 14th month pay.

Mandatory 13th month pay is enshrined in local employment law, so not paying a mandatory 13th month pay can lead to legal action and penalties for non-compliance. Because of that, it’s important to find out about these laws prior to hiring your international talent.

In countries where 13th month pay is customary, the terms will be agreed upon in a contract or through industry or collective agreements. While it may not be a legal requirement, not paying customary 13th month pay can negatively impact worker retention.

There are also countries in which 13th and 14th month pay is neither legally required nor expected as part of standard business practices. In these places, it is purely discretionary. However, employers that choose to provide payments in these contexts could attract positive attention.

Global Overview of 13th and 14th Month Pay

The tables below detail some of the key markets where 13th month pay is either mandatory or customary, with additional notes about when or how it’s paid. Companies looking to employ workers in Europe, Asia, the Americas, the Middle East, and Africa need to be aware of their respective requirements, cultural norms, and other considerations for 13th month pay.

13th Month Pay in Europe

Here’s a breakdown of 13th and 14th month pay in European countries you might be targeting:

Country	Status	Notes
Belgium	Mandatory	Paid at the end of the year provided employee has worked at least six months in the company
France	Customary	Applicability and amounts set out in industry agreements, paid at the end of the year
Germany	Customary	Typically paid on or around Christmas
Greece	Mandatory	13th month paid around Christmas (end of year); 14th month split between Easter and Summer
Italy	Mandatory	13th month paid around Christmas; customary 14th month typically paid in Summer (June)
Portugal	Mandatory	13th month paid in summer; 14th at Christmas
Spain	Mandatory	13th month paid in summer; 14th at Christmas

In European countries that have 13th and/or 14th month payments, payment dates tend to fall around the end of the year—Mediterranean workers also often get these payments in Summer.

13th Month Pay in Asia

Thirteenth and fourteenth month payments in Asia break down as follows:

Country Status Notes China Customary Usually paid at Lunar New Year or in spring India Mandatory Only applicable to certain types of employees, paid within eight months of the end of the year Indonesia Mandatory Paid before employees’ primary religious holidays Japan Customary 13th month typically paid in Summer (June); 14th month typically paid end of year (December) Philippines Mandatory Paid before Christmas or a contract’s end date Singapore Customary Paid in December or for Lunar New Year

Companies operating in Asia need to be aware of dates with cultural and religious importance for their workers; they may be required to make their 13th month payments around them.

13th Month Pay in the Americas

Here’s how 13th and 14th month payments look across North, South, and Central America:

Country	Status	Notes
Brazil	Mandatory	Typically divided and paid between February and November, then the remainder in December
Canada	Discretionary	No legal requirement; not a standard practice
Chile	Customary	Typically paid in full in December or divided and paid out between September and December
Costa Rica	Mandatory	Must be paid before December 20th
El Salvador	Mandatory	Typically paid in December; amount paid depends on years of service to company
Mexico	Mandatory	Paid in December; typically calculated as 15 full days’ worth of wages plus an allowance

In these countries, like in Europe, these payments typically occur on or around Christmas. The ways companies have to calculate these payments also tend to be more dynamic and varied.

13th Month Pay in the Middle East and Africa

Countries spanning Africa and the Middle East approach 13th months a bit differently:

Country Status Notes Israel Discretionary No legal requirement; not a standard practice Nigeria Customary Typically paid at Christmas as bonuses Saudi Arabia Customary Typically paid before Eid al-Fitr South Africa Customary Typically paid at the end of the year Turkey Customary Typically performance-based United Arab Emirates Customary Typically paid at the end of the year if provided; often accompanied by a 14th month payment

In this region, there are fewer mandates for 13th month pay. In places where it is common, the dates on which payments are made tend to revolve around year’s end or religious holidays.

Eligibility and Distribution Logistics for 13th Month Pay

Where it is mandatory, an employment relationship alone can include entitlement to 13th month pay. In the Philippines, for example, all employees are entitled to 13th month pay, provided they have worked for at least one month within a given calendar year.

However, in some countries, certain employees aren’t entitled to 13th month pay. This will be specified by local regulations. For example, managers, public sector staff, or personal service employees may be exempt. In addition, employees receiving bonuses of equivalent value do not necessarily receive 13th month pay either. Contractors and workers on zero-hour contracts will also not typically receive a 13th month pay—but you’ll also need to carefully consider whether local employment law considers a given worker to be a contractor or an actual employee.

Distribution Timing for 13th Month Pay

Once you’ve determined if your potential hire should receive 13th or 14th month pay, you’ll need to know when to pay it, which is dependent on the country they’re based in.

As the above tables suggest, 13th month salary payment dates are tied to national regulations and customs. The exact time of the year is often stipulated in employment contracts or collective agreements, if not in law. The timing can also be tied to cultural norms and traditional celebrations. The emergence of 13th month pay in the Philippines is in part linked to its Christian roots, so legally it has to be paid out before the cut-off date of 24th December.

This is the case in several other countries, too. In Greece, 13th and 14th month pay are both mandatory, and one half is paid out in full for Christmas, while the other is divided and paid out at Easter and in the summer. Likewise, in Saudi Arabia, 13th month salaries are not required but are paid on Eid al-Fitr when employers choose to provide them. In China and Singapore, 13th month pay tends to be paid out for Lunar New Year.

This timely pay helps employees afford expensive celebrations and enjoy special holidays with their families. Therefore, it’s an important part of an employee’s compensation package.

When employing new talent abroad, being aware of these cultural and regional nuances can do wonders for your employee recruitment and retention. It also signals adaptability to local business practices to local authorities—and keeps you out of trouble if there’s a mandate.

How to Compute 13th Month Pay

The exact computation of 13th month pay depends on the country in question.

In some countries, 13th month pay is calculated as an additional month's salary, so you typically divide the total basic salary by 12 to work out the amount owed for the 13th month:

13th Month Salary = Annual Salary/12

Here, the total basic salary does not include any bonuses or other monetary benefits received that year, it’s equivalent to one month’s salary of that year. This is the case in the Philippines.

In other countries, 13th month pay is calculated as part of the annual salary, as follows:

13th Month Salary = Annual Salary/13

In these cases, the 13 month pay is slightly lower than it is in places where it is not calculated as a part of the annual base salary. Countries using this method include Italy and Brazil.

In some countries, there are other unique forms of calculating 13th month pay.

For example, Argentina’s ‘aguinaldo’ is paid in two installments—once in June and again in December—and the amount paid each time is equivalent to 50% of the highest monthly salary paid in the months prior. Here, the formula is:

13th Month Salary =2((Highest Monthly Salary/2)Months worked)

Argentina’s formula adjusts the 13th month pay to the number of months an employee has actually worked. Many other countries apply similar modifications based on time worked.

As you can see, paying 13th month salaries isn’t straightforward, especially if you’re hiring talent in numerous countries. That’s why it’s best to seek help from those with knowledge of local payroll processes and regulations, like our team here at Omnipresent.

Common Challenges and Misconceptions with 13th Month Pay

Employers looking to expand their workforces and leverage the best talent other countries have to offer are faced with many challenges. Managing 13th and 14th month payments adds to the many complexities of sourcing, onboarding, overseeing, and optimising a global team.

Here are some of the most common challenges employers face with 13th month pay:

Determining eligibility – It may be unclear whether a given employee must be paid a 13th month due to local laws or might be expecting one due to local customs. Another factor at play is whether a worker’s status (i.e., contractor) would make them exempt.

Calculating prorated payments – It may be difficult to calculate what a worker should be paid for their 13th or 14th month, especially when employees are distributed across countries with different rules or norms. Other complicating factors include changes in position or location and hybrid compensation packages (i.e., bonuses or commission).

Distributing funds internationally – It can be difficult to get non-standard payments to employees on specific dates efficiently. Complicating factors include deadlines around (bank) holidays, especially for employees that move or work between countries.

Working with an EOR partner like Omnipresent is the best way to stay ahead of these and other struggles you may face. We’ll keep business leaders and other stakeholders at your company fully apprised of applicable rules or norms well in advance of due dates. That way, you can make decisions about hiring and management proactively and get the most out of global talent.

Tax Implications and Compliance Requirements

‍The 13th month pay tends to be taxed, but in some countries, it isn’t. Whether and how it is taxed varies from country to country. In the Philippines, for example, any payments over PHP 90,000 will be subject to taxes. In countries like Austria, the 13th and 14th month pay is taxed but at a significantly lower rate (6%) compared to the normal taxation rate.

You will need to be aware of these differences when hiring remotely, as not paying a required 13th or 14th month—or not paying appropriate taxes on the payment—can lead to non-compliance and the accompanying legal fines and penalties.

To return to the example of the Philippines, used throughout, penalties for failure to pay the mandated 13th month payment start at back wages for any 13th months missed. These could have interest applied in addition to legal fees for litigation leading to or resulting from the infraction. In addition, authorities may impose sanctions up to and including seizing business functions in the country. The same goes for other countries with mandatory 13th month pay.

Another consideration is the knock-on effect of failure to pay, whether the 13th month is a legal requirement or a cultural expectation. If workers in a given country expect a payment, and you fail to provide it, they could elect to work for another employer—at worst, a direct competitor.

Paying the 13th month, when it’s needed (or expected), can be the difference between a short and expensive dip into a foreign employment pool or an extended, profitable swim in it.

You also don’t need to go it alone, because Omnipresent can help take away the burden of international payroll and sort out all the complexities of 13th and 14th month pay for you.

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