How does 13th month pay works

It is because of compliance concerns like these that our clients contact us regularly for updates and changes to labor policies. With the help of our in-country partners, we keep them in compliance with all payroll and benefit requirements. We make international employment simple. The information in this article is subject to changes in local legislation. By nature, our world is incredibly diverse. Our communities are full of people with different backgrounds, ethnicities, physical and mental abilities, sexual orientations, gender identities, income levels, body shapes and.

Retirement funds are one way for employees to save for the future, and each country has a novel approach to how these funds are used. When you are hiring abroad,. Hiring employees overseas will require you to calculate all statutory benefits and social contributions in the host country.

This includes employee pensions for retirement where you will have to withhold. Have questions? Ask us! May 13, While there is no law mandating it, it is customary for employers to provide affordable and adequate health insurance coverage to full-time employees by subsidizing payments on a group plan. This is a thorny question thanks to all the different terms and details. There are a few dozen different countries on different continents that require or strongly encourage a 13 month pay schedule.

Five additional European countries may mandate 13 month pay by industry as part of a collective agreement. These countries include:. For example, in Greece, employees receive the most generous compensation allowances that include both a 13 month and 14 month salary, as well as a holiday bonus. Greek employees receive extra paychecks at Christmas, Easter and in the summer.

While many developing countries have provisions for this type of payment, there are currently no mandates for 13 month pay in the United States or Canada. Private employers in the U. However, there are no requirements for this compensation either. Mexico mandates a 13 month bonus to be paid by December 20th. This practice is also common in Chile , but unlike the list above, it is not federally mandated. This means that employers can choose to opt out.

However, doing so would be viewed unfavorably by local employees. The requirements still vary widely by country, even though the practice is more widely recognized throughout Latin and South America. For example, in Panama the installments are split into three payments on April 15th, August 15th and December 15th.

This practice actually started in Asia and is widely adopted in many countries. Some, like Indonesia, refer to it as a religious bonus and time the payment with the Christmas holiday. The practice is a little less common in Africa with only 3 countries mandating or encouraging the practice of a 13 month salary:. In most cases, African countries use this as a bonus to be paid around the holidays. And in Angola, for example, there are actually two bonuses.

The most common method is to take the annual base salary divided by 12 months to determine the amount paid per month. That amount is then paid one extra time per calendar year to account for the 13 month pay requirement. In some countries like Italy and Brazil, the employee's annual base salary is divided by 13 rather than 12 , with the extra installment paid out on a predetermined date.

In other cases, the formula for calculating 13 month pay gets a little more complicated. Let's take Argentina, for example, where the 13 month pay is mandated to be paid biannually in June and December.

And when it comes to paying taxes, different rules may apply to bonuses like 13 month pay. In almost all cases, this pay is taxed, but often at a lower rate than regular income. Among the countries who have adopted 13 month pay, it is not considered a bonus.

Bonuses are typically tied to the performance of either the individual or the company. What is 13 months pay if it is not a bonus? Thirteenth month pay is a deferred installment of a contracted salary. It is a customary element of compensating rank-and-file employees who receive a set salary. However, there is a long list of employees who may not be included in 13 month pay requirements. Since this is something that varies from one country to another, you will need to check with the local government for the country where you will pay these bonuses for complete compliance information.

For many of these positions, individuals are paid on a per task basis rather than a set salary. For example, a personal nurse or assistant might only be paid when they are needed for work with no formal employment contract.

In countries where the practice is customary, this usually means these types of employees forego claims to a 13 month salary. Who are covered or entitled to the 13 th month pay? All rank-and-file employees who have worked for at least one 1 month during the calendar year, are entitled to receive 13 th month pay regardless of the nature of their employment and irrespective of the methods by which their wages are paid.

Who are rank-and-file employees? All employees not considered managerial employees are considered rank-and-file employees. Are there employers who are exempted from paying 13 th month?

The following employers are exempted from paying 13 th month pay under PD How is 13 th month pay computed? To illustrate:. Are maternity leave benefits included in the computation of 13 th month pay? Maternity leave benefits are not included in the computation of 13 th month pay. To illustrate, assuming that a female employee is receiving a monthly salary of P 10, January - P 10,