In various countries across the globe, employees receive 13th-month pay. This is a form of compensation given to employees in addition to their annual salary. This is often, but not always, equivalent to an employee’s one month's salary.
This payment is commonly made at the end of the year. However, in a few countries, 13th-month pay is paid out across two installments across the calendar year.
The Philippines was one of the first countries to legally implement 13th-month pay. At present, many countries have enforced 13th-month pay for their employees.
Is 13th-month pay mandatory in all countries?
The 13th-month pay is a common practice in many countries. While it’s mandatory in certain countries, it is only customary in a few others. Here is a list of countries where this practice is common:
13th-month pay in Asia
13th-month pay is mandatory in four countries in Asia, including:
India - Payable within eight months of the end of the fiscal year for certain types of employees.
Indonesia - It is mandatory and paid prior to Ramadan.
The Philippines - It is mandatory and usually paid in December or paid in two parts in summer and at the end of the year.
It’s also customary in several other countries in Asia, including:
China - Paid during the Lunar new year or spring holiday.
Japan - Usually paid in June in addition to a customary 14th-month pay paid in December.
Singapore - Paid during the Lunar new year in December.
United Arab Emirates - It is customary with an additional customary 14th-month pay given in December.
13th-month pay in Europe
13th-month pay is mandatory in five countries in Europe, including:
Greece - 13th and 14th-month pay is paid during Christmas, Easter and summer.
Portugal - 13th-month pay is paid during summer in addition to 14th-month pay paid during Christmas.
Spain - 13th-month pay is paid during summer in addition to 14th-month pay paid during Christmas.
Italy - Applicable CBAs are paid at Christmas and also a customary 14th-month pay for eligible employees.
A few other countries in Europe where 13th-month pay is customary are:
Belgium - Paid at end of the year for employees who have worked for at least 6 months in the organization.
Germany - Paid during Christmas.
France - Paid at the end of the year.
13th-month pay in Latin America
In the following 17 countries, it’s a legal requirement that employers have to pay their employees:
Argentina - Paid in two installments - once in June and again in December.
Brazil - Split and paid between February & November, and December.
Costa Rica - Paid in December.
El Salvador - Paid at Christmas depending on the term of service.
Mexico - Paid in December.
The 13th-month pay is also common in Chile, although it’s not mandated by law. Chilean employees usually receive one extra installment in December or two split payments in September and December.
13th-month pay in Africa
This practice is a little rare in Africa, with only three countries mandating or encouraging paying a 13th-month salary:
Nigeria - Paid at Christmas.
South Africa - Paid at the end of the year.
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How is 13th-month pay calculated?
13th-month pay computation depends on the employment laws of the country. In some countries, 13th-month pay is calculated as an additional month's salary, so the amount owed for 13th month is usually calculated by dividing the annual basic salary by 12. In certain other countries, the annual basic salary is divided by 13 rather than 12.
For example, in the Philippines, 13th-month salary is equivalent to one month. Hence, the computation formula is total basic salary / 12 = 13th-month pay. In some countries like Italy and Brazil, the employee's annual base salary is divided by 13, with the extra installment paid out on a predetermined date. In some countries, there are unique forms of calculating 13th-month pay. For instance, in Argentina, employees are paid 13th-month pay in two installments - once in June and December. The amount paid each time is equivalent to 50% of the highest monthly salary paid in the last six months.
When is 13-month pay given?
13th-month pay is typically given by the end of the year, but this varies by country. For example, in some countries such as the Philippines, employers are mandated by law to provide their employees with 13th-month pay before the end of the year, not later than December 24th. However, in China and Singapore, the employees receive their 13th-month pay during the Chinese New Year.
Is 13th-month pay taxable?
The tax treatment of 13th-month salary varies according to the tax laws and regulations of the countries. In general, most countries that offer 13th-month pay tax this sum alongside their regular income. However, some countries may apply a different tax rate to 13th-month pay or even exempt it from taxes. In Austria, for instance, it is common for employees to receive two additional payments, one in the summer and one in the winter. These are taxed at
only 6%, which is much lower than the standard rate.
Who is eligible for 13th-month pay?
The eligibility for 13th-month pay may vary depending on the laws and regulations of the country or state. Wherever a mandatory benefit of 13th-month pay is given, employees qualify for it. For example, in the Philippines, all employees are entitled to 13th-month pay if they have worked for at least one month during the calendar year. Meanwhile, in Brazil, employees who have been employed for at least 15 days in a calendar year are eligible to receive 13th-month pay.
In a few cases, depending on the country, certain employees may not be eligible to receive 13th-month pay. This may include managers, public sector employees and personal service employees.
It is important to note that the specific rules and regulations for 13th-month pay may differ depending on the country or state, so it is advisable to check the relevant laws and regulations in the country to determine who qualifies for 13th-month pay.
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International hiring comes with complying with the employment laws and regulations of the country you hire. While it is strenuous to navigate through the complexities of employment laws, partnering with an EOR platform like Skuad makes global hiring and payroll easier.
Whether processing 13th-month pay, providing relevant benefits or calculating taxes for remote workers, Skuad’s global HR and payroll platform enables you to manage everything for your globally-distributed team compliantly.