What are the 13th and 14th months' pay and how do you pay for it?

The concept of the 13th month pay is rare, but it is gaining popularity in many parts of the world. The 13th and 14th months' pay refer to extra bonuses paid to employees on top of their regular salaries. These bonuses are typically paid out at the end of the year and are meant to provide additional financial support during the holiday season. In this article, we will explore what the 13th and 14th months' pay are, when they apply, and how they are paid.

What are the 13th and 14th months' pay?

The 13th and 14th months' pay are extra bonuses paid to employees on top of their regular salaries. These bonuses are typically paid out at the end of the year and are meant to provide additional financial support during the holiday season. The 13th month's pay is also known as the Christmas bonus, while the 14th month's pay is sometimes called the end-of-year bonus.

Before you offer comprehensive benefits packages, you must deeply understand bonuses such as the 13th month's pay. Check out this article: What is 13th month pay? Get deep insight into this popular payment.

When does the 13th month pay apply?

The 13th and 14th months' pay are not required by law in most countries. However, some countries have laws requiring employers to pay their employees these bonuses. For example, in Brazil, the 13th month's pay is a mandatory bonus that organizations must pay to all employees. In the Philippines, both the 13th and 14th months' pay are mandatory bonuses that must be paid to all employees who have worked for the company for at least one year.

In countries where the 13th and 14th months' pay are not required by law, some companies still pay these bonuses to their employees to show appreciation for their hard work and dedication throughout the year.

How do you pay the 13th month salary?

The 13th and 14th-month pay are typically paid as additional bonuses or compensation to employees, separate from their regular monthly salaries. The process for paying these amounts may vary depending on the company's policies and local labor laws. Here's a general guideline for making these payments:

1. Determine eligibility: Check your country's labor laws and company policies to understand which employees are eligible for the 13th and 14th month pay. In some cases, only full-time employees or those who have completed a certain period of service may be eligible.
2. Calculate the amount: The 13th and 14th month pay is often calculated as a proportion of the employee's basic salary. For example, in the Philippines, the 13th month pay computation is typically equal to 1/12th of the employee's total basic salary earned during the year. You can use Skuad's salary calculator to calculate your employee's salary or the estimated total cost of employment in over 160 countries.
3. Set payment schedule: The payment schedule for the 13th and 14th month pay may vary by country and company policy. For example, the 13th month pay may be paid in a lump sum at the end of the year or divided into two equal payments during the year. The 14th month pay, when applicable, might be paid at a different time, such as during the middle of the year or a specific holiday.
4. Record and report: Document the payment of the 13th and 14th month pay in your payroll system and ensure that it is accurately reported in the employees' payslips and tax documents, if applicable.
5. Communicate with employees: Inform your employees about their eligibility, the calculation method, and the payment schedule for the 13th and 14th month pay to avoid confusion and maintain transparency.

Remember to consult local labor laws and company policies to ensure compliance with any specific regulations in your region. To know more about compliance, check out Skuad’s compliance platform today.

Benefits of the 13th and 14th months' pay

The 13th and 14th months' pay has several employee and employer benefits. 

The benefits of 13th and 14th months' pay include:

1. Employee motivation: Additional pay can boost employee morale, motivation, and job satisfaction, leading to increased productivity. These in-kind benefits packages can help improve employee retention and reduce turnover, saving employers money in the long run.
2. Financial support: Extra payments can help employees manage their financial needs, especially during times of increased expenses, such as holidays or emergencies.
3. Retention and loyalty: Companies offering additional pay are more likely to retain their employees, fostering long-term commitment and loyalty.
4. Economic stimulus: Extra income can boost consumer spending, leading to a positive impact on the economy.‍
5. Competitive advantage: Companies that offer 13th and 14th months' pay can attract and retain top talent, gaining a competitive edge in their respective industries.

Offer comprehensive benefits packages with Skuad

The 13th and 14th months' pay are extra bonuses paid to employees on top of their regular salaries. While these bonuses are not required by law in most countries, they are becoming more popular as a way for employers to show their appreciation for their employees' hard work and dedication throughout the year.

With Skuad, you can provide bonuses such as the 13th and 14th month pay for your employees to keep your team healthy and motivated. 

To know more about Skuad, book a demo today.

FAQs

Is 13th month pay mandatory in Italy?

No, 13th month pay is not mandatory in Italy

How does 14th month pay work?

There is no standard or universal practice for a 14th month pay. It is not a common concept and may vary depending on the company or country's regulations. In some cases, it may refer to an extra month's salary paid to employees as a bonus or performance incentive, but this is not a guaranteed or widespread practice.

When should 13th-month pay be given?

In countries where the 13th-month pay is mandated by law, the specific date of payment may vary depending on the country's regulations. In general, the 13th-month pay is typically given at the end of the year, around the holiday season or before major festivals, to provide employees with extra income for these occasions. However, the exact date and frequency of payment may depend on the employment contract or company policy.

Is December included in 13th month pay computation?

In general, the 13th month pay computation includes the total basic salary earned by an employee during the entire calendar year, which typically covers the period of January to November. December is not usually included in the computation since the salary for that month is already covered by the regular payroll. However, this may vary depending on the country's regulations or the employer's policies. It is always best to consult with the company's HR department or relevant government agencies for specific information regarding 13th month pay computation.