In this article, Atty. Rami Hourani discusses with us the legal obligations of employers to pay 13th month pay in light of COVID-19
There are few more stark contrasts in society than the difference between employers and employees over the Christmas holidays. Employees are jubilant when December comes around because they expect to receive their 13th month pay - an extra full month's salary. On the other hand, employers try to one-up each other with how cash-poor they are after paying out their employees' 13th month pay.
This year though poses a special problem for both employers and employees. Almost everyone was closed for business at some point in time during the first half of this year in compliance with the government’s lockdown restrictions. This has left many employers and employees confused on their legal obligations and entitlements respectively when it comes to 13th month pay. Employers, already struggling with their business, do not know if they still need to pay 13th month pay to their employees and, if yes, how much should they pay. In turn, employees look forward to receiving their 13th month pay to help alleviate the hardships caused by COVID-19.
The Department of Labor and Employment (“DOLE”) has helpfully issued guidance on this point in Labor Advisory No. 28-2020. DOLE reiterated the rule that the minimum amount of 13th month pay is equal to the employee’s total basic salary earned during the calendar year divided by 12. The employee should have worked for at least one month during the calendar year to be entitled to 13th month pay.
Further, employers are to pay the 13th month pay on or before 24 December 2020. The DOLE will not recognize any request for exemption from payment of the 13th month pay, or for deferment of payment. Employers are required to report to the DOLE their compliance with the payment of 13th month pay on or before January 15 of 2021.
So if you were closed for business for two months in the past year, your employees’ 13th money pay would be the total value of an employee’s basic salary for 10 months divided by 12. This is the minimum entitlement of your employees under the law and you would be violating the law to give anything less. Ideally, you should issue a notice explaining this reduced amount to your employees to avoid confusion as to why they may be receiving less this year compared to last year.
If you find yourself in the fortunate scenario of not being as adversely affected by the pandemic as others in the business community, you may want to pay out more than the above amount as a show of compassion. If this is the case, I highly encourage you to. However, note that you should take steps to let your employees know that the amount they receive in excess of their 13th month pay is a one-time event. There are a few things you can do to make this clear:
If you have any questions about the above article, I highly encourage you to get in touch with a lawyer so that he/she can assist you with your concern. If you need a lawyer, you can find one right here on Legal Tree. It even lists me! Thank you for making it to the end of my article and I sincerely hope you never need my advice.
Happy Holidays to you!
Atty. Rami Hourani is a lawyer based in Cebu City who specializes in the fields of commercial and labor law. He is solution oriented and gives practical and commercial legal advice, being a businessman himself and a consultant to various business organizations. You can view Atty. Rami's profile here.
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