Requiring All Employers To Pay Their Employees A 13th Month Pay

Case Overview and Summary

Presidential Decree No. 851 and its implementing rules and regulations:

Requires employers to pay 13th month pay
- 13th month pay is 1/12 of basic salary within a calendar year (Section 2a)
- Basic salary excludes allowances, profit-sharing, and non-regular earnings (Section 2b)

Employers covered (Section 3):
- All employers except:
    - Distressed employers incurring substantial losses or with declining income (Section 3a)
    - Government and government-owned corporations operating as private subsidiaries (Section 3b)
    - Employers already paying 13th month pay or equivalent (Section 3c)
    - Employers of household helpers and personal service workers (Section 3d)
    - Employers of commission, boundary, or task-based workers (Section 3e)

Employees covered (Section 4):
- All employees receiving basic salary of not more than P1,000 per month
- Regardless of position, designation, or employment status
- Worked for at least 1 month in the calendar year

Payment options (Section 5):
- Pay full amount by December 24 every year
- Or pay half before school opening and half by December 24
- Subject to collective bargaining agreement for unionized employees

Exemptions for distressed employers (Section 7):
- Authorized by Secretary of Labor upon petition filed by January 15, 1976

Compliance reporting (Section 8):
- Report to regional labor office by January 15 each year
- Include details like number of employees, amount granted

Claims adjudication (Section 9):
- Non-payment treated as money claims case
- Processed per Labor Code and NLRC rules

Prohibitions (Section 10):
- Cannot reduce or eliminate other employee benefits

Supplementary rules:
- Contractors and security agencies exempt for 1975 if conditions met (1a-d)
- Private school teachers get 1/12 of annual pay regardless of months taught (2)
- New establishments operating less than 1 year exempt except subsidiaries (3)
- Overtime pay and non-basic earnings excluded from computation (4)
- Compliance deadline extended to March 31, 1976, except June 30 for private schools (5)
- Cannot withdraw or diminish existing compensation and benefits (6)