Hiring expertise abroad means navigating employment legal guidelines distinctive to every market, which complicates companies’ international growth plans. Together with country-specific employment legal guidelines and payroll laws, firms should consider Thirteenth-month pay.
Thirteenth-month pay is a standard sort of compensation that employers provide worldwide workers on prime of base wage. Offering Thirteenth-month pay to workers is customary in sure nations and required by regulation in others.
Earlier than firms rent expertise abroad, they need to contemplate how Thirteenth-month pay impacts their international growth plans and put together accordingly.
Learn our information to study the origins of Thirteenth-month pay, which nations require it, the place it’s customary to supply it, and different FAQs.
Desk of Contents
What Is Thirteenth-Month Pay?
Thirteenth-month pay—additionally known as a Thirteenth wage or Thirteenth-month bonus—is compensation along with an worker’s base annual wage. This further fee sometimes equals one month’s wage and is paid out throughout the monetary yr.
The Origins of Thirteenth-Month Pay
Whereas Thirteenth-month pay is a normal further fee all through lots of the world’s prime markets, it originated within the Philippines. A presidential decree made Thirteenth-month funds a compulsory addition to payroll in the Philippines in 1975, the place it stays required by regulation.
Initially, the presidential decree coated salaries lower than PHP 1,000. Nevertheless, in 1986, the Philippines authorities eliminated the wage cap and prolonged Thirteenth-month pay to all workers.
In the present day, a number of nations throughout Latin America, Europe, and Asia require that native workers obtain Thirteenth-month funds from their employers. Because of this, employers hiring expertise abroad should contemplate Thirteenth-month pay as a part of their global payroll processes.
Thirteenth-Month Pay vs. Bonus Pay
Whereas Thirteenth-month pay is sometimes called a bonus, it’s not technically a bonus fee. A bonus fee is mostly associated to worker efficiency or tenure and isn’t required by regulation. Conversely, Thirteenth-month pay is a statutory profit in lots of nations, which implies employers should provide it to sure workers no matter their job efficiency or tenure.
Is Thirteenth-Month Pay Obligatory?
Sure, employers should present Thirteenth-month pay to workers who stay in nations that mandate Thirteenth-month pay by regulation. Nevertheless, these nations might have various laws on how this extra fee is calculated and distributed to native workers.
Whereas not all nations mandate Thirteenth-month pay, it’s customary in others. Discretionary Thirteenth-month funds might rely upon efficiency or tenure and aren’t assured. Nevertheless, workers in these nations nonetheless anticipate to obtain Thirteenth-month pay on prime of their base wage.
Who Is Entitled to Thirteenth-Month Pay?
Any worker in a rustic the place Thirteenth-month pay is required is entitled to this further fee. If an worker works lower than 12 months in a single calendar yr, the quantity is usually prorated primarily based on the variety of months the worker labored.
Nevertheless, some expertise is exempt. Freelancers, contractors, and zero-hour staff sometimes don’t obtain Thirteenth-month pay. Different forms of expertise that could be exempt embrace the next:
- Non-public servants
- Staff who obtain a comparable bonus
- Civil servants
- Fee- or project-based workers
Which International locations Provide Thirteenth Month-Pay?
Under, study which nations mandate Thirteenth-month pay, in addition to the place it’s customary for employers to supply Thirteenth-month pay.
There are solely three nations in Asia that mandate Thirteenth-month pay. Nevertheless, it’s customary in 10 others:
Three nations in Europe require Thirteenth-month funds, and 5 nations require it relying on the trade. It’s customary in eight nations:
Obligatory for Sure Industries
Latin and South America
Thirteenth-month pay is frequent in Latin and South America, with 17 nations that mandate the additional fee. It’s customary in Chile however not required:
It’s much less frequent for workers in Africa to obtain Thirteenth-month pay. Three nations require it:
Learn how to Compute Thirteenth-Month Pay
The commonest strategy to calculate Thirteenth-month pay for an worker is to divide that worker’s base annual wage by 12. Nevertheless, Thirteenth-month pay computation differs from nation to nation.
Within the Philippines, the fee is one-twelfth of an worker’s base wage. For instance, if an worker earns the equal of PHP 60,000 yearly, they obtain PHP 5,000—equal to at least one month’s wage—as their Thirteenth-month pay.
Extra bonuses don’t apply to the Thirteenth-month pay calculation. For instance, if an worker’s annual wage is PHP 60,000, and so they earn a PHP 1,000 bonus in March, that further PHP 1,000 doesn’t depend towards their wage when calculating Thirteenth-month pay.
A number of nations use the identical sort of pay calculation because the Philippines—however not all nations. Employers should familiarize themselves with payroll compliance in every goal market because it pertains to Thirteenth-month pay earlier than hiring abroad to keep away from authorized dangers and penalties.
Different frequent calculation strategies all over the world embrace:
- The worker’s complete wage divided by 13 months
- Award bonus primarily based on the highest-paying month
- Common bonus quantity primarily based on the worker’s most up-to-date three-month wage
Nonetheless, some nations calculate Thirteenth-month pay in different distinctive methods. In Argentina, for instance, employers base the bonus on the best month’s wage from the earlier six months.
Prorated Thirteenth-Month Pay
Prorated Thirteenth-month pay is a portion of the additional fee for workers who labored fewer than 12 months in a calendar yr.
Sometimes, employers compute prorated Thirteenth-month pay by multiplying an worker’s month-to-month base pay by the variety of months the worker has labored within the calendar yr, then dividing that quantity by 12. The calculation seems to be like this:
(Worker’s base month-to-month wage x variety of months labored throughout the yr) / 12
For instance, if an worker earns a base wage of PHP 5,000 monthly and labored solely six months within the calendar yr, their Thirteenth-month fee can be PHP 2,500.
When to Concern Thirteenth-Month Funds
Each nation is totally different with regards to laws round distributing Thirteenth-month pay. Most nations require or advocate employers pay it in December and generally discuss with the fee as a “Christmas bonus.” Singapore and China, however, advocate that employers give Thirteenth-month pay to their workers earlier than the Chinese language New 12 months.
If a rustic doesn’t mandate a particular issuance date for Thirteenth-month pay, then the employer chooses when to supply it and notes that issuance date within the employment contract.
Guarantee Compliant Compensation With an Skilled Companion
Irrespective of the place your organization hires expertise, native employment and payroll laws differ—and Thirteenth-month pay necessities are not any exception. Employers invite noncompliance dangers if they don’t strictly observe country-specific Thirteenth-month fee guidelines.
Keep away from the dangers and shed the burden of navigating complicated employment and payroll legal guidelines by partnering with a world skilled like Velocity World.
Velocity World’s Employer of Record (EoR) solution helps companies shortly and compliantly rent and pay expertise in 185+ nations. Present correct, on-time funds to your worldwide expertise by way of one platform, obtain payroll and authorized help from our in-country consultants, and achieve peace of thoughts that you just’re in compliance with all country-specific payroll laws.
Contact Velocity Global to study extra about how our options simplify hiring and paying international groups.
Thirteenth-Month Pay FAQs
Under are solutions to frequent questions relating to Thirteenth-month pay.
Is There Thirteenth-Month Pay within the U.S.?
The U.S. doesn’t require Thirteenth-month pay. Nevertheless, it’s customary for U.S. employers to supply year-end bonuses to their workers.
Is There Thirteenth-Month Pay within the U.Okay.?
The U.Okay. doesn’t require Thirteenth-month pay, nor do native workers anticipate a customary Thirteenth-month fee. Nevertheless, some employers within the U.Okay. might present monetary bonuses as a strategy to enhance expertise retention.
Is Thirteenth-Month Pay Topic to Tax?
Most nations exempt Thirteenth-month pay from tax, but when funds attain past a decided cap, tax might apply in some nations. For instance, employment regulation within the Philippines states that Thirteenth-month pay is topic to tax if the additional fee exceeds PHP 90,000.