How to Compute and Spend Your 13th Month Pay 2025: Complete Guide + 14 Moneysmart Tips

Are you counting the days ‘til your 13th–month pay and Christmas bonus? For Filipino workers, that well-earned extra month’s salary, mandated by Philippine labor laws, is more than just a seasonal “balato”.

It’s a mandatory benefit woven into our financial calendar year, designed to support regular or rank-and-file employees across the private sector.

Before you create your wish list — new appliance, getaway, or tech upgrade — let’s talk about being moneysmart in 2025: maximizing every peso from your 13th-month pay, rather than just spending it all.

How much 13th-month pay will you get?
Who’s eligible for the 13th-month pay?
How do Philippine-based employers comply?
How to spend 13th-month pay wisely

How much 13th-month pay will you get?

Let’s start with the DOLE-approved computation formula below, as per Presidential Decree No. 851 and the Labor Code.

13th-month pay = (Total basic salary earned during the year) ÷ 12

“Basic salary” means only your core wage: exclude overtime pay, holiday pay, night shift differential, fringe benefits, living allowance, cost of living allowances, premium pay, and such managerial actions or additional payments.

Company practice, individual or collective agreement, or enforceable obligation may add perks, like productivity incentives or a year-end bonus, but these are not mandated for computation.

Quick scenarios (2025 edition):

Full-year, regular employee:
₱25,000 × 12 ÷ 12 = ₱25,000 (guaranteed wage for private enterprise or controlled corporations)
Resigned employees (August):
₱20,000 × 8 ÷ 12 = ₱13,333.33 – pro-rated according to services rendered and calendar year
Newly hired (July):
₱18,000 × 6 ÷ 12 = ₱9,000

Note: Employees working for multiple employers, private firms, or subsidiaries receive a separate computation per entity (private employers, all their private subsidiaries, etc.). Terminated employees and discipline employees get pro-rated pay if they rendered service during the year.

13th-month pay must be released by December 24, 2025 (DOLE establishment report system deadline).
It’s income tax exempt up to ₱90,000 (TRAIN Law). Anything above is taxable as fringe benefits or total earnings.

Here’s a cool 13th-month pay calculator I found by Grace Cuevas to give you an estimate of how much you will get this year.

Image credit: Grace Cuevas via Coda.io

Who’s eligible for the 13th-month pay?

You qualify for thirteenth-month pay if you’re any of these:

via GIPHY

Rank and file employees. Regular, probationary, contractual, or part-time employees, including those who’ve worked at least 1 month during the calendar year (including resigned employees and terminated employees).
Private sector workers. Those in private firms, controlled corporations, or private educational institutions—unless exempt due to grant-in-aid or special status.
Government employees are not covered by PD 851 but may get a year-end bonus, depending on political subdivisions and governmental policy.

Exclusions:

Managerial employee. Those defining management policies, or on task basis/personal service (contractors, freelancers, etc.).
Paid via profit-sharing payments, an extra month’s salary through a collective agreement or an individual agreement, or by receiving monetary benefits greater than the mandated guaranteed portion.

See full eligibility rules on DOLE 13th Month FAQ

How do Philippine-based employers comply?

Private employers must submit a compliance report using the DOLE establishment report system. Government owned, private firms, and corporations operating essentially as private enterprise must follow the presidential decree and report proper payout and compliance.

If you’re under multiple employers or changing jobs, every employer gives you a separate pay. Company policies may enable extra benefits, but can’t waive the required payout.

How to spend 13th month pay wisely in 2025

There’s nothing wrong with spending your hard-earned money. According to a JobStreet survey, Filipinos save and see how to spend 13th month pay and some of their bonus. But if you want to be moneysmart this year, you might want to check our list of how to spend your 13th month’s pay.

Here are some ideas on how you can spend it.

Start investing in the stock and shares
Pay your credit card debt (and other personal debts)
Start an online business or side hustle
Invest in upskilling for career advancement
Top up your emergency funds
Open a high-earning savings account
Add more funds to your MP2 savings account
Reward yourself (and family)
Buy insurance for a safety net
Start saving for retirement with PERA
Spend on annual medical check-ups and supply of vitamins and medicines
Spend on home improvements and maintenance
Save for your children’s education
Support family and charitable causes

1. Start investing in the stock and shares

Learn how the stock market works and choose products with an investment component to generate passive income. Opening an account on an investment brokerage is super easy these days. You can sign up and get verified online. For example, at COL Financial, you can register for a free trial or sign up immediately and get verified if you provide the necessary IDs and documents.

You can also do it on First Metro, another investment brokerage that lets you buy and sell stocks and shares independently. With your bonus, you can already start buying blue-chip stocks and let them grow for the long term.

2. Pay your credit card debt (and other personal debts)

Become debt-free and use this extra money to clear debts faster. Avoid paying compounding monthly interest by using your bonus to clear credit card debt.

Aim to pay off everything and enjoy a stress-free holiday this year. One of the best ways to pay yourself is to be stress-free from the shackles of debt.

Not only that, but you also gain good credit standing from your credit card issuer. If you still have personal debts you need to settle, don’t hesitate to contact your lender right away, even if it’s a relative or a friend. Paying your credit card bills, personal loans, and other informal debts by the end of this year will make your holidays and New Year worry-free.

3. Start an online business or side hustle

Many Filipinos make money through side hustles like selling items on Shopee or Lazada. If you have a knack for words, explore blogging and share your knowledge about a specific topic, from homemaking to entrepreneurship.

If you have extra space at home, you can use your bonus as capital to build a mini sari-sari store. The starting capital is around ₱30,000 to get a decent stock of essential items like toiletries, soft drinks, and canned goods.

There are also low-cost franchises and dealership packages available to explore. For example, for as low as ₱10,000, you can have your own Kettle Korn business. You can do all these from the comfort of your own home or sell them to family, friends, and co-workers.

4. Invest in upskilling for career advancement

Make the most of your 13th-month pay by investing in learning courses. Expand your skillset to enhance your career. Many options are available to help you grow.

Explore various online and offline courses that align with your needs and budget. For instance, check out Udemy, a website offering various topics and skills such as photography, web development, and graphic design.

With prices starting from $10 or ₱550 — almost three cups of Starbucks coffee and a sandwich — you can select multiple courses of interest and earn certifications.

5. Top up your emergency funds

Let’s remember to save up for emergencies, too. Remember those times when you woke up one day to find out that your car had been stolen or someone close to you, whether a family member or spouse, suddenly got hospitalized?

Build your emergency fund to cover living expenses for three to six months. Take advantage of current favorable interest rates from banks like Seabank, GoTyme Bank, and CIMB, where your savings earn up to a 4.25% interest rate per annum.

6. Open a high-earning savings account

If you don’t have a savings account yet, this is the best time to open one for yourself. Choose a bank that offers high interest rates to enjoy the compounding effect after a year or more. Digital banks like GoTyme Bank offer a 5% interest rate per annum, whereas CIMB gives you a 2.6% interest rate.

You also don’t have to visit the bank to open an account. You can do that right from your smartphone and get verified if you submit the valid identification cards and documents the bank requires

7. Add more funds to your MP2 savings account

If you have an MP2 savings account at PAG-IBIG, you can also increase your savings with your 13th-month bonus. Usually, the minimum contribution you can deposit is ₱500, which can be paid monthly.

But did you know you can also add more money to your account within a year? Imagine if you put your money into MP2 every year, then you’d indeed have a higher return on investment after the 5-year maturity period, on top of the dividends you receive annually.

8. Reward yourself (and family)

If you plan to buy this home appliance or gadget for yourself or the entire family, this could be the perfect time to buy since most shops already offer promos and huge discounts for their year-end sale.

If you’re keen on buying a new home appliance or a gadget, always be on the lookout for promotional codes to get up to 50% off. If you don’t want to spend on these things, you can book an out-of-town trip during the Christmas holiday or a staycation for some quality time with your family.

9. Buy insurance for a safety net

If you don’t have insurance yet, this is the sign you have been waiting for the coming years—spend your 13th month’s pay on life insurance.

You can ask around your friends who are financial advisors at Sunlife, AXA, PruLife UK, and BPI AIA, to name a few, and inquire about a quotation of basic or traditional life insurance to start the ball rolling.

Why not use your bonus to pay the annual premium instead of monthly or quarterly, saving you more than hundreds of pesos monthly? You get a lower premium price if you pay it annually, especially if you’re still young. The premium is much lower in your 20s, roughly around ₱20,000, compared to if you get one in your 30s, which would be around ₱30,000 with primary riders or coverage.

10. Start saving for your early retirement with PERA

As for investing in retirement with PERA (Personal Equity and Retirement Account) in the Philippines, it offers several benefits such as a tax credit of 5% if you max out your allowable annual contribution of ₱200,000. That means the 5% tax credit is deductible from your annual income tax.

Starting young allows you to use compounding interest over time, resulting in a larger retirement fund. PERA investment managers grow their money through stocks, UITFs, exchange-traded bonds, and government securities.

Investing in early retirement gives you more time to grow your savings and ensures financial stability during your golden years. With PERA, you can build a secure future and enjoy tax advantages.

11. Spend on annual medical check-ups and supply of vitamins and medicines for the family

Yearly medical check-ups are proactive preventive measures that help catch health issues early on. Early detection through regular consultations and screenings maximizes the chances of successful treatment. This approach can save your family from hefty treatments and hospitalizations.

Spending on vitamins and medicines may feel like an immediate expense, but it’s a smart move for long-term savings. Detecting and treating illnesses early on is less costly than tackling advanced conditions.

Health is your greatest wealth, so don’t neglect this opportunity when you have the means.

12. Spend on home improvements and maintenance

Want to increase your property’s value? Use your bonus as a down payment for property improvements. Basic improvements like repainting walls or fixing broken fixtures can prevent costly repairs in the future, especially when the rainy season comes.

Start with essential areas that give the best returns. Kitchen upgrades typically cost between ₱8,000 to ₱100,000, depending on the scope. You can find quality materials at Wilcon Depot or AllHome, which often offer holiday season discounts.

Remember to prioritize repairs that prevent bigger problems later, like fixing leaky pipes or replacing damaged tiles.

13. Save for your children’s education

Planning for your children’s education? Your 13th-month pay can kick-start their future. Remember how tuition fees and school expenses keep rising every year? Start saving now to avoid financial stress later.

Digital banks offer competitive interest rates that are perfect for education funds. You may also consider educational insurance plans. Sun Life and Pru Life UK offer education-specific policies combining savings with life insurance protection. These plans ensure your children’s education continues even if something unexpected happens.

Want more security? Government bonds and time deposits provide stable returns with minimal risk. You can also explore scholarship opportunities early on – many institutions offer academic and sports scholarships that could significantly reduce educational expenses.

14. Support family and charitable causes

In the spirit of “bayanihan,” your 13th-month pay can touch lives and strengthen community bonds. Studies show nearly half of Filipinos (47.7%) embrace this tradition of giving, making meaningful impacts across the nation.

Touch people’s lives through trusted organizations like Save the Children Philippines and Life Changer for Children in Mindanao. These programs focus on education, health, and disaster relief. These are causes close to Filipino hearts. Remember, even small donations create ripples of positive change in our communities.

You may also consider asking your local church for outreach programs this holiday so you can contribute and embody the Filipino value of “malasakit.” For lasting impact, local schools also welcome scholarship contributions, helping dreams take flight for underprivileged students.

By sharing your blessings, you’re not just giving money. You’re investing in hope and strengthening the Filipino spirit of caring for one another.

Final Thoughts

When spending your 13th-month bonus wisely, prioritize your goals for the year-end. Focus on areas that require attention and make informed choices.

For some people, this might mean investing in stocks, mutual funds, and shares or starting an online business. Others may want to think about upskilling for career advancement for next year or topping up their emergency funds.

The key is not just knowing what to do — we don’t all have the same priorities — but also taking action and planning.

We hope our list has given you plenty of ideas and practical steps toward getting started with smart personal finances.

Let us know which of these examples you should do first.

1. Who is entitled to 13th month pay under Philippine labor laws?

Rank and file employees in the private sector are entitled to 13th month pay as long as they have rendered at least one month of services during the calendar year, whatever their employment status (regular, probationary, contractual, or part-time).

This mandatory benefit covers resigned employees and terminated employees based on their total basic salary earned, but generally does not cover a managerial employee or those working purely on a task basis or personal service unless company policies or a collective agreement give an equivalent guaranteed wage.

2. How do I compute my 13th month pay from my basic salary?

The standard formula is 13th month pay = total basic salary earned during the year ÷ 12, where basic salary or basic pay means your fixed or guaranteed wage or regular wage for services rendered.

In this computation, overtime pay, holiday pay, premium pay, night shift differential, cost of living allowances, living allowance, fringe benefits, cash equivalent of unused vacation or sick leave credits, and other additional payments are excluded from total earnings unless they are clearly integrated into the employee’s basic salary by an individual or collective agreement.

3. Are government employees, private educational institutions, and corporations operating essentially as private enterprise covered?

Government employees in national agencies and many political subdivisions are not covered by the original presidential decree on 13th month pay, but they usually receive a year end bonus and other monetary benefits under a separate republic act and civil service rules.

Rank and file employees in private educational institutions, controlled corporations, and corporations operating essentially as private enterprise or other private sector entities are generally covered, unless the employer qualifies for one of the narrow exemptions under the law.

4. Is 13th month pay taxable under the TRAIN Law, and how do other benefits affect it?

Under the TRAIN Law, 13th month pay and other benefits are income tax-exempt up to a combined ceiling of ₱90,000, and any amount beyond that threshold becomes part of taxable compensation.

Profit sharing payments, Christmas bonus, productivity incentives, fringe benefits, and other benefits such as cash equivalent of unused vacation or sick leave credits are added when checking the ₱90,000 cap, but they do not change the basic rule that the mandatory benefit is computed only from basic salary and not from extra month’s salary or non-salary additions.

5. What are private employers required to do to comply with 13th month pay rules?

Private employers in the private sector, including private firms, controlled corporations, private subsidiaries, and other corporations operating essentially as private enterprise, must pay 13th month pay on or before December 24 of every calendar year.

They also need to submit a 13th month pay compliance report through the DOLE establishment report system, and company practice or management policies cannot reduce the mandatory benefit guaranteed by the labor code, presidential decree, and other Philippine labor laws.