One of the ideas that arose because of the economic problems in a country (more exactly the Philippines), was the 13th month pay. This concept managed to reach many countries around the world, where it is now a law and in others a custom. It is a compensation that the employees of a company receive, in many cases at the end of the year.
In this article, you will receive all the information related to this popular payment. This includes what it means, which countries apply it legally or as an option, and how to calculate it.
1. What is the 13th month pay?
2. What countries make this payment?
3. Which employees qualify for this payment?
4. How to calculate this payment?
5. Does this payment count towards the tax return?
6. When is the appropriate time to do the 13th month payment?
7. How can we help you with this type of payment?
1. What is the 13th month pay?
The 13th month pay, or 13th salary, is an extra annual payment and is equal to the salary of one month. This payment method began in the Philippines in the 1970s, due to the high cost of living. From that moment it began to be carried out in several countries around the world.
Although the name may vary between the countries that apply it, the essence is the same. In addition, the form and the moment in which it is carried out change according to the regulations and laws of each nation. For example, in certain countries, the companies pay it in June, while in others in December.
Similarly, in some countries, the employer must make this type of payment. On the contrary, in other nations, the law does not demand it but the companies pay it in the same way. This represents a benefit for them since it places them above other businesses where it is not customary to do so.
In addition to the above, it is good that you know about this compensation, if you make an international contract. This is because, if it is a legal matter in the employee’s country and you do not do so, you may incur legal misconduct.
2. What countries make this payment?
As said before, in some countries it is something that the law mandates but in others, it is just customary. Below you can see a list of countries that make the 13th month pay.
2.1 The Middle East
The Middle East countries where many companies make it are:
- UAE
Both 13th month pay and the 14th, are made as usual at the end of the year.
- Saudi Arabia
Voluntarily paid by employers and performed on the Eid al Fitr holiday.
2.2 Asia
In Asia, there are countries where it is mandatory and in others it is customary. These are:
- Philippines
In the country where this method originated, the employer must pay it on or before December 24.
- Japan
It is customary and the business to make this payment as a bonus in June. It also has the payment for the 14th month in December.
- China
In that country, the payment is made at the end of the Chinese New Year and is also customary.
- Hong Kong
There it is also awarded to employees in December.
- India
In India, it is mandatory for certain employees and the employer pays it within 8 months before the end of the fiscal year.
- Indonesia
Compulsory paid before Ramadan.
- Malaysia and Singapore
As in other countries, it is paid at the end of the year and is customary.
- Taiwan and Vietnam
Voluntarily paid in the lunar new year.
2.3 Latin America
In most countries this payment is mandatory.
- Argentina
It is mandatory and companies must pay them in two parts, one before or on June 30. The other before December 18.
- Bolivia
In that country, it is also mandatory and a 14th month bonus is paid if the GDP is above 4.5%.
- Colombia
The law makes it obligatory. Companies must pay it in two parts, one in December and the other in June. The latter is only for employees who do not receive a full salary.
- Brazil
There, the employer has to pay one part on November 30 and the other on December 20.
- Ecuador
Companies make the payment in December and the payment of the 14th month in March or April.
- Paraguay and Venezuela
As in other countries, it is mandatory to pay it at the end of the year.
- Peru
It is mandatory to make the payment in July and in December on the 14th.
- Uruguay
The employer must pay it in two parts: one in June and the other at the end of the year.
- Chile
The payment is not mandatory and the companies pay it in December. Also, can divide into two payments, one in that month and the other in September.
2.4 Central America and the Caribbean
Certain conditions apply for 13th month pay.
- El Salvador
In December it is paid as a Christmas bonus and depends on the worker’s years of service.
- Guatemala
The law requires the companies to pay both.
- Honduras
As in other countries, it takes place in December and the 14th month in July.
- Nicaragua
In that country, it is mandatory to pay it on December 10.
- Panama
Unlike other countries, here takes place in three parts: April, August, and December.
- Costa Rica and the Dominican Republic
In these countries, it is obligatory to pay on December 20. In the Dominican Republic, it is a Christmas bonus.
- Puerto Rico
Certain conditions apply for this payment: if the company has 20 employees or more, a payment of 2% is mandatory. If the company has less than that amount, must pay $300. On November 15 and the same date but in December, the employer pays half the established amount to employees in their first year.
2.5 North America
In two of the countries that make up this territory, 13th month pay is not mandatory.
- Mexico
In this country, the payment is by law and the employer pays it on December 20 as a Christmas bonus.
- The United States and Canada
It is not mandatory in these countries. However, private companies can opt for this compensation for their employees.
2.6 Africa
In these countries, the companies do not have the obligation to pay it.
- Angola
In the case of this payment, it is made before the holidays. Also, companies pay the 14th month in December.
- Morocco
Some employers pay this month as a bonus.
- South Africa
There it is also optional and normally December is the month to pay it.
- Nigeria
It is paid before Christmas.
2.7 Europe
As in other regions, there are countries where it is mandatory and in others, it is customary.
- Belarus
Commonly included in collective contracts, although not mandatory, also paid in December.
- Austria
Payments for the 13th and 14th months can be included in the agreements between the employer and the workers.
- Belgium
In this country it is mandatory and companies pay 100% of the monthly salary in December. They also pay 92% in June.
- Cyprus
In that nation, the companies define it in the contract of the employee.
- The Czech Republic and Lithuania
Here depends on the performance and skills of the employee.
- Finland
As in other countries of the world, in Finland, it takes place before Christmas.
- Greece
In the private sector, it is mandatory and the payment is in three parts: at Christmas, in the summer, and at Easter.
- Luxembourg
It has the name K15 and each employee receives it in the second half of the year.
- Portugal
It is mandatory, the 13th month in June and the 14th in December.
- Slovenia
In that country, it is paid at the end of the year.
- Switzerland
It is not mandatory but many employers do it in December.
3. Which employees qualify for this payment?
Of course, this applies to countries where 13th month pay is mandatory. However, the norm is that employers pay it to all workers in their company. However, some countries have regulations that exclude top executive-level leaders.
This payment can be through payroll or an agreement with an employer of record. In the case of remote employees, payment depends on the laws of the country where they reside. As a result, you should take this into account depending on the country where you have hired this type of employee.
On the other hand, you should know that freelancers and independent contractors do not qualify for this payment.
4. How to calculate this payment?
The way to calculate 13th month pay differs in each country, depending on the law, and the custom. It is commonly obtained by dividing the annual pay by 12. However, in countries like Brazil and Italy, the division is by 13, instead of the normal calculation.
As well, in countries where the payment is in two parts, they must divide it between the previous 6 months. In other nations, it is calculated according to a percentage established by law or by the employer. In addition, this payment is reflected in the salary receipt of each worker.
5. Does this payment count towards the tax return?
Most of the time it counts within the normal tax declaration but it can vary depending on the country. It may happen that in some countries it enters the annual declaration or the one established by law. In addition, you must be aware of the laws or recommendations in countries where you employ remote workers.
In this way, you will not incur legal faults that may harm you or your company. Thus, if your company operates internationally, study the case in each country where it is.
6. When is the appropriate time to do the 13th month payment?
As you could see in the section of the countries that carry it out, there are various payment methods. These depend on the law, if it is the case, or on the custom where payment is not mandatory. Normally the employer defines the latter in contracts or labor agreements within the company.
The most typical thing is that the company or business in question makes the 13th month pay at the end of the year. However, in some countries, it depends on the culture, religious festivals, or important dates. For example, in countries with Christian customs, the companies pay it as a Christmas bonus in December.
Also, in Saudi Arabia, the payment is made during a celebration as important as Eid Al-Fitr. Similarly, in Asian countries like China and Singapore, the employer pays this month during the Chinese New Year. In addition to this, the business can establish a fixed time of the year to make the payment, regardless of these factors.
7. How can we help you with this type of payment?
This type of payment compensates employees with a month, or even two, of extra salary in installments. Therefore, even if it is not mandatory in the country of origin of your business, you may have to pay it to your remote workers. Therefore, it is important to know where you pay and how you should calculate it.
For these reasons, we offer you our professional advice so that you can achieve this successfully. In addition, we have extensive experience handling payroll for companies throughout the Middle East. If you want to recruit staff in this region of the world, we have the best EOR service.
Do you still have some doubts regarding the 13th month pay? Write us an email at [email protected] to contact us. Similarly, you can call us at +971 43 316 688 and your questions will be taken care of immediately.
Also, if you want to work with our team, go to thetalentpoint.com and leave us your CV for us to review. Another way to apply is by email: [email protected]. Do not miss this opportunity!
