Ep. 200: Frequently Asked Questions About 13th Month

Welcome to the Secret Sauce of Outsourcing podcast that's dedicated to making you better at outsourcing to the Philippines. This is episode 200, frequently asked questions about the 13th month. So the 13th month payment is coming up in December, and I often get questions about it. So I'm going to try and answer a whole bunch of things about the 13th month, what it is. So the 13th month is an extra month's payment that is given to a person in the Philippines when they have worked for you for a year. And that's not completely true. So let's get into it. So the 15th month isn't required, first of all. So for you, it is not required. You do not have to pay this, but it is a really, really good idea. It builds really good loyalty. A lot of Filipinos will stick with the company longer because they know they're paying the 13th month, and the 13th month is such a big deal for them. It also tells them that the company is stable and, and able to pay the 13th month, and so that's a big deal for them. Plus, Filipinos often depend on the 13th month. Like they budget for it, they plan large expenses or home remodeling projects around the 13th month. They use it to buy gifts for family at Christmas time. It's a big deal for them. For companies with a legal entity in the Philippines, it's actually required. So if you're a Filipino employer in the Philippines with a legal registered business, you're required to pay the 13th month. For you, you're not a legal entity in the Philippines, you're not required to pay this, but it's still a really, really good idea. So when do you pay this? Well, it's paid in December, and typically the earlier in the month the better, or at least they'll like it better if you pay it earlier in the month. Also, just because it's paid in December doesn't make it a Christmas bonus. It's actually not a Christmas bonus. It's part of their annual salary. And if you want to pay a Christmas bonus, that's a separate thing. We pay a Christmas bonus. So, so how do we compute for the 13th month? So let's say someone works for you all year long, they've worked for 12 months, you pay them the same salary every month. You pay them $500 a month, you're gonna pay them in December, you're gonna pay them November's salary. On December 1, you pay them November's salary. And then somewhere in December, December 5th, December 16th, something like that, you're gonna pay them $500 extra dollars as the 13th month. Now what if they haven't worked for you for the whole year? Or what if they're part time? Here's an easy way to compute the 13th month. You, you add up the total amount of salary you paid them for the year and you divide by 12. So if they worked from like March to December, or if they work on an hourly basis, or if they got paid different amounts each month, it doesn't matter. Just add up the total amount you paid them throughout the year, divide by 12. That's the total amount of the 13th month. Another thing that I've had people ask me is about the training period. Like, I hired my VA in September and they spent a month in training. Now when do I compute for the 13th month? Is it when they started training or at the end of training? Well, it doesn't really matter as long as you both understand when it starts. Typically it would start after the training period, but for us we would start it on the date that we had them start. Also, if you hired someone like in November, well, they're not really eligible for the 13th month. Typically they have to work for you for three months or more through the year to be eligible to receive a 13th month payment. So if they work for you for three and a half months, you're going to add up the total you paid them, divide by 12. It's going to be a small amount. It's not going to be a full month salary that you pay them. It's going to be a smaller amount. But that typically if they've worked for you for at least three months, then they're eligible for the 13th month. If you're paying it for Philippines companies, it's a different story. They're obligated to pay it if the person has worked for them for one month during the year. So next, next question I often get is like, I let go of my VA during the year, I let go of them in August. Am I still obligated to pay the 13th month? Well, you're not obligated to pay it at all, but a Philippine company would be obligated to. So in my opinion, should you pay the 13th month? Yes, you should. Unless you maybe gave them a big severance pay or something like that. But consider that the 13th month should still be part of they work for you from January to August. Then you're gonna add up the total amount, divide by 12. You can pay that when you let them go. You can wait till December to pay it. But that's the only way they're getting a 13th month is from their employer who employed them during that time. The next person who hired them in September is gonna take September, October, November payments. Add those up and divide by 12 and they're gonna get. They're only gonna get a small 13th month payment total. So if they work for you for part of the year, yeah, that would be a good idea to include it. Last kind of common question that I get is your OFS work for you on a per project basis, should you pay the 13th month? Well, this is completely up to you. You don't have to. It's still a good idea, though. It'll still build loyalty in that person. As they, as you come to them, maybe you take some time off and they're working for other people and you come back to them, they're going to be more engaged in doing your work because you're paying them a 13th month. So for us, we always pay the 13th month, regardless of what goes on. We're paying it. And then we also give a Christmas bonus of like 25 to $50 in addition to the 13th month, and that also comes in December.