John Jonas explains the Philippines' 13th month pay for outsourced Filipino workers, a legal benefit introduced in the 1970s under Ferdinand Marcos. It's an extra month's salary, typically paid in December, calculated by dividing annual pay by 12. Paying it promptly boosts worker loyalty and cuts holiday absenteeism.
Questions this video answers
Episode 232.
John Jonas.
Introduced in the 1970s by Ferdinand Marcos.
Add the total amount paid to the worker during the year and divide by 12.
Chapters
Welcome to the Secret Sauce of Outsourcing podcast that's dedicated to making you better at outsourcing to the Philippines. This is episode 232. It's time to pay your ofs the 13th month. So as I record this, it's the beginning of December. This won't come out until mid December because I have podcasts scheduled already. But it's time to pay the 13th month to your OFS. So if you haven't already paid this kind of on a short time frame at this point. So let me just tell you, I'm going to go over the 13th month. I'll give you some details that you need to know here. If you haven't heard about the 13th month, I'm going to cover it. If you have, I'm going to tell you how to compute for it. So the 13th month is an additional one month's pay. It was created in the 1970s by Ferdinand Marcos. Yes, that Marcos, who is the father, the grandfather of the current, currently elected Philippines president, Bongbong Marcos. He did it to try and like amp up the holiday season for people where he mandated that businesses give each worker an extra month's pay in December. It allows the workers to pay for unexpected expenses or big expenses that they planned for or holiday presents. It's something that they have, they have come to look forward to every year. It's a really big benefit that if a job offers this, they're very likely to try really hard to stick around because that's a, it's a big deal for them at the end of the year. And when he created it was also a way to kind of diminish absenteeism around the holidays, where family traditions are so strong in the Philippines that workers would start disappearing around the holidays because they needed to be with family because they have to travel long distances to get there. And the 13th month was a means of lessening that. Now, the Philippines isn't the only country where this exists. There are others. But let me. Here's how the 13th month works. So it is paid in December. It is not a Christmas bonus. The earlier in December you pay it, the happier your worker will be. It's not required to be paid earlier, but the better off they'll be. So this year we're paying it very, very early in the month. It is one month salary as a bonus. So December 1st you're going to pay them November's salary because you never pre pay for work, you always pay after. And, and then sometime in early December, you're going to Pay them an extra one month salary, and then on January 1st, you're going to pay them their December salary. If you have people that are working part time or maybe not consistently the same amount each month, or maybe they started for you in June, the easiest way to compute the 13th month is to add up the total amount you paid them through the year. Divide by 12, that's your amount. So if someone made $600 or $650 and $550 or $800, you add all those numbers up. If they, those were four numbers, I think you add those four numbers up that let's say they started working for you in August, they worked August, September, October, November. There's four months that you've paid them. Add those up, divide by 12. That's the 13th month that you owe them. 13th month is, it is paid in December. However, it's legally required if you're in the Philippines. If you're a business in the Philippines, this is a legal requirement. If someone works for you for part of the year, you're still required to pay them the 13th month. So let's say you hire them in February, you let them go in July, they worked five months. When you let them go, you're supposed to pay them the 13th month. Some employers don't, we recommend it. We use that as a severance that we're gonna, if we let someone go, we're gonna pay you your 13th month, we're gonna pay you through the rest of the month. We hope that's enough time for you to find another job. And so this is how we're separating. So another thing that I mentioned was the 30th month is not a Christmas bonus. So if you want to send a holidays bonus, a Christmas bonus, whatever, that's a separate thing. So in the past, we've always sent like 25 to $50. This year we sent a little bit more as a bonus to each worker along with their 13th month. So December is a really good month for them. They got November salary, they got the 13th month, they got a Christmas bonus, all in the month of December. In our business, we actually start saving up for this in previous months so that we know like, oh, here's all the money for this 13th month payment in December. So again, this isn't required because you're not a legal entity in the Philippines. You're not beholden to the Philippines government here. But it's a really, really good idea to pay it. Your Philippines workers will really, really appreciate it. It'll buy you a lot of loyalty, and it will make them really happy for you. It'll get them to do things that you want them to do, even if they didn't want to do it. It's just a really, really big deal.
