If you read the title of this post, you are probably saying to yourself that “Bob must be drunk!” or something along those lines. But, I promise, I have not been drinking, and it really is true. In the Philippines, a year consists of 13 months, not 12. At least it is true if you are an employer.
You see, here in the Philippines, if you employ people, it is mandatory under the labor laws that you pay them 13 months pay per year. The “13th Month Pay” as it is called, is basically a bonus that you are required to pay to your employees every December. So, in effect, even though they work only 12 months, they are paid for 13.
Personally, I don’t like this arrangement. Don’t take me wrong, I like to take good care of my employees, and pay them what they deserve, but I don’t like the government dictating to me the amount of what I should give. For some employees, if it were left up to me to decide, I would give them much more than the equivalent of one month’s pay as a Christmas Bonus. Then again, for others, if they have not earned it, I would give less when it comes to a bonus. But, the government dictates that I am to give them their “13th month” pay, so that is what I do.
I believe that government mandates when it comes to pay and such are actually counterproductive for employees. You see, if the government mandates that you give one month pay for a bonus, that is what employers give (I am a prime example). If the government did not mandate the amount, then you have an open and competitive marketplace. If you have a really good employee and offer her or low bonus, you run the risk of her leaving your company and going to your competitor. But, since the government mandates the amount, then there is no incentive to go to a different employer, the bonus is the same there anyway. I feel that it is better for the employee to be rewarded based on their performance, not just be given a mandated amount!
This 13th month thing always kind of bugs me. What do you think?
Hi Bob,
I agree with you 100%. I have my own business here in the states for over 30 years……this would be a dissaster here. I wonder if this is a law due to foriegn businesses, they would see this as better than nothing..??? I am stiil leaving this Sept for Butaun, am very excited to meet you & your family. Oh Yes, i read your artical on the water heater……the first thing i need to install in the beach house i will be living in is a water heater & a shower, what a great way to go. The house now has an outside shower, what are your thoughts about this…..???…a future friend, Bill Huff
It's a difficult situation, I think. You have many employers who do not pay living wages. I thing the government is trying to compensate for that. The problem, though, is exactly what you describe. Competition is what drives the market and the salaries. If you know you are getting that 13th month of pay regardless of how well you perform, where is the incentive?
Hi Bob, Gina and I just came back from a day at the races, so we are coming in at the back end of this one, Gina said "I like having my little bet on the Gee Gees, and she won £20.00 ($40.00) so she was ecstatic, well about the 13th month, Gina says, som e employers pay so little in terms of basic salary, that the bonus is welcome, from my own point of view this is the Philippine government nanny state in operation, interfering in the employment market, I suppose its like everything else, its good for some and not so good for others, as with all governement interferece, where the "State knows best" it causes more problems than it solves.
Hi Bob,
The "bonus" or 13th month pay is always welcome by employees because of the low living wage. The gov't mandated it because there are a lot of employers who work their employees to the ground with little pay. But a smart employee will not only look for the 13th month pay. There is always the treatment on the job and other benefits to consider. Too, a smart employee would like to grow with the company they work for. That's when the labor market becomes competitive.
Liklik
13th month pay also excist in Belgium and I think also in most countries in the EU. Perhaps not in the UK.
Hi Bill – We are also looking forward to meeting you! Godspeed!
Hi Tom – Exactly, Tom. I am a free market guy, I guess. I don't believe in the Government getting involved in the private sector.
Hi Pete – Nanny state! Excellent! I like that one!
Hi Liklik – When the government makes mandates, it always works out bad for the people – that's my opinion! Of course, everybody can have their own opinion!
Hi Luc – A lot of EU countries have quite different ways of looking at the economy than the way I was trained. So, it doesn't surprise me.
Hi bob in greece also give cristmas bonus (30 days). also give easter half bonus (15 days). and also sumer (vacation) bonus (30days). Total bonus 75days for at year.
regards
Another thought is whether there is any real-dollar (or real-peso) gain in this system. If you are an employer, do you pay a person less knowing that you have to pay that 13th month? Hard to know.
me…any Govt. intrusion into how i run my affairs is obtuse !
Hi zois – I guess the 13th month is more common than I knew.
Hi Tom – Most employers here only pay minimum wage for most jobs anyway, and that's government mandated too!
Hi brian – I'm with you!
FYI, I hear from my fellow Filipinos here who came from local banks there in the Philippines that they even get to have 14, 15, and even (!) 16th month pays.
Talk about having so much benefits working for financial businesses.
Hi Jio – Wow… the year is getting longer every time I turn around! Maybe if we institute the 16th month for everybody, we all won't age as fast! 🙂
hi,bill huff! Look at my comments on bob's article on showers, if you can wait a few months I will be in Philippines and setting up a business to do with showers,e.t.c., I will be glad to offer assistance to you and anyone else coming to or already in P.I., Beach house,huh? Lucky stiff!!
Hi Bob:
The 13th month pay provides a little augmentation to the meager earnings of the employees. It's very rare for employers in the Phils to provide health benefits. Vacation and sick leaves, however, are mandated. It's not surprising that many commercial establishments do "padding" payroll– and they let their workers work beyond the law-required hours. I have never heard of any establishments being apprehended because of their illegal activities. Working in cahoots with the dept of Labor personnel ? Some offices give half of the 13th month pay in June in time for school registration. Thanks!
Hi Jul – Actually, health benefits are now required from employers. They must provide "PhilHealth" plans for their employees.
Now I am starting to understand why the employers there hire on 3 and 5 month contracts.
Hi Tim- Unfortunately, that is too true!
hi bob,
just started reading your articles from the last page and found this piece. if jio’s surprised hearing about 14th to 16th month pay bonuses at some local banks, he might reconsider if he hears about the way Smart (the telco) gives its bonuses. a friend of mine who works there says in better years when there was enough income to go around, the company paid up to 24 months’ bonus. it seems they’d rather share profit with their employees rather than pay major, major taxes ” )
beat that!
= )
Hi biz doc – Wow, I didn’t know that Smart was so generous with the profits! Certainly the telcos like Smart and Globe are among the top earning companies in the Philippines, though, since almost every citizen here has at least one cellphone/sim.